The Hindu Business Line : Will the new board help reconstruction of PSUs?

THE approval of the Cabinet Committee on Economic Affairs (CCEA) for the establishment of the Board for Reconstruction of Public Sector Enterprises (BRPSE) has marked the first step towards redeeming the promise made by the Union Finance Minister, Mr P. Chidambaram, in his July 8 Budget speech in Parliament.

The proposed board will have seven members with a non-executive Chairman, though none of the names up till now is disclosed.

The entire disinvestment process came to a grinding halt with the advent of a new coalition Government in the Centre after a cornucopia of proceeds last year under the National Democratic Alliance (NDA) — against a budgeted Rs 13,200 crore the revised receipt through disinvestment for 2003-04 is put at Rs 14,500 crore.

This naturally led the major ruling partner in the current coalition, the Congress party, to put on a brave visage of not abandoning altogether the whole exercise lest its reform credentials is questioned. Hence, it settled down for a moderate target of Rs 4,000 crore through disinvestment route this fiscal.

As even the modest receipts putatively to flow from disinvestment might rub the Left parties supporting from outside the wrong way, the Finance Minister proposed the setting up of the BRPSE in the 2004-05 Union Budget. Even prior to that, the United Progressive Alliance (UPA) in its national common minimum programme (NCMP) envisaged, among others, modernisation and restructuring of sick PSEs to render them viable on a sustainable basis while fully providing for the workers' legitimate dues and compensation. It is small wonder that the BRPSE has been tasked with advising the Government on the measures to be taken to restructure PSEs, including cases where disinvestment or closure or sale is justified, as also to scan the proposal of the administrative ministries for revival/restructuring of sick/loss making CPSEs and suggest steps for their turnaround.

Incurring loss is not the sole criterion for determining the sickness of an enterprise. A sick industrial company, in the definition of the Sick Industrial Companies (Special Provisions) Act, is one registered for not less than five years and whose accumulated losses have either equalled or exceeded its networth. Public Enterprises Survey (2002-03) conceded that as many as 86 CPSEs had logged negative networth as on end-March 2003.

The Minister of State in the Ministry of Heavy Industries and Public Enterprises, Mr Santosh Mohan Dev, said in Parliament that out of 80 CPSEs which had been incurring losses continuously for the last three years (2000-01 to 2002-03), only 45 were registered with the Board for Industrial and Financial Reconstruction (BIFR) as per provisions of SICA and remaining 35 enterprises were not covered under the provisions of the SICA. The 35 PSES, not covered under the provisions of the SICA and, hence, the non-BIFR CPSEs during the last three years amounted to Rs 2,247.73 crore in 2000-01, Rs 3,572.93 crore in 2001-02 and Rs 1,857.99 crore in 2002-03. These CPSEs hail from all major Central Ministries such as Civil Aviation, Heavy Industry, Chemicals & Petrochemicals, Steel, Shipping, Tourism, Railways, Small Scale Industries, Textiles, Commerce and Agriculture and Cooperation.

Whether all these 80 CPSEs would be taken up by the proposed BRPES as the fate of the BIFR itself hangs in the balance or only those hopeless cases as per the predilections of the political leadership or the Ministers presiding the PSEs is a moot point.

Already, the Ministry of Heavy Industry has prepared a Cabinet note on the sick PSEs under its fold numbering 28, the single largest entity and accordingly pitched itself to keep the proposed Board under its ambit. So meeting even half-way the remit for BRPES covering finding ways and means for strengthening PSEs, restructuring and advising the Government on disinvestment/sale/closure in full or part in respect of chronically sick PSEs is going to be the tough task, demanding the combined wisdom of the Finance Ministry, Law Ministry and the Planning Commission, leave alone that of Heavy Industry even if the BRPSE is billeted there.