The Hindu Business Line : Banks in a fix over Keltron dues

THE continuing uncertainty over settlement of the long-pending dues from the public sector Kerala State Electronics Development Corporation (Keltron) has put the creditor-banks in a fix.

The failure of the State Government to take a decision on the one-time settlement proposal made by the Enterprises Reforms Committee (ERC), which remains suspended now, has left the consortium of banks wondering what to do next.

According to banking sources, the banks have been pulling on all these years on the strength of the Government guarantee to the loans but now fear that they will have to provide for them as non-performing assets if a settlement is not reached soon.

The one-time settlement proposal was prepared by ERC in November 2003 after a meeting with the officials of the State Bank of India, the leader of the consortium. The proposal envisaged settlement of liabilities to the tune of Rs 57.85 crore in three instalments.

The one-time settlement figure was reached at a meeting the Industries Secretary had with the representatives of the banks consortium on December 16, 2002. The amount included sanctioned limit of Rs 41.80 crore, encashed bank guarantees of Rs 1.51 crore and devolved letters of credit worth Rs 14.53 crore.

As per the proposal forwarded by ERC to the State Government, the first instalment of Rs 25.85 crore had to be paid to the banks in March 2004, followed by Rs 20 crore in October 2004, and Rs 12 crore in March 2005.

ERC had pointed out in the proposal that dues in the books of accounts of Keltron worked out to Rs 221.84 crore as on March 31, 2003, while the actual debit by the banks was Rs 94.71 crore. The proposed OTS meant that the banks would have to waive normal as well as penal interest to the tune of Rs 36.86 crore as debited by them.

The consortium comprises State Bank of Travancore, Canara Bank and Indian Overseas Bank, apart from SBI.

According to Keltron management sources, the non-settlement of dues has severely affected the company's finances as also its business prospects. In the company's books of accounts, the liabilities are mounting to the tune of Rs 45 crore every year. Of this, Rs 25 crore is towards interest on bank loans, and Rs 20 crore as interest on loans extended by the Government for implementing the voluntary retirement scheme for employees offered by the company a few years ago.

On the business front, Keltron has been unable to take part in important tenders on account of its negative net worth. For instance, the company could not take part in tenders floated by major cities in the country for installation of traffic signal systems. This is despite the fact that Keltron is maintaining the traffic signal system in Delhi.

Similarly, the company had to stay away from the tender for supplying ticket issuing machines for Delhi Metro Railway, even as the Keltron machines installed at Kolkata Metro Railway are functioning smoothly, the sources said.

They pointed out that the company has been making operating profit since 2000-01 and that it has been able to sustain its own during these years without any budgetary allocations.

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