NTC to lease out 30 mills to pvt sector Short of cash for modernising all mills

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G. Srinivasan

New Delhi, Oct. 3

THE Government has granted approval to the National Textile Corporation (NTC) to scout for private parties to run as many as 30 NTC mills on a lease basis in order to quicken the pace of modernisation.

Sources in the Government told Business Line here that the holding company NTC has now 52 running mills after it closed down as manyas 65 mills as part of its turnaround strategy.

The Rs 3,937-crore turnaround strategy comprised of Rs 1,465.78 crore for modernisation, Rs 1,663.35 crore for voluntary retirement scheme, Rs 210.42 crore by way of statutory dues and Rs 598 crore for settling dues to pressing creditors. While the value of assets vested with the mills worked out to Rs 3,830 crore, the Government sought to give Rs 687.22 crore by way of wage support and another Rs 180 crore by way of NTC loan for VRS as grant.

The sources pointed out that since safeguarding the interests of workers was of paramount concern, NTC mobilised Rs 1,779.35 crore through Government-guaranteed NTC bonds for payment of VRS to surplus workers. So far, VRS compensation package has been given to 45,135 surplus employees (till April 1, 2005) at a cost of Rs 1,580 crore.

As per the turnaround strategy, the cost of modernisation has to be met from the sale of surplus assets. As on May 1, 2005, surplus assets valued at Rs 2,458.52 crore have been sold. Since most of the amounts raised through sale of surplus lands went towards payment of interest and principal on loans taken and also for financing the improved VRS scheme, the NTC mills had been finding themselves short of cash for the much-needed modernisation.

Hence, it was decided to go in for direct modernisation of only 22 mills by the holding company and give the balance 30 mills on lease basis to private parties to run for a long-term period of around 30 years, with a view to quickening the entire process of modernisation of mills, the sources said.

As the private textile industries in the country are in an expansionary spree to cash in on the advantages of a quota-free regime governing global trade in textiles and clothing since the beginning of 2005, the sources are quite sanguine about private mills lapping up the offer.

They said that the 30 mills being put up for a "transparent public tender" would help the private sector to take it up since it does not involve any upfront cost by way of installation of plant and machinery with little liabilities, as the surplus workers in these mills had been given a modified VRS by the government. The sources, however, contend that the prospective private parties taking up the NTC mills on lease basis should focus only on modernisation and running the mills efficiently and would not be allowed to resort to any real estate development on the leased properties to make fast buck.

When contacted, NTC Chairman, Mr K. Ramachandran Pillai, told this correspondent that the Corporation has indeed obtained the approval of the Government to look for private partners to run 30 NTC mills on a lease basis. He said that the Corporation's lease strategy for private players would be "flexible" as far as structure goes. He is quite "optimistic" that the response would be positive.

It might be noted that the total installed capacity excluding that of the closed NTC mills as on November 30, 2004 is 14.11 lakh spindles, 6,526 installed loom with a processing capacity of 3.63 lakh metres per day.

(This article was published in the Business Line print edition dated October 4, 2005)
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