Monday, December 8, 2014

Govt to set up expert panel for Air India revival plan; Hope for other sick PSUs?

THE government is all set to constitute an expert committee by the end of this month comprising senior personnel with experience in the aviation industry, to set a road map for the cash-strapped public-sector national carrier Air India.
The committee of four or five experts...
will submit its report by March-April spelling out measures to help the carrier realise its full potential.
The Air India is also seeking a mid-term review of its turnaround plan.
“We are examining options of inducting former civil aviation secretaries and former Air India chairmen-cum-managing directors in the committee. Former Air India managing director Michael Mascarenhas would be a good person to have on board,” a media report quoted a senior civil aviation ministry official as saying.
Veterans with extensive knowledge of the transport infrastructure sector, such as former Delhi Metro Rail Corporation chairman E Sreedharan, could also be approached. However, the priority is inducting professionals from civil aviation background.
The panel is being constituted according to objectives outlined in the draft civil aviation policy, unveiled by minister Pusapati Ashok Gajapati Raju last month.
Whereas the privatisation of Air India is virtually ruled out, the minister had said: “An expert committee would be set up soon to develop a road map for Air India. All these suggestions have emerged. We don’t want to open a Pandora’s Box. We will have to take a conscious decision, as it is a delicate matter.”
Raju and Minister of State for Civil Aviation Mahesh Sharma are set to meet Air India Chairman & Managing Director Rohit Nandan on Saturday to review the airline's financial and operational performance.
The proposal also rekindles hope for other sick PSUs reeling under financial strains. Though the Narendra Modi-led NDA government has not declared its policy vis-a-vis the sick PSUs, recently, finance minister said that the government is open to privatising sick public-sector undertakings.
The government's statement seems to offer hope on 79 state-run companies that had an accumulated loss of Rs 55,656 crore in 2012-13, according to the latest available numbers.
But now the question arises will the government pursue some clear cut policy regarding reviving the sick entities.
Air India's losses widened to Rs 5,389 crore in 2013-14, primarily due to high operational costs. It also missed the target of Rs 1,040 crore in operational profit. The net loss was Rs 5,100 crore in 2012-13 and Rs 7,100 crore in 2011-12.
The September quarter of 2013-14 was the worst for the airline; it missed its revenue target by Rs 700 crore because of lower passenger load and a local fare war, said sources. Air India, however, hit the 2013-14 revenue target of Rs 19,300 crore.
According to one latest survey, the number of operating PSUs registered with the Board for Industrial & Financial Reconstruction (BIFR) was stable in 2012-13, at 44.
The prominent unlisted companies that figure on the list of sick companies are Air India, Hindustan Cables, Hindustan Fertilizer Corporation and Hindustan Photo Films.
Recently, a committee headed by NTPC Chairman Arup Roy Choudhury supported the Government’s view on revival of sick public sector undertakings with the help of cash-rich PSUs.
The committee that submitted its report to the ministry of heavy industries and public enterprises was tasked to examine the feasibility of cash-rich Maharatnas, Navratnas and other Central public sector enterprises (CPSEs) seeding a a joint venture (JV) company that would revive sick PSUs.
However, as the Centre has not spelt out its policy vis-a-vis the sick PSUs, the government's proposal about reviving the national carrier now once again keeps hope alive for other loss-making PSUs.
According a rough estimate, profitable PSUs have over Rs 2 lakh crore of cash lying with them, mainly in banks which will go a long way to bring many a sick PSUs back on the path of profit.
According to an answer given by the heavy industries ministry in Parliament, there were 61 sick CPSEs as on March 31, 2013, with over 1.53 lakh employees.
Currently, sick PSUs are referred to the Board for Reconstruction of Public Sector Enterprises for revival, restructuring, sale or closure. According to a Government resolution, a company will be considered sick if it has accumulated losses in any financial year equal to 50 per cent or more of its average net worth during the four preceding years.
Recently, the ministry announced a plan to close six PSUs: HMT Watches, HMT Bearings, HMT Chinar Watch, Hindustan Photo Films, Hindustan Cables and Tungabhadra Steel.

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