Tuesday, March 17, 2015

RIP BRPSE? A smart panel may be set up to revive sick PSUs

IS it a smart move on the part of the Narendra Modi-led NDA government to bring the ailing PSUs back on track or is it just a cosmetic change. Soon, the Board for Reconstruction of Public Sector Enterprises (BRPSE) may be on its way out and a new panel might be tasked to revive the sick PSUs. The BRPSE...
has not been successful in its job assigned by the government.
The new panel will act on such cases at a faster pace, says a national daily. The panel is likely to outline guidelines to determine whether such entities should be revived, shut or sold.
The Prime Minister's Office has given its in-principle approval to the proposal of winding up the panel, a senior government official said, as quoted by the national daily.
The ministry of heavy industry and public enterprises will soon move a Cabinet note to shut down the BRPSE.
BRPSE was set up in 2004 to sketch revival plans for sick state-owned companies. The move is expected to clear way for the government to sell stakes in most of the 65 sick central public sector companies or close down non-viable ones.
The heavy industry ministry has already floated a Cabinet note on the closure of six companies — Hindustan Photo Films, Tungabhadra Steel Products Ltd, Hindustan Cables Ltd, HMT Bearings Ltd, HMT Chinar Watches Ltd and HMT Watches Ltd.
The new panel is likely to be smaller in size to expedite decisions in respect of companies that have become a burden on tax-payers.
The new panel may be headed by the cabinet secretary with representation from the administrative ministry under which the respective PSU falls.
BRPSE has not been able to deliver the desired results because of various external factors, which include political pressures. A new mechanism is required for faster disposal of such cases.
Once the panel comes into being, a loss-making PSU will be considered for revival only if it is operational in a strategic area or if banks are willing to lend it money without a government guarantee.
In case a PSU has a market share of at least 10%, then the government may continue its efforts to revive it.
If a company's return on capital employed is lower than the rate it pays lenders, it may be considered as a case for strategic sale.

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