Wednesday, May 20, 2015

Centre asks cash-rich entities to come up with roadmap for PSU revival

IN A bid to take the ailing PSUs back on track, the Centre has asked cash rich Central Public Enterprises (CPSEs) to come out with a detailed road map for using their cash surplus to turn around sick CPSEs, said media reports .
As on March 31, 2014, profitable CPSEs had over Rs 2.63 lakh crore as ‘cash and bank balance’.
The heavy industries and public enterprises minister Anant Geete chaired a meeting of 21...
profitable CPSEs recently to discuss the strategy for reviving sick PSUs.
Cash rich PSUs were asked to come up with a road map for using their surplus for reviving sick PSUs, a senior government official told BusinessLine. According to Public Enterprises Survey of 2013-14, there were 163 profit making CPSEs, while 71 were loss making.
When it was suggested to profitable PSUs to use their surplus cash for reviving sick ones, they said they needed this money for their own capital investment.
However, the cash and bank balance position of profit making PSUs are almost constant over the last three years.
“This means that they prefer to park this money in bank and mutual funds and earn more money. Though there is nothing wrong in parking funds, government guidelines prescribe investment of surplus funds of CPSEs to ensure maximum safety, no element of speculation on the yield, sound commercial judgment and maturity period of not more than one year,” the report quoted an official as saying. “Why can’t this money be used in reviving PSU through innovative means?”
Cash and bank balance at the end of 2011-12, 2012-13 and 2013-14 were over Rs 2.83 lakh crore, Rs. 2.66 lakh crore and Rs. 2.63 lakh crore, respectively. At least 60 percent of the funds can be placed with public sector banks without inviting competitive bids for bulk deposits while up to 30 per cent can be parked in SEBI-regulated Public Sector Mutual Funds.
The official said one of the possible models is forming sick CPSE Revival Company (SCRC) with assistance from cash rich PSUs. However, this would be slightly different from what the Arup Choudhury committee suggested last year. The Committee talked about allowing a part of CSR (Corporate Social Responsibility) funds towards SCRC.
“But we feel that rather than CSR fund, companies should use their surplus cash for the company,” he said.
The proposed SCRC would leverage its capital to raise resources from the market, which in turn will be used for only those sick PSUs that have a potential to revive. Once, the company is revived, either minority shareholding could be divested or there could be strategic disinvestment.
Money earned through this process will come back to SCRC, which then can be used for reviving other PSUs. The officials said that final decision will be taken as soon as the roadmap is presented.

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