Thursday, February 18, 2016

Centre to create a new crop of ‘weak’ PSUs; to turn them to profitable

THE Centre has decided to create a new category of “weak” public sector units that would be closely monitored to prevent them from turning into loss making or sick entities, say media reports.
“The objective is to corporatise PSUs so that they can compete with private sector firms. Reviving a PSU or shutting it down when it becomes sick should not...
be the aim. The Centre wants to turn around all PSUs into profitable entities before selling stake in them,” said a senior official was quoted as saying.
Currently, the Department of Public Enterprises (DPE) also does not have any data on such “weak” firms. However, based on the new guidelines prepared by the DPE, under the Ministry for Heavy Industry, for revival and restructuring the PSUs would be considered weak or performing sub-optimally if their turnover or operational profit has declined by over 10 per cent on average in the last three years or its profit before tax is less than income from other sources. Firms with claims or inventories amounting to more than half of their net worth would also be considered to be weak.
Once identified, administrative ministries will put them under “observation and intensive review” to arrest early signs of weakness and take measures such as nominating independent experts on their boards, taking corrective business actions or fixing responsibility for the declining performance of the firm. The new guidelines will be used starting from this fiscal after the annual accounts of firms will be finalised and the new categorisations would be reflected in official data soon.
The Public Enterprises Survey, which tracks the performance of all central PSUs categorises them only as loss making and profit making firms. Latest data available till 2013-14 revealed that of 234 operating companies, 71 firms had reported losses.
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.
Time and again the Centre has been taking measures to revive these sick PSUs.

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