(by Baby Thomas)

LETTER TO MINISTER SHRI.PRAFUL PATEL

Posted on 17-Sep-2011

Submission to Sri. Praful Patel, Hon’ Union Minister for Heavy Industries & Public Enterprises.

• Government’s policy towards Central PSEs:

1. Need for communication
The Government does not feel the need to explain its policies to the middle management that is responsible for actually implementing the policies.

As a starting point Minister may address the National Confederation of Offiers’ Associations of Central PSEs.

2. Disisnvestment
It is difficult to accept that the wealth being created by our sweat is being used to
a) Transfer future earnings to private hands
b) Resolve the crisis of profligate spending of the Government of the Day.
c) While creating multiple owners Government controls PSEs like a sole owner. For example an important factor of production the wages are determined through a Presidential Directive.
d) NCOA questions whether the legislative intention of Companies Act is to create a watershed between 49 % and 51 % share holding of the President of India. For example in Delhi Discoms Government has a complete hand off policy and even RTI does not apply even though Government owns 49 %. Whereas with 51 % Government as complete right to even usurp the powers of the Board of Directors besides RTI, CAG, CVC, DPE, Jt Secy in the concerned Ministry - an endless list of hurdles to smooth functioning of an enterprise.

NCOA wants a white paper on the subject of ownership and its consequences - Present and future as envisaged by the Government policy.

3. Sick Units
Reviving sick units requires commitment (in policy and leadership), skill besides money. Unfortunately there is no clear policy in respect o
I Financial
A. Government funds
Issues
What should be done to the two/three types of loans given, in the past, to sick units
a) 'Plan' loans for creating productive assets.
b) 'Non plan loans' for meeting cash deficits, arrears of interest, outstanding installments of principal etc.
c) Inter-corporate loans from other PSEs (generally from the same Ministry)

Question of policy that need to be established
Would the Government
a) Write off all non plan loans together with interest accumulated on them.
b) Convert a part or whole of the plan loan together with interest accumulated on them into equity (say 50 %) and balance as Zero interest debentures to be paid after a period of moratorium of say 3/5 years during which a scheme of rehabilitation would be implemented. Some of the interest could be written off.

B. Non Government Funds
Issues
What should be done with :
a) Irregularities in the "working capital" given by banks (amounts not covered by current assets)
b) Outstanding payments to State Electricity Boards and other vendors.
c) Non repaid portions of inter-corporate loans.
d) Unpaid wage arrears of employees.

Question of policy that need to be established
Would the Government
a) Issue guidelines of policy to be followed.
b) Provide financial support in liquidating these liabilities.

C. Funding rehabilitation
Question of policy that need to be established
Would the Government
a) Issue guidelines for providing fresh funds required for technology upgradation, modernisation, diversification etc.
b) Issue directions to FIs not to discriminate between private and public sector in financing rehabilitation schemes.
c) As a promoter, on the analogy with the private sector, provide atleast 30 % of the funds required for rehabilitation.

II Technology
Issues
a) Evaluation of the contemporary status of the technological status available with the PSE.
b) Problem of acquisition of technology.
c) Relationship between technology and market.

Question of policy that need to be established
Would Government
a) Support and enable tie ups with national Research labs (Civil, Defence, Space, Atomic Energy)
b) Use policy instruments to ensure foreign collaborations.
c) Provide market protection ( atleast for a for limited period)

III Acquisition and Mergers & management of assets
Issues
a) Since some of the PSEs (especially hopelessly sick units from the taken over sector - like Mumbai based textile mills or Calcutta based engineering units) are asset rich there could be attempts by various private interest to offer take over.
b) Merger with healthy PSEs - directly or as subsidaries. Some parts of the PSE could be attractive for a merger while the other part may not ( for example, Instrumentation Ltd. the Palghat unit rather tha the Kota unit)
c) Sale of "surplus" land or other assets. Some aspects of this issue are i) PSE not having free hold property but property on leased from state Governments; ii) within the same PSE some assets in one state may command a high price whereas not in another state (like NTC mills in Mumbai and Haryana) and transfer of funds from one state to another may be objected to.

Question of policy that need to be established
a) Policy to be established in this regard

IV Ownership and management
a) Privatisation (if desirable then , at what stage) and alternatives structures of ownership.
b) Staff Managerial ranks - attracting and retaining talent.

V Manpower
a) Policies (including wage policy) to enable sick units to attract and retain talent and skills.

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