PSU recasts may hit govt coffers

NEW DELHI: Even as the fate of the National Investment Fund (NIF) is uncertain due to the derailment of the government’s disinvestment plans, the revival of sick public sector units may cost public exchequer a fortune.

The government plans another Rs 700-crore revival package for Nagaland Pulp and Paper Corporation (NPPC), which is over and above the Rs 1,800 crore already committed towards the revival of PSUs like HMT Bearings, Heavy Engineering Corporation, Cement Corporation of India and BBJ Construction.

“The idea of having NIF was to mobilise resources for the revival through disinvestment. However, since disinvestment is on hold and the NIF has no money, the revival will bleed government coffers,” a senior official told ET.

Out of the Rs 700 crore committed for the revival of NPPC, Rs 240 crore will be used for capital restructuring. In effect it will be used to wipe out debt. The rest of the Rs 460 crore will go towards capital expenditure and restructuring the company in order to turnaround the loss-making PSU.

The company, which had come out of the purview of the Board for Industrial and Financial reconstruction (BIFR) due to the financial restructuring efforts made by the government, has again become sick. The revival scheme could not be put into operation due to law and order problem, lack of infrastructure and the absence of banking facilities, ministry sources said.

With more and more PSUs slated for revival, the government may have to take a reality check on whether the money will be spent on wages and salaries or on a viable turnaround plan, sources said.

So far, no funds have come from the disinvestment in the NIF, revival funds will have to come from the exchequer, a source said.

If the proposal by the Board for Reconstruction of Public Sector Enterprises (BRPSE) gets the Cabinet nod, the government would land up committing almost Rs 2,600 crore towards the revival of nine PSUs alone. It has already committed about Rs 142 crore towards wiping out bad debt of eight PSUs.