Panel clears sale of Cochin, Hindustan shipyards

NEW DELHI: The Disinvestment Commission has recommended minimum 51% divestment of Cochin Shipyard (CSL) and 100% privatisation of Hindustan Shipyard (HSL) in its latest report.

The Commission has also said that HSL should be closed if the government does not succeed in finding a buyer for the company.

HSL has been in the red for several years and it is estimated that the cost of closing down the yard is lower than the cost of restructuring and divesting it.

Unlike CSL which was turned around in the mid-90s after a financial restructuring, a restructuring scheme was never implemented in HSL although the union cabinet had cleared a proposal in 1997 as the management found benefit under minimum alternate tax regime more attractive.

The Commission, in its 14th report submitted late September, has recommended that the restructuring package for HSL should be concurrent to the divestment programme and could be formulated in consultation with the prospective buyers.

"This would help in bringing in productivity improvements and marketing ability needed to turn around HSL."

The Commission has further stated that if the "divestment programme does not succeed owning to lack of interest from prospective buyers, closure of HSL may be inevitable".

The Commission notes that the turnaround prospects of HSL does not appear very bright. The current level of performance of the yard, it says, has been possible to the existing subsidy schemes of the Central government.

Referring to a Crisil Advisory Services estimate, the Commission says the net cash outflow for the union government in the event of a decision to close down HSL would be around Rs 175 crore.