Railway Ministry opposes Rites, Ircon divestment

NEW DELHI: The Railway Ministry has opposed the disinvestment of Rail India Technical and Economic Services (Rites) and Indian Railway Construction Corporation (Ircon) and has said it may have to create a new organisation if Rites is divested.
The disinvestment commission had recommended 51% divestment of the government holding in the company to its employees while the government may retain 25% holding. The residual equity, the commission has said, can be distributed among infrastructure consultancy organisation and infrastructure leasing and financing organisations.The commission’s recommendation on Ircon is awaited.
In a written reply in the Lok Sabha on Thursday, Railway Minister Nitish Kumar said that the disinvestment ministry’s recommendation that shares in Rites be sold to the employees was not feasible.The ministry stated that if all the existing employees of Rites were to opt for buyout scheme, each of them would be required to shell out Rs 3.5 lakh.
“This may not be possible,� Mr Kumar has said. The railway ministry has said that Rites with share capital of Rs 2 crore had networth Rs 158 crore at present. This would mean that each Rs 100 equity share is would have to be sold for Rs 7,900 each.
Interestingly, Mr Kumar has argues that divestiture of Rites would come as a setback for railway operations, particularly export of rolling stock and ability of railways to take up overseas assignments. The ministry has also stated that Rites would not benefit from the divestment as it would lose the advantage of Indian Railway’s strengths when competing for projects overseas. Several overseas projects were bagged on the strength of operating experience of Indian Railways, Mr Kumar has stated in his reply to Lok Sabha today.
Rites is a consultancy organisation that carries out studies required by the Indian Railways, client railways overseas and other sectors. It is also in the business of export of rolling stock and inspection of materials. Ircon is engaged in construction of railway projects.The minister has also said that the disinvestment commission’s recommendation of deputing railway personnel to Rites for five years after disinvestment is not possible.
Further, he stated that export of rolling stock was delegated to RITES only because of Indian Railways was unable to handle it directly through governmental set-up. The divestment would “immediately affect export of Railway rolling stock and Indian Railways efforts to utilise spare capacity available in workshops�, Mr Kumar said.