IISCO revival plan on Cabinet roster
Flushout fears ahead of selloff

 
 
IISCO REVIVAL PLAN ON CABINET ROSTER 
 
 
FROM JAYANTA ROY CHOWDHURY
 
New Delhi, June 9: 
Under pressure from its allies, the government will present a Rs 1,100-crore proposal to revive the Burnpur-based Indian Iron and Steel Company (IISCO) at the Cabinet meeting slated for Tuesday.

The change in the government’s stance comes within weeks of a Cabinet note, which had proposed 9,000 job losses — or 40 per cent of employees — at the ailing subsidiary of Steel Authority of India (SAIL). This would have been done without a revival plan, a move that was seen by many as a prelude to imminent closure.

Sources say Trinamool Congress leader Mamata Banerjee took up the issue with Prime Minister Atal Bihari Vajpayee and persuaded him to reverse the move despite strong opposition from the finance ministry. For Banerjee, and most other Bengal politicians, reviving IISCO is a big issue in state politics and any leader seen being responsible for reviving the steel maker would gain a lot of political mileage.

Sources said about Rs 400 crore from the new package would be used as investment while Rs 500 crore would be spent on a voluntary retirement scheme to help the company bring down the head-count. The remaining will go towards loan write-offs, including the money owed to the Steel Development Fund.

“The infusion could be a life-saver, but certainly not an end in itself. More money would have to be invested in IISCO later to really turn it around. Our plans are to go in for another round of investment later and achieve a turnaround in five to seven years,” officials said.

Among other things, IISCO needs a new sinter mill, a twin hearth furnace and an upgraded wire-rod mill at Burnpur. The revival plan needs to be cleared by the Cabinet this month. Otherwise, the Board for Industrial and Financial Reconstruction (BIFR) may shut down the steel company.

The Cabinet note points out that of the offers received from companies in an abortive bid to privatise IISCO, the only acceptable one came from Russian engineering giant Tyazpromexports. However, the Russian firm’s inability to get its government to release rupee funds and the large number of concessions sought by it made its proposal unworkable.

The other bidders —Mitsui of Japan and Broken Hill Properties of Australia —were disqualified as they were more interested in running the company’s lucrative mines, rather than its steel and iron making facilities.

With its antiquated steel-making apparatus, the company is considered by many to be as good as junk. But others see it as a goldmine with a good reputation for its products in the market, a loyal workforce with high productivity, huge land holdings, and rich iron and coal mines.

IISCO suffered a net loss of Rs 210.37 crore on a turnover of Rs 918.06 crore in 1999-2000. Technically, it remains sick in spite of the fact that it makes operating profits and has had much of its past loans written off through an executive fiat.

The 125-year-old company was taken over by the government in 1972 and attached to SAIL as its subsidiary six years later. Since then, the Centre has considered 11 proposals to modernise its nearly 80-year-old Burnpur steel plant, but political apathy and bureaucratic indifference squelched revival hopes.

   

 
 
FLUSHOUT FEARS AHEAD OF SELLOFF 
 
 
BY ANIEK PAUL
 
Calcutta June 9: 
Five key public sector companies that have been put on the block—Hindustan Petroleum, Bharat Petroleum, National Aluminium (Nalco), Shipping Corporation and Engineers India—have a combined reserve in excess of Rs 14,800 crore. However, after the impasse over the Tatas’ decision to plough around Rs 1,200 crore from Videsh Sanchar Nigam’s accruals into Tata Teleservices, the market expects the government to withdraw some cash from these five companies before they change hands.

The government, though, has not yet indicated any such plans.

Irked by the Tatas’ bid to invest VSNL’s wealth in Tata Teleservices, Union minister for telecommunications Pramod Mahajan turned the heat on the group, forcing them to reconsider the decision, but not before the issue led to a stand off between Mahajan and divestment minister Arun Shourie.

In fact, the government had withdrawn a substantial amount from VSNL’s reserves prior to its disinvestment by way of special dividends. It dipped into VSNL’s reserves twice—on one occasion a few weeks before the disinvestment.

Hindustan Petroleum is the most cash-rich among the companies yet to be sold off. It has a war chest of Rs 5,578.87 crore, while the other oil major, Bharat Petroleum, had reserves of Rs 3,780 crore at the beginning of 2001-02.

The Orissa-based aluminium major Nalco had Rs 2,928 crore worth of reserves as of March 31, 2001, while Shipping Corporation had Rs 1,924.78 crore and Engineers India had a little over Rs 650 crore as of that date.

Though Shipping Corporation and Engineers India are in the advanced stages of divestment, there has been no indication yet of the government dipping into their resources.

The government’s holding in these five companies is substantial, ranging from 90.4 per cent in Engineers India to 51 per cent in Hindustan Petroleum.

In Bharat Petroleum, the government holds 66.2 per cent, in Nalco, 87.16 per cent, and in Shipping Corporation, 80.12 per cent. In Bharat Petroleum, however, the government plans to reduce its stake to 51 per cent through an initial public offering.

   
 

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