New Delhi, Sept. 10: The department of heavy industry has forwarded a proposal to the cabinet for sanctioning Rs 5.3 crore to Reyroll Burn Ltd (RBL), a subsidiary of Burn Standard and Co, so that the bankrupt Calcutta-based company can settle its debt with United Bank of India.
Sources disclose that the finance ministry and the department of disinvestment (DoD) is likely to oppose the proposal when it comes up for discussion at tomorrow’s cabinet meeting.
The ministry of industry is seeking the bailout package from the government as a “one-time settlement” of the dues that RBL owes to the bank.
However, DoD feels that instead of the government shelling out the money, the bank dues should be recovered by liquidating the assets of the company as it has been already declared sick and has filed for winding up proceedings. The matter has been sent to the Board for Industrial and Financial Reconstruction.
On the other hand, the finance ministry is of the view that Bharat Bhari Udyog Ltd (BBUL), the holding company of Burn Standard, should repay the loan as it is expected to get sufficient funds following the disinvestment of Burn Standard and Co. The ministry is keen to rein in the fiscal deficit, which is spinning out of control and fears that other sick public sector companies will cite this example to seek similar bailouts.
Department of heavy industry argues that BBUL has already paid over Rs 3 crore on behalf of RBL to United Bank of India, Industrial Investment Bank of India and IDBI. Hence, the government should shoulder the rest of the burden as a “one-time settlement”.
The total exposure of RBL to United Bank was to the tune of Rs 5.8 crore. Another Rs 1.1 crore accumulated by way of 16 per cent penal interest as it failed to repay on the cut-off date.