New Delhi, May 29: The Left may not exactly like this, but the cabinet committee on economic affairs is all set to take up its first case of privatisation this year later this week. If the Left agrees, the government will start the hunt to pick a private partner who can control up to 71 per cent in the ailing Tungabhadra Steel Products.
The state-run Tungabhadra Steel has been earmarked as a ‘hopeless’ case by both the government and the Board for Reconstruction of Public Sector Enterprises. A joint venture floated by the central government, which holds a 79 per cent equity with minority holdings of 9 and 12 per cent by Karnataka and Andhra Pradesh governments respectively, the company is in a financial mess.
The problem for the Left is that it had agreed while discussing the common minimum programme to let the UPA government sell or shut down chronically sick units that just cannot be revived. The common minimum programme states, “Chronically loss-making companies will either be sold off or shut down ... The UPA government will induct private industry to turn around companies that have potential for revival.”
Senior officials said if the attempt to bring in a private player failed, steps to shut it down would be considered.
The selloff bid for Tungabhadra comes in the wake of problems in selling off residual stake in Bharat Aluminium and bringing out a follow on public offer in National Aluminium. Besides differences between ministries on these issues, the Left too had come out strongly against these sales.
Set up in 1960, Tungabhadra manufactures hydro-mechanical equipment, rope drums for hoists, cranes, established transmission line towers and sub-station structures on a turn-key basis. Till some years back, it used to make marginal profits but in recent years it has not even been able to get a solvency certificate from its bankers.
Earlier this year, the government decided to spend Rs 140 crore to pay off statutory dues of some 15 public sector units, including Andrew Yule & Co, Bharat Heavy Plates & Vessels, Burn Standard, Bharat Wagon Engineering, Heavy Engineering Corporation, Hindustan Cables, HMT and Tungabhadra.
“We felt Tungabhadra was one case where we could not take up the revival as the BRPSE felt it could not be done,” officials said.
Senior finance ministry officials said North Block has made it clear that only those PSU revival projects which meet the standards set by banks for normal business loans will be taken up for revival.
The budget 2006-07 has provided for raising Rs 3,084 crore from divestment, which would be put in the National Investment Fund.