New Delhi: Burn Standard, the 237-year-old wagon-maker, will be shut down and sold off because of poor financial performance, the government said on Wednesday.

The cabinet, which took the decision, also approved a Rs 417-crore package to pay the severance benefits to the 508 employees and clear past debt and liabilities of the company.

"The government will provide a one-time grant of Rs 417.10 crore towards severance packages and for clearing the current liabilities of the company. In addition, outstanding loans of Rs 35 crore given to the company by the ministry of railways shall be written off. The 508 employees of BSCL will benefit from a voluntary retirement scheme (VRS)," an official statement said.

Justifying its decision to close the Calcutta-based firm, which began operations in 1781, the government said: "Continuous poor physical and financial performance of the company for more than 10 years despite financial assistance and other support provided by the government, and low probability of its revival in the future prompted the move."

Burn Standard Company Limited was incorporated in 1976 following the nationalisation of Burn and Company and it was subsequently amalgamated with Indian Standard Wagon Company under the department of heavy industries.

The company was referred to the Board for Industrial and Financial Reconstruction in 1994 and was declared sick in 1995. The company continues to be a sick company since then.

Union reaction

"It is not clear to us as to why the government is looking to shut down Burn Standard, which has had immense contribution in the past, including export of wagons to Vietnam and Uganda and building girders for second Hooghly bridge.

"The units at Burnpur and Howrah are operational and there is an order of around 1,200 wagons. We are opposed to the move as it would put the job of around 500 direct employees and around 2000 indirect employees at stake," said Gopal Bhattacharya, working president of INTTUC-affiliated Burn Standard Workers Union.

The union will discuss the Centre's decision and inform the state leadership before taking a call on the next step.

CCI members

The cabinet has decided to right-size the Competition Commission of India into a three-member body headed by a chairperson from a seven member body, including the chairperson.