July 18, 2011 2:54:34 am
The UPA government is likely to turn its back on the first strategic sale of a loss-making public sector undertaking,Scooters India Ltd. With Uttar Pradesh elections less than 10 months away,state Congress Committee chief Rita Bahuguna Joshi has warned the Prime Minister of public backlash if the Lucknow-based company is sold.
According to sources,the Prime Ministers Office has assured the UPCC chief that the government would look at the issue. The sources said the PMO has sounded out the concerned administrative ministry Heavy Industries and Public Enterprises,in this case about the political fallout of the disinvestment.
Scooters India was the first PSU to be put on the block by the government through a Cabinet decision taken on May 19. The Cabinet had approved a proposal to sell the governments entire holding of 95.37 per cent in the company by roping in a joint venture partner. Mahindra & Mahindra and Atul Auto were two companies that had evinced interest in the PSU. But M&M recently pulled out without citing any noteworthy reason.
The company that produces three-wheelers under the brand name Vikram has been incurring operational losses since 2002-03 and net losses since 2006-07,largely due to inefficiency and low productivity. The UPCC chief is learnt to have told the Prime Minister that the company was close to a turnaround. Its net loss decreased to Rs 17 crore during 2010-11,down from Rs 28 crore the previous year. It actually posted operational profit of Rs 1.5 crore in the fourth quarter of the last financial year.
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But government sources said Scooters India is unable to pay salaries and other statutory dues of its employees,which are now being provided by the government as non-Plan loans. In 2008-09,its net worth was fully eroded and the company,as per the audited accounts for the year ended March 2008 and March 2009,became sick in terms of Board for Reconstruction of Public Sector Enterprises (BRPSE) guidelines and Sick Industrial Company Act (SICA),respectively. The BRPSE had recommended induction of a joint venture partner.
The company sells about 15,000 three-wheeler units a year and has around 1,500 employees. The employees have also sought Congress president Sonia Gandhis assistance on the disinvestment issue. Government sources said the company needed new age technology to compete in the three-wheelers market. A joint venture partner will not only infuse fresh funds but also bring the latest technology.
While the government holds a little over 95 per cent in Scooters India,the balance of about 5 per cent stake is held by banks,financial institutions,corporate bodies and others. Government sources said the stake sale will help arrest further drain of public money and ensure a brighter future for the company and its employees.
To carry forward the stake sale process,the Heavy Industries and Public Enterprises Ministry needs to introduce a resolution in both Houses of Parliament for authorising it to identify and induct a strategic partner through the Department of Disinvestment and to give effect to the terms and conditions between the two. Besides this,Parliament approval is also required for continued extension of salary support and one-time cleaning of the companys balance sheet.
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