DoT sops for ailing ITI

NEW DELHI, May 2: Even as the Disinvestment Commission has recommended the dilution of government equity in the public sector ITI Ltd, the ...

NEW DELHI, May 2: Even as the Disinvestment Commission has recommended the dilution of government equity in the public sector ITI Ltd, the Department of Telecommunications has drawn out a detailed proposal to invest around Rs 200 crore in the company8217;s equity base.

The DoT has also proposed forwarding of Rs 150 crore as soft loans to the company. The proposal is scheduled to be taken up for discussion in the inter-ministerial meeting under the aegis of the full Telecom Commission on May 5.

Apart from the equity participation and the soft loan, the DoT has recommended a Rs 65 crore advance against orders for the supply of equipment and an allocation of Rs 50 crore drawn from the National Renewal Fund NRF to execute its Voluntary Retirement Service VRS scheme to siphon off excess labour force from the company.

While the DoT top brass have projected a bright future for the company with the opening up of basic services to private participation and are therefore in favour of strengthening it through injection of capital, the Disinvestment Commission is learnt to apprehensive about its future owing to the delays in the progress of privatisation of basic services and its high level of accumulated losses.

The Disinvestment Commission is also concerned about ITI8217;s joint venture with Alcatel of France for the manufacture of large switches. The company derives 50 per cent of its turnover from this business alone. However, Alcatel also has a joint venture with the B K Modi group which has put ITI in a vulnerable position. When the ITI-Alcatel tie-up expires in 2000, the company may be in a further spot in terms of sourcing of equipment.

According to senior officials of the DoT, Monday8217;s meeting of the full Telecom Commission is likely to discuss the recommendations of various bodies like the Disinvestment Commission, the Parliamentary Standing Committee and the recent report of the Committee on Public Undertakings. The full Telecom Commission which is represented by the secretaries from the ministries of finance, industry, electronics, planning and the DoT is likely to take these recommendations into consideration before finalising the package for ITI.

The Disinvestment Commission on the other hand has suggested the government reduce its equity participation in the company to 26 per cent and sell off 50 per cent of the shares to a strategic partner as per the rules of the Securities and Exchange Board of India SEBI regulations of 1997.

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ITI8217;s present paid up capital stands at Rs 88 crore which is expected to climb up to Rs 288 crore if the DoT package comes through. The company has an authorised capital base of Rs 100 crore. The company has been making losses consistently for the last three years. The last time the company made a profit was in the year 1993-94 when it chalked up profits of Rs 84.4 crore and paid a 20 per cent dividend to the government.

Since then however, the company has been suffering huge losses. During 1994-95 losses amounted to Rs 81.9 crore, and climbed up to Rs 284 crore in 1995-96. However the company showed a marked improvement in its order book position during the previous financial year of 1996-97 which has reduced the company8217;s losses which are estimated to be in the region of Rs 150 crore. On the basis of the results of 1995-96, ITI had made an advance report to the Bureau of Industrial and Financial Reconstruction BIFR under section 23 of the SICA as 50 per cent of its net worth had been eroded with cumulative losses of Rs 366 crore in two years, 1994-95 and 1995-96.