Panel set up to look into IFCI package

The finance ministry has set up a committee under the finance secretary to finalise the bailout package for IFCI. The fiministry has also as...

The finance ministry has set up a committee under the finance secretary to finalise the bailout package for IFCI. The fiministry has also asked the financial institution (FI) to reduce the amount of rollover of its outstandings to the other FIs and banks.

According to ministry sources, IFCI, in the recent rounds of meetings between the FI top brass and the officials of the ministry, had chalked out a bailout package to the tune of Rs 10,000 crore.

The finance ministry on the other hand is of the opinion that the rollover amount should not cross more than Rs 5,000 crore. The committee set up under the finance secretary is trying to thrash out the core issue. However, the committee is expected to reach a final solution on the package shortly. “The committee is working in a real fast pace to bring to table a solution quickly”, sources said.

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Earlier, it was expected that the IFCI bailout package would be announced in the budget. However, the core issue of rollover amount and the other issues like the possible merger of IFCI with other FIs has held back the IFCI package, sources said.

IFCI’s CMD V.P. Singh had earlier told The Indian Express that he “was expecting the package to be announced any time”.

Sources in the finance ministry indicated that IFCI has demanded Rs 10,000 crore bailout package mainly due to the fact that the total outstanding of the FI at present is around the figure.

In fact, as on March 31, 2002, the total outstanding of IFCI to other institutions and banks was to the tune of Rs 11,184 crore. Apart from LIC, BoB, SBI and PNB, the FI also has outstandings to some other social security funds to the tune of Rs 700 crore.

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However not the entire outstanding amount of Rs 11,184 crore would be due for IFCI in one go. According to finance ministry’s estimates, the FI would need to pay around Rs 5,000 crore by April 2004. Hence, the ministry is of the opinion that the package should not exceed Rs 5,000 crore.

The ministry is also of the opinion that the FI should be able to meet its obligations after April 2004 on its own. The restructuring exercise being considered for the FI should be such that this bailout should be final, sources added.

The Minister of State for finance Anandrao Adsul had hinted that the government is considering the merger of IFCI with IDBI and IIBI as one of the options for the financial institution. The other options being considered by the finance ministry includes keeping IFCI as a standalone FI which would concentrate only on medium and small sized corporates. The FI is also in the process of implementing a shift in its operations from fund based to fee-based activities.

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