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ARTICLE : Nursing Sick Units Back to Health
Monday, 10 June 2013 03:05


Nursing Sick Units Back to Health

Once blue chip Central Public Sector Enterprises (CPSEs) like BSNL, Air India, Hindustan Cables Ltd andFertiliser Corporation of India today stand testimony as to how not changing with the changing times and technology could change their fate and turn them into sick units.

However, there has been always a silver lining in this regard as the government has been relentlessly making efforts to revive maximum number of sick public sector units (PSUs) to take the country's growth engine forward. This was possible with the help of revival packages provided by the government to these units.

With this aim, the Government set up the Board for Reconstruction of Public Sector Enterprises (BRPSE) in December 2004 to advise the government, inter-alia, on the measures to restructure/revive, both industrial and non-industrial CPSEs.

Since then cases of around 67 sick CPSEs have been referred to BRPSE up to October 2012, out of which the Board has made recommendations in respect of 62 cases, while returning five cases to the concerned ministries for further examination.

No wonder, there has been significant improvement in the overall condition of these enterprises since 2004. In comparison to 90 sick CPSEs in March 2005, there were 66 sick PSUs in March 2012. As per the BRPSE recommendations, of these cases, 45 were accepted for revival by the Government.

Most of the remaining cases are awaiting nod for revival while in case of  45 cases accepted for revival, 14 have already turned around including Bharat Pumps and Compressors, Cement Corporation of India, HEC, Andrew Yule and MECON and making profits while others have been infused with revival packages.

The companies for which revival packages have been approved include Hindustan Shipyard, HMT and Scooters India.

As the CPSEs operate under dynamic market conditions, it is quite natural to see ups and downs in their performance.

As far as the reasons for losses and sickness in CPSEs are concerned it varies from enterprise-to-enterprise. While in some cases, the cause is historical. In case of textile companies which were taken over from private sector on socio-economic considerations could not be modernised quickly.

Likewise other enterprises in the engineering and refractories sector too failed to modernise. Still others like some consumer goods companies and the new ones, turned sick over the years on account of inadequate job orders, high man-power cost, lack of finance, technological obsolescence, high input costs and competition from cheap imports.

In addition, other problems common to most sick and loss-making PSUs have been poor debt-equity structure, weak marketing strategies and slow decision-making process.

As one such policy initiative, the Sick Industrial Companies (Special Provision) Act, 1985 (SICA) brought theCPSEs under its purview in 1991 (made effective from 1992). Under the provisions of the SICA, CPSEs with at least five years of registration whose accumulated losses are equal to or have exceeded their net worth may be referred to the BIFR. During the last twenty years -- between 1992 and 2011, 63 CPSEs have been referred to BIFR.

The government has made several attempts to overcome "sickness" in these CPSEs through various policy initiatives.

The strategies for revival/restructuring of sick CPSEs include financial restructuring involving investment by the government in the form of equity participation, loans, waiver of debt etc and business restructuring which includes change of management, hiving off viable units from CPSEs for formation of separate company and closure of unviable units, besides formation of joint ventures.

The other strategies include manpower rationalisation by shedding excess manpower and introduction of voluntary retirement schemes.

The contribution of each and every company is significant as CPSEs are considered as the backbone of the economy and are equal partners in the nation building.

As on March 31, 2012, there were 260 CPSEs in the country. These companies contributed Rs 1.6 lakh crore to the central exchequer by way of taxes, duties, interest on loans and dividend, amounting to 21.4 per cent of government's revenue receipts.