Government Weighs New Solution For Problem Of Sick PSUs
After repeated changes in strategy to shut down sick public sector companies such as Scooters India Ltd., the government is contemplating a new approach. It is now considering a policy to separate land holdings of such sick companies from the process of their closure.
Shutting down sick central government-owned companies, those that have eroded their net worth, has been a task, as several of them face pending litigation—often related to land. Hence, the Finance Ministry is working on a new framework that would delink land holdings from the process of closing the PSU, and transfer the land held by it to the administrative department/ministry, said a government official on the condition of anonymity. BloombergQuint sought a confirmation from the Finance Ministry but has yet to receive one.
For instance, Scooters India has two ongoing land disputes with the Uttar Pradesh government for two land parcels. The new policy may lead to transfer of the land to the Department of Heavy Industries, thereby allowing the department to see through the litigation and its outcome. This may allow the closure of Scooters India, which has seen two such failed efforts before.
Other sick PSUs that may benefit from such an approach are Hindustan Fluorocarbons Ltd., Bharat Pumps and Compressors Ltd., and Hindustan Prefab Ltd.
The present policy for closure of PSUs gives first priority for utilising their land parcels for affordable housing projects. The land can also be sold to the central or state government departments or other state-owned firms within a period of eight months. If that’s not feasible, the land can be used for public purposes like parks and other utilities in consultation with NITI Aayog within 11 months, according to current guidelines.
As land and property is a state subject, necessary approvals have consumed a lot of time and kept the closure process on hold, the official quoted above said. The ongoing land disputes have made it difficult to turn around the land, and hence a decision to revamp the process is proposed, he said.
To be sure, earlier efforts at exiting such sick companies have included attempts at full divestment, sale of key assets as well as non-core assets.