The Centre is giving a fresh lease of of life via cash support to some central public sector enterprises (CPSEs) to let them stay afloat, even as the strategic sale policy is put on the backburner.
With less appetite for privatisation, the Narendra Modi 3.0 government’s approach towards public capital management is now “holistic,” sources said.
Take the case of RINL, also known as Vizag Steel, whose privatisation plan was hanging on fire for over three years after the Cabinet decided in February 2021 that the government must exit the firm in line with the new public sector enterprise policy which considers steel manufacturing to be a non-strategic sector.
With the recent return of the Telugu Desam Party (TDP) in Andhra Pradesh and to the ruling alliance at the Centre led by the Bharatiya Janata Party, the Modi government is giving it a shot to revive the fortune of the company.
TDP, which otherwise pushes for a public-private partnership model for the development of the state, has opposed the privatisation of the plant. The plant is struggling due to a lack of captive mines for iron ore and coal, cyclic markets and the liquidity crisis.
The Centre has already infused Rs 1,600 crore into the steel plant in the last two months including Rs 500 crore in equity and Rs 1100 crore in working capital loans to keep it afloat. The government is now working on a package of Rs 15,000-20,000 crore for the steel maker that would involve fresh equity infusion and fresh working capital loans by the Centre along with restructuring of bank loans, sources said.
People aware of the goings-on in the plant are sceptical about the revival of the plant that lacks captive mines, which inflate input costs due to purchases from the open market, besides legacy issues. Its net worth has fallen to just Rs 391 crore in FY23 from a high of Rs 13,659 crore in FY12, due to the accumulation of losses over the years.
Like Neelachal Ispat Nigam Ltd (NINL) bought by Tata Group in January 2022, privatisation of RINL was crucial to reviving the fortunes of the plant and protecting the interest of the employees.
Another basket case is that of BSNL. The state-owned telecom operator last showed profits in 2008-09 and in the last 15 years post that, its net loss topped Rs 1.3 lakh crore. Notably, in the three revival packages, the government has spent Rs 3.2 lakh crore on BSNL. Experts attribute the reason for the derailment of BSNL to the delay in the adoption of new technologies like 4G just like private operators did, employee inefficiency, weak customer service, and inability to control huge expense outgo in terms of employee bills.
“In terms of financials, yes, BSNL was bleeding. But in the last 2 years, we have had a positive Ebitda. So we are not in the red on Ebitda,” communications minister Jyotiraditya Scindia said at a recent Express Adda. With regard to 4G, the minister said BSNL chose the hard route as it wanted to launch 4G on domestic telecom technology.
As Kunal Chaudhary, tax partner at EY, says, “the government still wants to revive BSNL for security reasons, and create connectivity infrastructure, especially in the rural areas where there is a need for large investments.”
While for BSNL, a continuous pumping of money could be the way forward to make it stay afloat while bleeding, the government has higher chances of success with its own foot forward in the semiconductor space. The modernisation of state-owned Semi-Conductor Laboratory (SCL) in Mohali even at an initial amount of around Rs 10,000 crore could get the ball rolling and help the organisation carve out its own financially sustainable path, unlike the telecom PSUs – BSNL and MTNL, where the government has continuously pumped money, sector experts say.
“SCL has a strategic importance for developing the semiconductor ecosystem of India. With modernisation, it will probably be the only option available for chip design companies in the country to do prototyping and low volume production,” said Danish Faruqui, CEO of Fab Economics – a US-based boutique semiconductor fab/OSAT greenfield projects advisory and implementation consultancy.
According to Faruqui, to transform India into a semiconductor product nation, productisation needs to be a big mandate for SCL. “This whole business of productisation is very profitable. It is more profitable than high-volume manufacturing because it is done in lower volumes and incurs less cost,” Faruqui said.
Experts said the government can look at re-building SCL in phases, starting with low volume production till 45 nm node and then move towards lower nodes such as 28 nm.
Chaudhary says, “SCL would require to find international players who are willing to give them the technology to get into lower nodes. But to get to lower node technology and modernisation, it would need at least $3-4 billion (around Rs 34,000 crore) of investments.”
In the case of Pawan Hans, a 51-49 joint venture with state-run oil explorer ONGC, the Centre was rather unlucky. Despite completing the strategic sale processes, it had to disqualify the winning bidder consortium Star 9 Mobility due to integrity issues, reflecting many a slip between cup and lip in strategic disinvestment. Now, the Centre will likely infuse a few thousand crore rupees for its revival including the purchase/leasing of a new fleet of helicopters to replace the ageing fleet. The recourse to privatisation of Pawan Hans may be out of sight for now.
From: financialexpress
Financial News
