The proposal for time-bound closure of sick or loss-making CPSEs and disposal of their assets is under inter-ministerial consultation
The cabinet may soon consider revised guidelines for time-bound closure of loss-making central public sector enterprises (CPSEs) and disposal of their assets. These may include measures to simplify the process of closure under the Companies Act by delinking disposal of land assets from the closure process of such CPSEs.
“The proposal for time-bound closure of sick or loss-making CPSEs and disposal of their assets is under inter-ministerial consultation. The revised guidelines propose to delink disposal of immovable assets from the closure process of CPSEs. It also proposes to simplify the process under the Companies Act, 2013, for removal of the name of a company under closure from the Register of Companies, thus ensuring timely closure of CPSEs," a government official said on condition of anonymity.
“To ensure completion of closure of loss-making CPSEs, we will introduce a revised mechanism that will ensure timely closure of such units," Union finance minister Nirmala Sitharaman had said in her FY22 budget speech. The budget also proposed to set up a special purpose vehicle for monetization of non-core assets, largely surplus land, with ministries and CPSEs.
The revised guidelines are likely to prioritize shutting down sick units where all efforts, including privatization through strategic disinvestment, have failed, the official said. The department of public asset management has not found strategic investors for Scooters India Ltd and Bharat Pumps and Compressors Ltd even after inviting expressions of interest.
An oversight committee in NITI Aayog monitors the implementation of all cases of closure, along with prescribed timelines, according to the current guidelines. The administrative ministry approaches NITI Aayog for resolution of problems arising out of the sale of immovable assets of CPSEs approved for closure.
The exchequer suffered a loss of ₹31,635 crore because of 70 CPSEs in FY19, as per data submitted in the Lok Sabha on 17 March last year by minister of heavy industries and public enterprises Prakash Javadekar. Between August 2013 and March 2020, the government approved closure of 21 loss-making CPSEs, including HMT Watches Ltd, Indian Drugs and Pharmaceuticals Ltd, and Hindustan Fluorocarbons Ltd.
“CPSEs function under the administrative control of the respective ministries/ departments. The board of CPSEs/administrative ministries monitor the performance of CPSEs, including identification of reasons for losses. Common problems faced by CPSEs include obsolete plants and machinery, heavy interest burden, resource crunch, low capacity utilization and productivity, surplus manpower, high input cost," Javadekar had informed Parliament.
The parliamentary committee on public undertakings in its report Review of Loss Making CPSUs in FY21 observed that while a private company has autonomy to dispose of some of its assets, including land, to come out from the worst scenario, but a CPSU does not have such autonomy.