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AP to draw up strategy for PSU reforms phase II

V.Rishi Kumar

HYDERABAD, May 6

WITH the phase one of divestment process in crucial stage, the Andhra Pradesh Public Enterprise Department is now working towards drawing up a strategy for divestment for the phase II of the reforms process.

The Principal Secretary, Public Enterprise Department, Mr. P.C.Parakh, told Business Line that the second phase strategy would involve a detailed study of all uncovered enterprises out of the Phase I, and based on the findings, a blueprint for their div estment will be prepared.

"This exercise will be directed towards finding out if these PSEs have any relevance today in view of the changed economic scenario. In the backdrop of this environment, a clear recommendation on PSEs will be made to the State Government."

However, the Government will continue to handle certain programmes and schemes which are not available in the private sector. For instance, the weaker section finance is one area which the Government will have to address. Despite spread of the commercia l banking sector, these sections do not have access to funds. Therefore, we could not think of winding up these services, he said.

However, there are certain agencies such as Basix, promoted by Mr. Vijay Mahajan, an IIM expert, who have initiated pioneering work in micro finance for weaker sections. This innovative model ensures that the recoveries too are excellent. Therefore, ther e is a need to study them further and see how they fit into the existing framework.

Until 70's, PSEs were very well managed. Progressively, the character of professional management has loosened and has been taken over by a variety of vested interests. Therefore, these units cannot be run efficiently in the present form.

Citing the example of Allwyn Watches, Mr. Parakh said assets of these units have been lying idle. There was a situation where private bidders were ready to take over the company. Due to prolonged negotiations and delayed decisions, this was referred to the BIFR. Thereafter, it has become difficult to handle. The situation has changed and it is in Government's and the employees' interest to take quick decisions so that such companies can be revived, he said.

A VRS package has been drawn up for affected employees. After the VRS package is offered, the Social Safety Net Programme (SSNP) will be offered wherein employees will be trained in other areas and are guided to relocate, he said.

The World Bank has sanctioned $ 26 million to finance 70 per cent of the VRS amount of employees affected by privatisation and the balance 30 per cent is to be funded by the State. The DFID (Department for International Development) has sanctioned a gran t to create an institutional framework and to support the SSNP.

With a capital investment of Rs. 4,444 crores, about 40 PSEs in AP have accumulated losses of Rs. 1,894 crores. The gross State debt in them is estimated at Rs.4144 crores and the external debt is about Rs.14,742 crores. This apart, 60 cooperatives, with a capital investment of over Rs.1000 crores, have recorded losses of over Rs. 250 crores.