Liquidity crunch likely to delay lifeboat for central PSUs

NEW DELHI: The revival process of 83 central public sector enterprises (CPSEs) is likely to be delayed due to the liquidity crunch. Public sector banks have said that they would not be in position to participate in bailing them out by waiving interests and infusing fresh capital. The government has approved Rs 9192.69 crore bailout package to revive 32 CPSEs. The package has cash assistance of Rs 2,013 crore and non-cash assistance of Rs 7,179.69 crore. The package has been extended to the sick firms on recommendation of the Board for Reconstruction of Public Sector Enterprise (BRPSE). The latest setback has come for Mining & Allied Machinery Corp (MAMC), which owes Rs 520.68 crore to State Bank of India (SBI). The bank has rejected its application for interest waiver. “Traditionally, PSU banks have been lenient with sick PSUs and have been offering loans at considerably lower interest rates. They also waived off interests in case companies went sick. However, due to the financial crisis, banks are facing liquidity crunch,” an official in the ministry of heavy industries said. Currently, there are 29 PSUs under the ministry that have been declared sick. The refusal to bail out ailing PSUs forced the government to divest up to 74% stake in HMT Bearings. “It’s not that the banks are asking for higher interest rates from PSUs. Already, we take into account that the company is sick and under financial strain. However, given the current situation, it is not possible to offer freebies like full waiver of interest charges or repayment of principal amount only after the company has turned profit making,” an SBI official said. The government had recommended that the revival of sick PSUs should be taken by the concerned administrative ministry and it should prepare a financial and business restructuring plan. The revival scheme includes waiver of loan and interest, conversion of loan into equity, fresh cash infusion and change of management. Some companies such as Easter Coalfields, Praga Tools and Hindustan Antibiotics for which the revival scheme was approved have started making profit since the last financial year. The PSUs are planning to request banks to spread their loan period over a longer term and allow part-payment of the interest if the full outstanding amount cannot be waived off.