NEW DELHI: The government has introduced a new policy for public sector companies for non-strategic sectors to allow the Ministry of Public Enterprises (DPE) to promote the privatization or closure of state-owned companies. In cases in which the liabilities are “exorbitantly high”, the government has indicated its willingness to take the path of the Bankruptcy and Insolvency Act (IBC).
The norms stipulate that the entire process of closure should be completed within nine months of approval by the Cabinet Committee on Economics (CCEA).
The move, following on from Finance Minister Nirmala Sitharaman’s political declaration on non-core sectors in the final budget, is to be implemented for PSUs in sectors other than nuclear, space, defense, transportation, telecommunications, energy and minerals, and financial services. The directive clearly states that in cases where a director or head of a PSU does not cooperate, the government has the right to replace him or her with a joint secretary from the relevant ministry, which is a clear message to the mess to reconcile.
The release of the directive coincided with protests against the government’s plan to privatize state-owned banks, suggesting the center did not appear in the mood to give way. The plan will benefit several companies that the government had proposed for sale but failed to find buyers in recent years.
DPE has been hired to work with the Department of Administration, Niti Aayog, Dipam and the Expenditures Department to compile the list of companies to be closed and divested. It will also move forward with the closure process, once CCEA clears it, which will include the scope of claims and budget support required to pay legal and other dues, including those to employees.