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Centre to take Rs 219 cr hit on NJMC selloff

Ishita Ayan Dutt & Kausik Datta

The central government is set to sell National Jute Manufacturers Corporation Ltd at a loss of Rs 2.19 billion, which will have to be borne by the government on account of accumulated liabilities. This is in sharp contrast to the windfall gains that have accrued to the government through other divestments namely, IBP, CMC, VSNL, Hindustan Zinc and Balco.

The government has relieved the bidders from the accumulated liabilities of the mills while they will have to bear the gratuity liabilities. These liabilities, in turn, will be set off against the bid prices of each mills separately.

According to the clause set forth, except gratuity of the workers engaged in the six mills, other liabilities need not be taken over by the bidders. If any contingent liability matures, the same will continue to be the liability of the parent company.

Liability other than gratuity of continuing workers is at Rs 2.27 billion and the gratuity of continuing workers is Rs 204 million. After setting off the gratuity with offer prices received, the net offer for purchase of the liability-free jute mills is Rs 277 million.

Liability of factory employee attaining the age of superannuating on the date of takeover will also continue to be the liability of the parent company and will not devolve on the new management.

The accumulated losses of the mills stands at Rs 25 billion. Government loan till date is at Rs 9.6 billion and the accrued interest on government loan is at Rs 11.81 billion.

Industry sources said, the government has resorted to divestment of the mills despite negative returns as plant and machinery which were installed a century back are in poor condition due to normal wear and tear coupled with age-old technology. The government did not even fixed a reserve price for the mills - a deviation from the normal practice adopted for other cases.

The six mills - National, Kinnison, Khardah, Alexandra, Union and RBHM which are under the Board for Industrial and Financial Reconstruction will take a final call on the issue during its August hearing.

According to surveys, the funds required for rehabilitation of the mills would be around Rs 4.02 billion.

NJMC, the only public sector undertaking for jute goods manufacture, was incorporated in 1980 with five of the six mills around Kolkata and one at Katihar, Bihar. Prior to nationalisation, the mills were lying closed for a very long time.

The successful bidders for the mills are Ambica Multifibres for National, Kinnison and RBHM, Kali Impex Pvt Ltd for Alexandra and Cheviot Co for Khardah.

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