PSUs with high liabilities may face IBC-based closure

What is the news?

The government has unveiled a new public sector companies’ policy for non-strategic sectors so that the department of public enterprises (DPE) can drive the privatisation or closure of state-run firms.

In cases where the liabilities are “exorbitantly high”, the government has indicated its willingness to go for the Insolvency & Bankruptcy Code (IBC) route as well.

What are the key points of the policy?

The policy clearly states that in cases where a director or the head of a PSU fails to cooperate, the government will have the right to replace him or her with a joint secretary rank from the department concerned.

The plan will be beneficial to several companies which the government had proposed to sell but has not been able to find buyers for the last several years.

DPE has been entrusted with preparing the list of companies that would be taken up for closure and disinvestment in consultation with the administrative ministry, Niti Aayog, Dipam and the expenditure department.

DPE will also drive the closure process once CCEA clears it, which will include the extent of receivables and the budgetary support required to clear statutory and other dues, including those to employees.

The latest move is to be implemented for PSUs in sectors other than atomic energy, space, defence, transport, telecommunications, energy & minerals and financial services.

About Department of Public Enterprise (DPE)

The Department of Public Enterprises is the nodal department for all the Central Public Sector Enterprises (CPSEs).

It formulates policies pertaining to CPSEs, and collects and maintains information in the form of a Public Enterprises Survey on several areas in respect of CPSEs.

Department of Public Enterprises is headed by Secretary to the Government of India

– The Estimates Committee of 3rd Lok Sabha (1962-67) stressed the need for setting up a centralized coordinating unit, which could also make continuous appraisal of the performance of public enterprises. This led to the setting up of the Bureau of Public Enterprises (BPE) in 1965.

– In May 1990, it was made a full-fledged Department, known as the Department of Public Enterprises (DPE). Presently, it is part of the Ministry of Finance.

Source: This post is based on the article “PSUs with high liabilities may face IBC-based closure” published in TOI on 15^th Dec 2021.