Uptron revival plans again skewed

Plans to revive Uptron India Ltd have again gone awry
due to bureaucratic procrastination. The delay has not only proved fatal for the
company, as the banks have been given permission to recover their dues but will
also create a whopping financial burden on the state government to the tune of
several hundred crore of rupees.

Sources said that the cabinet in principle had approved
the Uptron revival package on December 8,1999. But even after 17 months, the
packages were not sent to the Board for Industrial and Financial Reconstruction
(BIFR) for approval. Even the Industrial Finance Corporation of India (IFCI),
which was appointed as an operating agency for revival, was not informed
properly.

On the same day, during the Cabinet meeting, a
presentation was made on revival package of the company. As per the package,
Uptron required Rs 28 crore immediately as working capital. Besides, a term loan
of Rs 9 crore was required for technological upgradation of the company. The
state government was not required to pump even a single penny in the entire
project.

In the package one time settlement of old dues was
proposed, which could have assisted the company in getting fresh loans. But it
was later stated that there was a liability of Rs 332 crore against bank dues
pending on the company. To settle the dues, it was proposed that government
bonds of Rs 90 crore would be issued to banks on an interest of 12.5 percent per
annum for period of 10 years.

Interestingly, even the banks agreed to settle 25
percent of the dues and were ready to write off the remaining 75 percent.
"The reason was that the banks considered pending loan on Uptron as
agreement, was reached between the banks and the management in August
1999," said a union leader. Besides that the disinvestments of the
company’s share in future was also proposed. "It was planned that from
the third year, shares would be disinvested slowly for private equity in the
company," said the leader.

But the proposal gathered dust for more than 17 months.
The bureaucratic delay proved fatal for the company’s revival plan as the BIFR
now has given permission to two banks-Allahabad Bank and Punjab National Bank-to
realize their pending dues from the company. The employees fear that a few more
banks could move applications with the BIFR for realization of their dues.

Sources said that closure of the company would create a
liability of Rs 401 crore. This includes liability of Rs 332 crore against banks
loans. "There are loans against government guarantee of Rs 37.70 crore
which in case of closure would have to be cleared immediately," said the
sources. In additions to this, the UP Electronics Corporation Ltd, the holding
company of the Uptron, gave a guarantee of Rs 117.74 crore.

With interest over a period of time, the total liability
has increased up to Rs 290 crore. "As the electronic corporation has no
assets of its own, the amount will have to be paid by the government which own
the company," said the leader. As compared to liability, the net merely Rs
45.50 crore. "Even if the assets of the company are sold off, then too the
government will not be able to clear off the bank loan liabilities," the
sources added.

In addition to this, closure will also create
liabilities of pending salary and compensation to the employees. Presently, Rs
35 crore is pending against the salary of the employees.

"The government will also be required to pay Rs 39
crore to employees as compensation under the voluntary retirement scheme,"
said the leaders. "This could have been avoided if the package had been
sent to the BIFR timely in which the total running cost of Rs 22 crore was
estimated, they added.