KR News Desk
Srinagar Oct 9
Jammu and Kashmir administration on Sunday approved the privatization of Jammu and Kashmir Cements Limited (JKCL), a public sector unit, saying the company was a loss-making entity due to mounting liabilities.
The Administrative Council (AC) led by Lieutenant Governor Manoj Sinha approved the proposal for disinvestment of the JKCL “after exploring all possibilities for its revival.”
Disinvestment in public sector undertakings in India is a process of public asset sales to private companies.
Rajeev Rai Bhatnagar, Advisor to the Lieutenant Governor and Arun Kumar Mehta, Chief Secretary, J&K attended the meeting.
The disinvestment in JKCL was necessitated as the company was not able to sustain and manage its finances properly and maintain efficiencies of operations over the period of time, an official statement issued said.
The company was also not able to fully exploit the potential and sustain stiff competition in the market despite having dedicated limestone mining leases at its disposal, it said.
“In spite of enjoying economy of scale, the company failed to show requisite growth and generate cash flows and operating margins during the last more than two decades,” reads the statement.
A government spokesperson said the company despite having assured demand from the Government against advance payments has not grown even marginally over the long period of time and has rather shown a sharp decline in its production and revenues from 2012-13 onwards.
Managerial and financial inefficiencies, coupled with failure to exploit locational advantage, has made the company defunct further depreciating plant and machinery without any resultant productivity, it said.
The government said the company had not only accumulated losses but is also burdened with liabilities on account of salaries and outstanding wages and payments in addition to default in statutory deductions like CP fund, GST etc.
In 2021, the Administrative Council vide had given in-principle approval for the complete sale of JK Cements Limited by exploring the option of ascending e-auction and authorization to utilize 240 kanal of land adjacent to Khrew Plant at Industrial Estate.
The interested Bidder should have a minimum net worth of Rs.250 Crore. The interested bidder should have a net positive EBITDA in at least three out of the immediately preceding last five financial years. Eligible entities are permitted to form a Consortium to participate in the transaction. The maximum number of members, including the lead members, in a consortium, can be four.
“The key principles and actions underlying the recommended disinvestment modality include 100% ownership in JKCL in favour of a private company or consortium. Further, all the assets of the JKCL on an as-is-where-is basis, along with approvals and licenses (including mining license) will be transferred as part of the share purchase sale,” the official statement said.
It was further decided that the Government of J&K will take over all employees of JKCL and the acquirer will be responsible for staffing requirements to get the plant operational.
Moreover, all legacy and material liabilities will be carved out and assigned to the Union territory.
All the pre-bid requirements including renewal of the lease in favour of the corporation, power availability, finalization of accounts and their audits etc. shall be completed before the start of an auction process.
While disinvesting, it shall be ensured that the provisions of the Mines and Minerals (Development and Regulation) Act, 1957 and the rules framed there under are not violated in any case. It was also decided that the process of reverse auction will be adopted for the purpose of disinvestment.
The step was expedient as the company has turned defunct for more than two years. The attempts for the revival of the company have failed in absence of fund flow that could have paved way for the revival of the Company.
