In a bid to revive the 16 ailing textile mills of the National Textile Corporation, the government has now decided to form separate joint ventures for each of the 16 sick units.
While retaining ownership of prime land associated with these mills, government will now give land on 33 years lease to the JV partner who in turn would to infuse fresh funds, a textile ministry official told Hindustan Times on Thursday.
Under the proposed business model, NTC will continue to own a majority stake of 51 per cent and will give only 49 per cent to the private companies.
Government will initiate the process of inviting expressions of interest (EOI) within a fortnight.
“The EOI will be invited from parties that are keen for joint venture partnership with any of the these 16 sick units. The process should be completed in a fortnight after the bids are vetted by the Law Ministry,” the official said.
To protect the interest of employees of these mills, the official said, NTC will roll out a voluntary retirement scheme (VRS) for the 7,000 employees. “We expect 80 per cent of these employees will opt for the VRS and it is likely to cost around Rs 200 crore,” the official said. Earlier a Group of Ministers had approved a revival package for these 16 NTC mills through the joint venture route.
Under the joint venture plan, the ailing mills will be leased out to the venture partner initially for a period 33 years that would be extendable by another 33 years.
Government’s equity in the joint venture will be in form of land and building and the joint venture partner will make the necessary capital infusion on a case-to-case basis, the official said.
“Day-to-day operations of the mill will remain with the JV partner while the NTC will have a majority on the board,” the official said. The official said, "If the mill continues to make losses for 5 years in succession even after going the JV route, government can ask the private partner to exit.”
“Government may also consider putting in fresh funds in the joint venture if the mills earn profit for a five-year period under the joint venture operation,” the official said.
The 16 mills that will go the JV way include 10 in Maharashtra, two in West Bengal, and one each in Uttar Pradesh, Gujarat, Orissa, and Kerala, the official said.
NTC runs 40 textile mills with accumulated loss of Rs 6,500 crore accumulated over a period of 30 years.
Earlier, NTC had sold five of its mills in prime locations to different bidders significant among which are the Mumbai Textile Mills to DLF group for Rs 702.2 crore, Jupiter and Elphinstone Mills to Indiabulls Property for Rs. 725 crore,
Apollo Mills to Lodha group for Rs. 180 crore and Kohinoor Mills to Matoshree Realtor Pvt Ltd for Rs 421 crore.