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Government may pull the plug on Puncom disinvestment
Rethink due to a feeling that government may not get full value of the company and its assets through this route, besides it doesn’t have any debt despite the losses; it is taking a relook at the strategic disinvestment of its 71.20% equity holding in the telecommunication and information technology (IT) equipment manufacturing and solutions company.
The Punjab government appears set to pull the plug on strategic disinvestment of loss-making public sector undertaking Punjab Communications Limited (Puncom).
It is taking a relook at the strategic disinvestment of its 71.20% equity holding in the telecommunication and information technology (IT) equipment manufacturing and solutions company. The industries department has been asked to again study the financial situation, assets and staff position of the public sector enterprise and suggest the available options, officials privy to the developments said after a meeting was held recently by the finance department with the industries departments and Puncom under the chairmanship of the chief secretary.
The state government holds the controlling stakes in Puncom though Punjab Information and Communication Technology Corporation Limited (Punjab Infotech) and bulk of the remaining equity is held by public. A decision was taken by the state cabinet in the previous Capt Amarinder Singh-led Congress government four years ago to sell off the government equity in Puncom, Punjab Financial Corporation (PFC) and Punjab State Industrial Development Corporation (PSIDC) through strategic disinvestment with transfer of management control. The decision to disinvest in the three loss-making state undertaking was based on the recommendations of the Punjab Governance Reforms and Ethics Commission.
The cabinet had then also set up a core group under the chief secretary to carry out the process and later the directorate of public enterprises and disinvestment floated a global invitation for expression of interest (EoI) in September 2020 to sell off the state government’s entire equity holding of 71.20% in the company, but it did not fructify. The company’s share closed at ₹32.65 in stock market on Tuesday.
“There is rethinking on disinvestment of Puncom due to a feeling that the government may not get full value of the company and its assets through this route. The company, though incurring losses, has not only no debt liability but also possesses assets and reserves worth roughly ₹150 crore,” one of the officials quoted above said.
The industries department has been asked to reduce the employee cost by offering voluntary retirement scheme to its staff or try to adjust them in other departments on deputation. “Once this is done, the government may then decide on how to dispose the building, land and other fixed assets, the official added, refusing to be identified.
Of the 187 regular staff, 22 have already opted for VRS and six others gone on deputation. “Puncom plans to make a fresh offer for VRS to its employees as its liquidity has been affected due to continuous losses, and cash reserves are being used to meet employee salary and other expenditure,” a company official said.
Failure to upgrade tech pushed it into losses
Puncom, established in 1981, had started off well but then slipped into losses as it failed to upgrade its technology, from analog to digital, and incurred a loss of ₹11 crore last year. The company, according to officials, is not getting adequate new business, and is mainly doing maintenance work for some existing clients or in collaboration with other companies. Punjab has 46 working state-level undertakings and seven inactive units, besides some cooperative apex institutions, with total equity infusion of ₹23,851 crore by the state government as on March 31, 2022. The total outstanding debt of these undertakings stands at ₹43,204 crore. The state government had directed these state-level public sector undertakings for a 5% return on equity to the exchequer annually, but only three complied and paid a miniscule total dividend of ₹3.74 crore last year. Puncom, which reported a turnover of ₹20 crore from sales, services and other income in financial year 2021-22, has also not paid any equity dividend to the state government in past five years.
