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Punjab suffers loss of Rs 26 crore
Ruling party MP, business group gain
Ajay Banerjee
Tribune News Service

Chandigarh, July 17
The Punjab Government has incurred a loss of crores of rupees in settling the pending dues of two profit-making industrial units of the state. One unit is owned by a ruling-party MP and another by one of the oldest business families of Ludhiana, known for manufacturing woollens.

Both units, in separate developments, have defaulted on re-payments that were due to the Punjab Government. The office of the Accountant-General, Punjab, has estimated this loss at Rs 26 crore. The same was communicated to the state government two weeks ago. This was part of the ongoing annual audit for the financial year ending March 2005.

The family of the MP owes Rs 41. 25 crore ( Rs 11.50 crore on account of equity and Rs 29.75 crore by way of interest). The Ludhiana-based industrial group owes Rs 18.80 crore (Rs 6.11 crore on account of equity and Rs 12.69 crore on account of interest) They have been asked to pay Rs 23.52 crore (saving Rs 17.73 crore) and Rs 9.95 crore (saving Rs 8.85 crore), respectively, the findings of the AG point out. The AG’s report, however, does not mention what is the rate of interest charged from these companies.

All this is due to a policy called the one-time settlement (OTS) scheme, introduced in April 2003, by the Punjab Government to bail out defaulting industrial units. The OTS scheme has a formula under which defaulting industrial units are given relaxations and close to 50 per cent of their financial liability is waived off.

Questioning the policy for allowing profit-making industrial houses to take benefit of the OTS scheme, the AG says, “This scheme of the Punjab Government is deficient.”

In the last week of June, the Principal Accountant-General, Punjab, Mr Arijit Ganguly, shot off a letter to the state government criticising its OTS scheme. “The Punjab Government did not take into account the financial health of an institution while covering it under the OTS scheme,” says the AG.

It all started when the government’s industrial development arm, the Punjab State Industrial Development Corporation (PSIDC), entered into an agreement in 1993 with the company owned by the family of the MP. The agreement with the second company owned by the Ludhiana-based business house was carried out in 1997. These agreements made the PSIDC a partner in the projects of the two companies.

Under the financial collaboration agreement, the PSIDC, on making payments, held equity stake in these companies. After a specified period, the companies were supposed to buy back the equity at the then prevailing market price. However, this did not happen and the companies were declared defaulters.

The AG has asked the government why it did not appoint its nominee as Managing Director of the companies or sell off the equity (in the market). Further, raising a point the AG says, “The government lacked the financial prudence because it had laid down no criterion for judging the genuineness of the defaulters thereby ignoring the distinction between willful and genuine defaulters.”