Standing Committee Reports 228Th.Pdf

DEPARTMENT-RELATED PARLIAMENTARY STANDING COMMITTEE ON INDUSTRY

TWO HUNDRED AND TWENTY-EIGHTH REPORT ON ACTION TAKEN NOTE ON THE 219TH REPORT OF THE COMMITTEE ON REVIVAL AND RESTRUCTURING OF CEMENT CORPORATION OF INDIA LTD. PERTAINING TO THE MINISTRY OF HEAVY INDUSTRIES AND PUBLIC ENTERPRISES (DEPARTMENT OF HEAVY INDUSTRY)

(PRESENTED TO THE RAJYA SABHA ON 27TH MARCH, 2012) (LAID ON THE TABLE OF THE LOK SABHA ON 27TH MARCH, 2012)

RAJYA SABHA SECRETARIAT NEW DELHI MARCH, 2012/CHAITRA, 1934 (SAKA) Website:http://rajyasabha.nic.in E-mail:[email protected] PARLIAMENT OF INDIA RAJYA SABHA

DEPARTMENT-RELATED PARLIAMENTARY STANDING COMMITTEE ON INDUSTRY

(PRESENTED TO THE RAJYA SABHA ON 27TH MARCH, 2012) (LAID ON THE TABLE OF THE LOK SABHA ON 27TH MARCH, 2012)

RAJYA SABHA SECRETARIAT NEW DELHI

MARCH, 2012/CHAITRA, 1934 (SAKA)

CONTENTS

PAGES

1. COMPOSITION OF THE COMMITTEE ...... (i)-(ii)

2. INTRODUCTION ...... (iii)

3. REPORT ...... 1—8

(i) Chapter – I Recommendations/observations, which have been accepted by the Ministry...... 2

(ii) Chapter – II Recommendations/observations which the Committee does not desire to pursue in view of the Government’s replies...... 3—4 (iii) Chapter – III Recommendations/observations in respect of which the Committee has either not accepted the replies of the Ministry or has asked the Ministry to review its replies ...... 5—7

(iv) Chapter – IV Recommendations/observations in respect of which final replies of the Ministry have not been received ...... 8

4. MINUTES ...... 9—12

COMPOSITION OF THE COMMITTEE (Constituted w.e.f. 31st August, 2011)

RAJYA SABHA 1. Shri Tiruchi Siva — Chairman 2. Shri G. Sanjeeva Reddy 3. Shri Bhubaneswar Kalita 4. Shri Ashk Ali Tak 5. Shri K.B. Shanappa 6. Shri Natuji Halaji Thakor 7. Prof. S.P. Singh Baghel 8. Shri Srinjoy Bose 9. Shri Nandamuri Harikrishna 10. Dr. Vijay Mallya

LOK SABHA 11. Dr. Rattan Singh Ajnala 12. Shri Kamlesh Balmiki 13. Shri Sabbam Hari 14. Shrimati Poonamben Veljibhai Jat 15. Shri Ramsingh Kaswan 16. Shri Kaushalendra Kumar 17. Shrimati Putul Kumari 18. Shri M. Krishnaswamy 19. Shrimati Ingrid Mcleod 20. Shri Bharat Ram Meghwal 21. Shri Somen Mitra 22. Shri Gorakhnath Pandey 23. Shri Kishn V. Patel 24. Shri R.K. Singh Patel 25. Shri B.Y. Raghavendra 26. Shri Ramsingbhai Patalbhai Rathwa 27. Shri Ijyaraj Singh 28. Shri E.G. Sugavanam 29. Shri Bibhu Prasad Tarai 30. Shri Suresh Kashinath Taware 31. Shri Subhash Bapurao Wankhede

(i) (ii)

SECRETARIAT Shri S.N. Sahu, Joint Secretary Shrimati Sunita Sekaran, Director Shri Vimal Kumar, Joint Director Shri Anil Kumar Saini, Assistant Director INTRODUCTION

I, the Chairman of the Department-related Parliamentary Standing Committee on Industry, having been authorized by the Committee, hereby present this Two Hundred and Twenty-Eighth Report on Action Taken Notes furnished by the Ministry of Heavy Industries and Public Enterprises (Department of Heavy Industry) on the recommendations contained in the Committee’s Two Hundred and Nineteenth Report on the Revival and Restructuring of Cement Corporation of India Ltd. pertaining to Department of Heavy Industry.

2. I thank the Ministry of Heavy Industries and Public Enterprises (Department of Heavy Industry) for furnishing the Action Taken Notes on the recommendations contained in the Committee's Two Hundred and Nineteenth Report.

3. The Committee in its meeting held on the 29th February, 2012 considered and adopted the report.

TIRUCHI SIVA NEW DELHI; Chairman, February, 2012 Department-related Parliamentary Standing Committee on Industry

(iii)

REPORT

The Action Taken Report of the Committee deals with the Action Taken by the Ministry of Heavy Industries and Public Enterprises (Department of Heavy Industry) on the recommendations contained in the Committee’s Two Hundred and Nineteenth Report on the Revival and Restructuring of Cement Corporation of India Ltd. pertaining to Department of Heavy Industry.

2. Action Taken Notes have been received from the Ministry of Heavy Industries and Public Enterprises (Department of Heavy Industry) in respect of the recommendations contained in the Report. These have been categorized as follows:

Chapter–I The recommendations/observations, which have been accepted by the Ministry.

The Committee is pleased to observe that the Ministry has accepted its recommendations as mentioned in the Chapter–I of the Report.

Chapter–II The recommendation/observations which the Committee does not desire to pursue in view of the Government’s replies.

In respect of these recommendations the Committee is convinced with the logic and explanations advanced by the Ministry and therefore do not want to pursue them for the present. Chapter–III The recommendations/observations in respect of which the Committee has either not accepted replies of the Ministry or has asked the Ministry to review its reply.

The Committee expresses its concern over the non-implementation of recommendations contained in Chapter–III and desires that the Ministry should furnish logical explanations therefore.

Chapter–IV The recommendations/observations in respect of which final replies of the Ministry have not been received.

In respect of recommendations placed in Chapter-IV, the Ministry has either furnished the interim replies or couched its language in vague terms like noted for compliance/guidance, therefore, the Committee desires that the Ministry should furnish Action Taken Notes in respects of recommendations categorized in Chapter-IV in detail and to the point, as per the intention and spirit of the recommendations of the Committee.

3. The details of the ATR are being discussed in the succeeding pages. 2

CHAPTER-I

Recommendations/Observations, which have been accepted by the Ministry

The Eleventh Five Year Plan document also takes note of the point and observes “The production of cement is a continuous process requiring uninterrupted power supply. Since the availability and quality of grid power supply continue to be a problem, the use of captive power has been increasing. Most of the cement units have installed captive power generation capacities to the extent of 60% to 100% of their requirement. The captive power generation capacity of cement industry is estimated to be 1825 MW at present, of which 61 % is based on diesel and the rest 39% on coal. With growing uncertainties of grid power availability, it is estimated that 2000 MW captive power would be required during Eleventh Plan”.

Recommendation The Committee strongly recommends both to the Planning Commission and the DHI to pay heed to the above observations of the Eleventh Five Year Plan document and seriously undertake efforts for establishing captive power plants in the plants of the CCI. (Para 29)

Action Taken Note In Tandur unit, CCI is getting power supply from APGPCL (14 MW) and APCPDCL (8MW), which is sufficient for the existing plant, in addition, CCI has 4 MVA DG Set to supplement the requirement. As regards the other two operating unit at Bokajan and Rajban, capacity of these units is too small to set up captive power plants of economic size. CCI has already 4 MVA DG Set at Bokajan also to supplement the power requirement. Establishment of captive power plants in the operating units of CCI is, therefore, neither necessary nor feasible at this stage.

2 3

CHAPTER-II

Recommendations/Observations which the Committee does not desire to pursue in view of the Government’s replies

Recommendation The Committee while taking note of the measures of the Government of India for revival and restructuring of the CCI, would like to know the outcome of the money spent. It recommends that the Department of Heavy Industry (DHI) must closely monitor the way in which money is being spent for achieving the targeted goal and submit a detailed report in this regard to the Committee. (Para 22)

Action Taken Note As per recommendations of BIFR, the Govt. of India had provided funds as under:–

(i) Non-Plan Loan : Rs. 128.62 crore (Out of sanctioned funds of Rs.153.62 crore only Rs.128.62 crore were availed by the Company

(ii) Plan loan and equity : Rs. 30.67 crore

Rs. 159.29 crore

The above amount has been spent as under:–

Sl. No. Description Amount

1. Secured creditors Rs. 22.27 crore 2. Consortium Banks Rs. 52.83 crore 3. Unsecured creditors like public deposits, Indira Gandhi Foundations, etc. Rs. 49.26 crore 4. Dues of employees Rs. 4.25 crore 5. Expansion of Rajban Unit Rs. 6.80 crore Rs.135.41 crore

Further, work of up gradation/modernization of Tandur Unit and expansion of Bokajan Unit is to be carried out by funds available out of sale proceeds of the non-operating units. It is also stated that a monitoring system of the Company has been devised by the Hon’ble BIFR which is stated under General Terms and Conditions of the Scheme vide para No. (iii), (iv) & (v) and are reproduced below:–

3 4

(iii) The company shall constitute a management committee in a form satisfactory of BIFR/Monitoring Agency (MA), to review, on monthly basis, the operation of the company in all aspect and closely monitor the implementation of the project and rehabilitation scheme till such time dues of secured creditors are paid in full. BIFR’s special director shall also be member of the Committee along with one representative each from the Institutions and Banks.

(iv) The company shall submit to the MA/BIFR, on quarterly basis, the progress Reports, in the prescribed format, regarding the implementation of the scheme. MA shall monitor the implementation of the scheme in all its aspects and shall submit a review of the implementation of the scheme to BIFR on half-yearly basis along with the audited/provisional result duly signed by the managing director of the company.

(v) The package of reliefs and concessions shall be subject to annual review and the MA/secured creditors shall have the right to step up rate of interest/right to recompense for the sacrifices as specified in the scheme/accelerate the payment should be profitability cash flow and other circumstances of the company warrant, based on such annual review, subject to prior approval of the BIFR.

The system is being followed scrupulously. Department of Heavy Industry is also monitoring closely by holding Performance Review Meetings periodically at the levels of Hon’ble Minister (Heavy Industries and Public Enterprises), Secretary (Heavy Industry) and Joint Secretary concerned, for achieving the targeted goals of the Company. 5

CHAPTER-III

Recommendations/Observations in respect of which the Committee has either not accepted the replies of the Ministry or has asked the Ministry to review its replies

Recommendation 1. The Committee notes with concern that the Cement Corporation of India which was established to be a leading player in manufacturing cement and promoting balanced regional development had to go through such tragic state of affairs. It also notes with concern that no attempt was made for renovation, replacement and modernisation of its plants. In the background note supplied to the Committee, it has been stated under the heading ‘Future Strategy for Sustainable Revival’ that “The company learning from past mistakes plans to continue to invest a part of its profit for renovation, replacement, modernisation of its plants so as to keep them updated and avoid occurrence of obsolescence of technology in future”. The Committee feels that the Corporation committed a costly mistake. It is heartening to note that the Corporation has adopted a future strategy for sustainable revival one of the key components of which is to use part of its profit for modernisation and renovation. In fact, the Eleventh Five Year Plan dealing with the cement industry has observed that “The industry has been modernising and some units can now boast of having the state of the art technology plants with energy consumption comparable with the best in the world”. The Committee is happy to note that the officials of the Corporation are hopeful to not only register profit but also compete with the key players in the market. In fact, in its presentation before the Committee, the Corporation outlined the measures taken to turn around the company. The Committee sincerely feels that the stress given on expansion and modernisation of the operating plants would result in its revival and progress. (Para 15)

Recommendation The Committee notes that the host of measures adopted to support the CCI has helped it to transform this ailing Corporation and bring it to a level of profitable company at present. This is a noteworthy success. It has to be carried forward and the momentum of its revival has to be sustained. (Para 20)

Further Recommendations The Committee is disappointed to note that the Department has not forwarded its Action Taken/Comments on para nos. 15 and 20. It takes a serious view of this Casual approach and is of the opinion that the matters highlighted in the said paras are of great importance. The Committee, therefore, reiterates its earlier findings as stated in the said paras and expects the Department to come out with a suitable reply.

Recommendations 2. On the basis of the information supplied to the Committee it is evident that the recommendation of the BIFR to close down the aforementioned seven unviable units (at para 18) was revisited. Based on the revised assessment it was found that it would be

5 6 possible to revive the five non-operating units (Adilabad, Kurkunta, Nayagaon, Akaltara and Mandhar Plants) and other three remaining non-operating units such as Charkhi Dadri, Delhi Cement Grinding Unit and Bhatinda Cement Grinding Unit would be sold out after the re-evaluation of their assets. (Para 23)

3. The Committee felt that it is a worthwhile effort as the aforementioned five non- operating units have access to vast reservoir of limestone which is essential for manufacture of cement. The Techno Economic Feasibility Report for revival of these units have been prepared and such reports indicate the possibility of their revival to address the rising demand for cement in our country. The feasibility report outlines the plan for next ten years which would enhance the capacity of the cement plants and increase its economic operations. (Para 24)

4. The Committee strongly recommends that due attention must be paid to the Techno Economic Feasibility Reports for the revival of non-operating plants either by starting production process there through joint ventures or by leasing them to the other cement manufacturing bodies. The Committee would like to get a detailed report in this regard, both from the Cement Corporation of India and the Department of Heavy Industries. (Para 27)

Action Taken Note of Paras 23, 24 & 27 The Sanctioned Scheme issued by the Hon’ble Board for Industrial and Financial Construction (BIFR) in May, 2006 for the revival of the company provides, inter-alia, for closure and sale of the seven non-operating units and expansion/modernisation/technological upgradation of the three operating units to be funded from the sale proceeds of the closed units. Besides, the sale proceeds will also be utilized for re-payment to the unsecured creditors, settlement of liabilities of Yerraguntla unit, repayment of Government loans etc. There was a thought of restarting 5 of these units through either by Joint Venture or CCI itself. The matter has, however, been re-examined and it has been decided to abide by the BIFR Sanctioned Scheme for sale of all the 7 non-operational units. The assets of the non-operating units have since been got revalued in 2010 by following the directions of Hon’ble BIFR as per the Sanctioned Scheme for sale of non-operating units. The Asset Sale Committee (ASC), in its meeting held on 7th December, 2010, decided that the sale of the non-operating units will be pursued and expedited through e-auctioning. BIFR has approved this proposal and the sale of non-operating units is being pursued through e-auctioning by the company.

Further Recommendation The Committee views that the reply of the Ministry is not satisfactory. The reply states that the Asset Sale Committee (ASC) took a decision on 7th December, 2010 for the expedient sale of non-performing Units through e-auction. Since then more than one year has passed but nothing concrete has come out. It would have been highly appreciated if the Ministry would have conveyed the current status of the e-auctioning/revival of non- performing Units. The Committee, therefore, expresses deep concern over the lackadaisical approach of the Ministry and strongly reiterates its earlier recommendations by stating that the Ministry either revive the non-performing Units or put them for e-auctioning by fixing a time frame and intimate the Committee accordingly. 7

Recommendation 5. The Committee strongly approves the demand of the CCI seeking enhancement of retirement age from 58 to 60. The Committee also strongly supports the stand of CCI for immediate posting of board level executive in the key area of operations and marketing. It is understood that the public enterprises selection board is considering a proposal in this regard for creation of such posts. The Committee strongly recommends that the Public Enterprises Selection Board must clear such proposals immediately. The Committee also would like to have a report from the PESB in this connection. (Para 31)

Action Taken Note The retirement age of the employees of the CCI was 60 years. Due to sickness of the company retirement age was reduced to 58 years as per guidelines issued by the Department of Public Enterprises (DPE). There are three conditions, stipulated by DPE for enhancement of retirement age to 60 years in the sick Company. CCI does not fulfil one of these conditions, namely positive net worth for the last three years. DPE was consulted for relaxation of this condition. DPE informed that guidelines were issued on the basis of decisions of the Cabinet. DPE does not have the authority to relax the condition. However, the Hon’ble Minister (HI&PE), in a performance Review Meeting of the CPSE taken on 16.3.2011, has desired that DPE may, through a Cabinet Note, seek general relaxation on condition on enhancement of retirement age of employees from 58 to 60 years in respect of all such sick CPSEs which have turned around but are not meeting all the conditions. The Company has initiated the process for recruitment of 21 Executives at various levels.

Further Recommendation The Committee is of the view that Department of Public Enterprises may closely monitor the entire process for enhancement of retirement age of employees from 58 to 60 years and submit an updated status on CCI including all sick CPSEs which have turned around but not meeting all conditions.

Recommendation 6. The Committee feels that the demands and concerns of the CCI for posting of board level executives in the key area of operation and marketing and the immediate enhancement of retirement age from 58 years to 60 years to retain the qualified and experienced manpower are valid in the context of the articulation of the Prime Minister of our country who has strong faith on the ability of our public sector to face the taste of market scrutiny. (Para 33)

Action Taken Note The posts of Chairman and Managing Director and Director (RR) have since been filled up. The post of Director (Fin.) has fallen vacant consequent upon appointment of Director (Fin.) as CMD, CCI on 26.11.2010. This Deptt. has initiated the process for filling up of this post through Public Enterprises Selection Board (PSEB), the recruiting agency for the Board level Posts in the CPSEs.

Further Recommendation The Committee acknowledges with satisfactions this coordinated move of DPE and PSEB and appreciates that the positive efforts being made in the right direction. Keeping in view the sensitive stage the CCI is going through the DPE and PSEB should accelerate this process. CHAPTER-IV

Recommendations/Observations in respect of which final replies of the Ministry have not been received

Recommendation The Committee takes note of the fact that company’s Board in its 298th meeting held on 22nd July, 2010 has authorized C&MD of the company to take necessary action for filling up of vacant posts arising out of normal retirement, resignation, death, etc., at Operating Units and Corporate Office with effect from the year 2010 as per Recruitment Rules and guidelines issued from time to time and the process of recruitment to fill up these posts is under progress. The Committee would like to have the status of progress made in this regard. (Para 39)

Action Taken Note The Company has initiated the process for recruitment of 21 Executives at various levels.

8 MINUTES

VIII EIGHTH MEETING

The Committee met at 11.00 A.M. on Wednesday, the 29th February, 2012 in Committee Room No. 63, Parliament House, New Delhi.

PRESENT Shri Tiruchi Siva — Chairman

RAJYA SABHA 1. Shri G. Sanjeeva Reddy 2. Shri Ashk Ali Tak 3. Shri K.B. Shanappa 4. Shri Natuji Halaji Thakor 5. Prof. S.P. Singh Baghel

LOK SABHA 6. Dr. Rattan Singh Ajnala 7. Shrimati Poonamben Veljibhai Jat 8. Shri Ramsingh Kaswan 9. Shrimati Ingrid Mcleod 10. Shri Bharat Ram Meghwal 11. Shri Somen Mitra 12. Shri Gorakhnath Pandey 13. Shri Kishn V. Patel 14. Shri R.K. Singh Patel 15. Shri Ramsingbhai Patalbhai Rathwa 16. Shri Ijyaraj Singh 17. Shri Bibhu Prasad Tarai 18. Shri Suresh Kashinath Taware

SECRETARIAT Shri S.N. Sahu, Joint Secretary Shrimati Sunita Sekaran, Director Shri Vimal Kumar, Joint Director Shri Anil Kumar Saini, Assistant Director

2. At the outset, the Chairman welcomed the Members and briefed them that the agenda of the meeting, was to consider and adopt the 228th and 230th reports of the Committee on Action

11 12 taken Notes on the 219th report on Revival and Restructuring of Cement Corporation of India Ltd and on the 225th report on Revival and Restructuring of Hindustan Machine Tools Ltd., respectively.

3. Thereafter, the 228th and 230th reports were taken up by the Committee for consideration, separately. After some discussion, Members of the Committee suggested a few points to be incorporated in both the draft Reports. At the end of the discussion, the Committee unanimously adopted the 228th and 230th Draft Reports along with the suggestions.

4. Further, the Committee also decided to undertake a study visit to Jammu- Srinagar- Chandigarh during the month of June, 2012. Accordingly, it has been directed to take necessary permissions for the abovementioned study tour.

The meeting adjourned at 12.30 P.M. Printed at : Bengal Offset Works, 335 Khajoor Road, Karol Bagh, New Delhi-110005.