New Delhi, January 3, 2018

A parliamentary panel has suggested the Niti Aayog to develop a more ‘holistic view’ on strategic disinvestment or closure of state-owned enterprises that may have a chance of progressing with some assistance.

In its report tabled in Parliament today, the Standing Committee on Industry said it is of the opinion that “CPSEs are still relevant and they may be allowed reasonable and financially prudent chances to revive and restructure”. On the issue of strategic disinvestments or closures, the committee said though the modern theories of government and economics want the government to withdraw from business, while deciding upon disinvestments/closures, it is always prudent to keep in mind that CPSEs are also meant to serve larger social causes. Citing the example of Hindustan Newsprints Limited, a central public sector enterprise (CPSE) which was classified only as “Incipient Sick” in 2016, the panel found that the decision was taken despite the dissent of Department of Heavy Industry and the perception that the company could have turned around with a modernisation mill development plan that was under submission. Besides, the panel also wants the government to examine the feasibility of transferring the subsidy on electric vehicles directly to individual buyers instead of original equipment manufacturers, through direct benefits transfer under the FAME India Scheme. The committee also observed that the efforts taken by state-run power equipment maker BHEL to arrest its downward spiral during the last few years has begun to bear fruit.

However, considering the elongated cycle of capital goods market, the committee said it expects the upward swing in the performance of BHEL to be “gradual and anticipated to be facilitated by the impetus of the government to invest more in power and related infrastructure in the coming times”. The panel said the success of BHEL in power plant commissioning and in order booking indicates that the path of revival for the company lies largely in focusing on strengthening its core business. The committee also urged the government to consider restoring the income tax deduction for research and development (R&D) investment to 200 per cent, observing that the move has affected the prospects of BHEL.

“Being the highest spender in R&D, as claimed by the management, BHEL stands to lose the most because of this move,” said the panel in the report. In its reply, the Department of Heavy Industry said it was important for the government to expand incentives to encourage companies and organisations to carry out or expand R&D activity and contribute to innovation in the country. “Hence, the allowability of weighted deduction under section 35 (2AB) of Income Tax Act should be restored by the Government of India,” the Department said, adding that this will facilitate companies and organisations in contributing to the ecosystem of Make in India programme.

[The Financial Express]