Finally, Kerala Initiates Steps to Take Over Hindustan Newsprint

Kozhikode: The Kerala government has initiated the process to acquire Hindustan Newsprint Limited (HNL) which had been enlisted for disinvestment by the Bharatiya Janata Party-led Central government.  The Kerala Industrial Infrastructure Development Corporation (KINFRA) has been directed to take steps in this regard, Chief Minister Pinarayi Vijayan informed the Assembly on August 24.

The funds required to purchase the public sector unit (PSU) will be allotted through Kerala Infrastructure Investment Fund Board (KIIFB) -- a state government-owned financial institution to mobilise funds for infrastructure development from outside the state revenue.

As on March 2019, HNL, which is located at Velloor in Kottayam district, had liabilities of Rs 409 crore.

HNL, which is under the administrative jurisdiction of the Department of Heavy Industry, Ministry of Heavy Industries and Public Enterprises, was incorporated as a wholly-owned subsidiary of the Hindustan Paper Corporation Limited  on June 07, 1983.

When the Centre had enlisted HNL for disinvestment, the Kerala government initiated steps to acquire the company. The state government had even approached the National Company Law Tribunal (NCLT), which had earlier liquidated Hindustan Paper and had ordered transfer of shares to the state. But, seeking clarity over settling of HNL’s liabilities, six banks had approached NCLT, and thus Kerala government’s plan to buy shares was halted for a while. While considering the plea of RBL Bank, the NCLT had directed calculation of   liabilities before transferring control of HNL.

When bidders were invited to buy HNL, four public sector companies had expressed interest, based on directions from the Kerala government. All the four were certified as able to run HNL.

As of now, following a directive from the Department of Industries, the Public Sector Restructuring and Internal Audit Board (RIAB) has prepared a takeover plan that has been handed over to KINFRA. Two private companies are also in the race to buy HNL.

Efforts to privatise HNL had begun long back. In 2002, the then Central government tried to sell the company to a private entity. But following an employees' agitation, the government could not go ahead.

The Kerala government had played a significant role to strengthen this PSU. When HNL was established, the then government of Kerala acquired about 700 acres and handed it over to the company. Over a period of time, HNL developed a township in coordination with the state government.

As the raw material required by HNL is pulp from the eucalyptus tree and bamboo reed, the state government ensures supplies at subsidised rates. The company also gets subsidised water and power from the state government.

In 1963, the Kerala government had allotted 5,600 hectares of pulpwood plantations belonging to the Forest Department to HNL, for its captive plantation of raw material. But, now, only 3,035 hectares remain, as the rest has been lost to encroachment and other reasons.

Once, when the PSU faced financial troubles, the state government gave it two years’ exemption from paying taxes under the Kerala GST (KGST) Act, even as Central government refused to extend the same benefit to HNL under the Income Tax Act.

On October 24, 2016, chief minister Pinarayi Vijayan requested the Centre to delink the company from its holding company. He also requested the Union Government to make it an independent enterprise under the Department of Heavy Industries so that it has more operational freedom.

Since there was no response from the Centre on this request, the Kerala Newsprint Employees Union approached the Kerala High Court in 2018. In this petition, the court had sought an explanation from the state Ministry of Industries. In its reply, the Industries Department undersecretary had stated that the decision to hand over the land was illegal. If the Centre is selling the company to private players, the state government can step back from the contract on land, as per the agreement. The state said it had had made its stand clear on this issue.

Centre Yet to Hand Over Instrumentation Ltd to State

The Left Democratic Front government has been opposing privatisation of public sector units in Kerala. When the Centre had decided to disinvest Instrumentation Limited Palakkad (ILP), the state government had expressed its willingness to take over the unit. Though a memorandum of understanding had been signed, the Centre is yet to transfer control to the state, citing issues related to land assets.

In June 2018, the Kerala government had decided to take over ILP and on November 16, 2018, a tripartite memorandum of understanding (MoU) was signed by the Department of Heavy Industry (DHI), Government of Kerala, Department of Industry and the Instrumentation Limited defining the modalities of transfer of the Palakkad unit to the Kerala government, with the approval of the competent authority.

The Union Cabinet had, on November 30, 2016, approved the closure of the Kota unit of ILP and had accorded ‘in principle’ approval for the transfer of the Palakkad unit to the Kerala government.

When Elamaram Kareem, a parliamentarian from Kerala, raised the question as to why the Centre was delaying the handing over of ILP to the state on the floor of Rajya Sabha on November 25, 2019, Prakash Javadekar, the minister of heavy industries and public enterprises, said: “...the required assessment of Net Asset Value (NAV) of the Palakkad Unit was underway, it was learnt that the High Level Committee had not taken into consideration the value of land owned by the Palakkad Unit, measuring 566.30 acres which was assigned on registry to Instrumentation Limited, Kota for the establishment of Precision Instrumentation Project at Pudussery Kerala under the Rules of Assignment of Government Land for Industrial Purposes dated 30.03.1964, which has material bearing on the transfer modalities. The value of this land owned by Instrumentation Limited has not yet been assessed.”

The Centre is delaying the handing over of the unit over the value of the land, which was not part of the earlier MoU.

Back in 1964, ILP’s unit was established at Kanjikkode in Palakkad. The land was acquired by the state government for industrial purposes and was handed it over to ILP. However, much of land is not with ILP now, as it has been handed over to the Railway, Kendriya Vidyalaya etc. At present, ILP possesses only 122 acres.

The state government had also stepped up for the Kochi refinery of BPCL as well when the Centre had put up it for strategic disinvestment. Along with Kerala government, Assam government had also stepped up against the privatisation of BPCL. Assam government had expressed their interest for Numaligarh refinery in state. But, while Assam’s request was heard, Kerala’s remained unheard.