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December 8, 1997


DoT is set to revive Hindustan Cables

The Department of Telecommunications would like to revive the 'sick unit' of Hindustan Cables and has submitted a proposal for it to the ministry of communications.

The DoT action follows a Department of Heavy Industries request to bail out Hindustan Cables.

As per the draft, 30 per cent of DoT's and Mahanagar Telephone Nigam Limited's annual orders would be reserved in favour of Hindustan Cables.

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MTNL's GDR does well
Hindustan Cables
To execute the orders, Hindustan Cables would receive 50 per cent advance payments at the prevailing bank rates for three years. Also Hindustan Cables will receive the same facilities available to two other state owned telecommunications enterprises, ITI and HTL.

In return, Hindustan Cables would have to reduce the staff strength to the bare minimum; maintain fiscal discipline and ensure timely execution of the orders, the draft says.

The conditions, sources say, is to control prices and 'cartellisation' by private-sector companies and secure the 'vast growth potential of the telecom sector'. 'Even a 10 per cent increase in price may result in an additional burden of about Rs 3.5 billion,’ says the draft.

Though the draft has been cleared by DoT and is currently under consideration by the ministry of communication, DoT Secretary A V Gokak would only reveal the short-term plans it has for Hindustan Cables. "We are trying to give them some help in the short-term by giving them a larger number of orders," Gokak said.

The industry is complaining that Hindustan Cables has been favoured against other competitors by being handed orders out of turn orders and with a 50 per cent advance payment.

While the private operators do not discount the fact that steps should be taken to revive Hindustan Cables, they have reservations about restricting 30 per cent of DoT and MTNL annual orders in favour of Hindustan Cables for an indefinite period.

The major suppliers to DoT and MTNL, including Finolex Cables, Siemens, Alcatel, Fujitsu and AT&T, have reacted to this. ‘If the draft is cleared and becomes a policy, then we go to the court,' said an industry source.

In a memorandum submitted to DoT, the industry has stated that by restricting orders to the tune of 30 per cent for Hindustan Cables would result in smaller quantities or orders for other vendors. Hence, it would be difficult for them to achieve scales of economies, resulting in cost escalation. As a result, the prices to be quoted by companies other than Hindustan Cables are likely to go up.

A year back, DoT had chalked out a similar plan to revive Hindustan Cables, but it was shelved as the major private suppliers had appealed to DoT.

Under DoT’s vendor rating system 60 per cent is given to price rating, 30 per cent to delivery rating and 10 per cent to quality. Hence, 40 per cent weightage is given for timely delivery and competitive prices. The performance of Hindustan Cables in this regard has been dismal, the draft submitted to the ministry of communication points out.

Also the delivery rating assigned to Hindustan Cables by DoT reflects 0.45226 against the industry average of 0.80 with over 11 companies having delivery rating above 0.95.

To help Hindustan Cables recover from its losses, the draft enumerates budgetary support as well. Besides providing Rs 750 million as a 'non-Plan' loan, it is also proposed to convert outstanding government loans totalling Rs 1.27 billion (as on March 31, 1997) into equity which would waive the interest of Rs 713.4 million. A moratorium is also proposed to be issued in favor of Hindustan Cables on fresh Plan and non-Plan government loans for five years.

In their memorandum, vendors have expressed the need for financial re-structuring of Hindustan Cables in the form of converting loans to equity and steps to reduce the interest burden.

In keeping with the present divestment policies of the government, the shares of government in Hindustan Cables can be considered for divestment, the memo said.

DoT has also appealed to the ministry of communication to consider taking the total administrative control of Hindustan Cables.

The ministry has declined the offer on the ground that it is a sick company with heavy losses in the last three years and with an interest burden, which the government might not waive, in case the ministry takes over the administration.

- Compiled from the Indian media

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