Central Electronics Limited stall at an exhibition. Image Courtesy: Facebook

New Delhi: The employees union of Central Electronics Limited (CEL) have resolve to continue their fight against the disinvestment of the Sahibabad-based public sector enterprise even as latest media reports indicate that the Centre has decided to scrap the sale deal for now.

The Centre has decided to scrap the sale of CEL to Nandal Finance and Leasingprivate Limited as the bidder failed to disclose its ongoing litigation in the National Company Law Tribunal (NCLT), news agency PTI reported quoting a government official earlier this week.

The official, according to the report, said that an insolvency case is pending against the bidder in the NCLT that Nandal Finance hadn’t disclosed at the time of bidding for CEL, and it is in violation of disinvestment guidelines.

CEL Employees Union vice-president TK Thomas told Newsclick over the phone that the union is “cautious enough” since the development does not amount to the withdrawal of the decision to disinvest CEL. “The union will continue to fight against the disinvestment of CEL. It is a profit-making company which must remain in public hands,” he said.

The Centre had approved the strategic disinvestment for Rs 210 crore last November when Nandal Finance had won the bid for sale of 100% equity shareholding in the public sector unit.

In January, the government, however, decided to put brakes on the privatisation of CEL after the employees union approached the Delhi High Court highlighting irregularities in the sale process. In two separate petitions, the union alleged that the expression of interest criteria was “diluted” and Nandal Finance “have poor credentials”.

The decision to scrap the sale highlights that the union’s allegations “hold truth”, Thomas said. “Further, in order to save its own reputation, the DIPAM (Department of Investment and Public Asset Management) would have now decided to scrap the whole deal,” he said adding, “This, however, does not mean that the decision to privatise CEL is withdrawn. We are cautious enough to know that.”

In-principle approval for the disinvestment was given by the Cabinet Committee on Economic Affairs back in 2016. In the first iteration, due process was followed for the strategic sale of CEL and a ‘request for proposal’ document was shared with the qualified institutional buyers in May 2019. However, no financial bids were received and the process subsequently relaunched in February 2020.

Thomas cautioned that the process can “always be relaunched again”. “The employees union will request the [Delhi High] court to grant permission to us to once again file a petition against the disinvestment of CEL, in case, such a situation arises,” he said.

The next date of hearing is scheduled for October 6 with the union expecting a response from the Centre informing the court about the scrapping of the sale deal. The union is planning to place its request that time.

Functioning under the Department of Scientific and Industrial Research, the ministry of science and technology, CEL was established in 1974 to commercially export indigenous technology developed by national laboratories and R&D institutions. Over the years, the company has also developed a number of products for the first time in the country through its R&D efforts.

Courtesy: Newsclick

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Rampant privatisation of government establishments like the Central Electronics Limited (CEL) can put national security at a risk, company employees told SabrangIndia.

Employee unions breathed a sigh of relief when the central government put a hold on the sale of CEL to Delhi-based company Nandal Finance and Leasing on January 12, 2022. However, the battle is far from won for them, as members are acutely aware of the government’s authority in disinvesting companies at will.

“Since the Centre has the power to disinvest in government companies at will, we cannot say anything about the privatization drive. However, this is only true for companies making a loss. CEL has been making profits over the past year. So, how can the government just hand over the company to an inexperienced company? This is ghotala,” said CEL’s Bharatiya Mazdoor Sangh (BMS) leader Manjeet Singh to Sabrang India.

According to employees, CEL is a profit-making PSU with a net sale of ₹ 296 crores and gross profit of ₹136 crores in 2020-21. The company manufactures crucial state of the art technology products for Defence, Railway, Solar business and Security systems such as: ceramic radomes for seeker missiles, laser-based Perimeter Intruder Detection System (PIDS), dielectric substrates, Piezo-Electric Generator Fuse for Heat-55, circulator and isolator for satellite systems, bullet proof material for body armour, material for night vision devices. Further, the company has pending orders worth ₹ 1,592 crores since October 31, 2021, providing a gross profit of ₹730 crores.

All of this highlights CEL’s status as a strategic player in these fields and thus begs the question as to why a profit-making PSU was to be handed over to Nandal Finance and Leasing Pvt Ltd, a company majorly held by a furniture and interior company owner.

“As per 2019-20 financial statements, 99.96 percent of Nandal Finance’s equity is held by Premier Furnitures and Interiors Pvt Ltd. How can you hand over items of national safety to a company that looks into furniture and interior?” asked CEL Employee Union General Secretary Virendra Kumar Singh while speaking to Sabrang India.

The South-Delhi based company’s statements also showed that the company had less than 10 employees with less than five years of continuous service, while it had a case pending in the National Company Law Appellate Tribunal (NCLAT).

“We do not mind if a good group with proper evaluation that considers employee benefit takes over CEL. But it should have a similar type of experience. Handing over the company to a blacklisted group threatens national security,” said Manjeet Singh.

When the company was first put up for auction in 2016, the government had not found a bidder. Then in November 2021, the government found two bidders including Nandal Finance. But employees looking into this move questioned the inter-connection between the aforementioned company and the other bidder, JPM Industries, both of whom share the same parent company. Directors of both these groups also share the same position in other company Sharda Tech.

While the case remains with the court until July 2022, employees allege that the other party is targeting CEL’s land property.

The total area of land available with CEL was 2.02 lakh sq.m. with a circle rate valuation of the land at ₹440 crores. Similarly, CEL’s valuation was estimated at ₹957 crores that can rise up to ₹1,300 crores in coming years. Yet, the reserve price was set at ₹ 194 crore by the government. The whole enterprise was finally sold for ₹ 210 crore – less than half of the land’s circle rate valuation.

Threats of privatising PSUs

The threat to human and national security by way of PSU privatisation is among the last and most disconcerting worries mentioned in the ‘Privatisation: An Affront to the Indian Constitution’ report. Created by the Peoples’ Commission on Public Sector and Public Services, the report talked about how disinvestment in public enterprises over the years concentrated economic power, creating an oligopoly in India.

“Given the fact that these are public assets, many of which have been established over many years following sustained public investment, how fair is it to offer the assets to private interests at deeply discounted rates?” said the report.

It argued that potential investors were offering only a fraction of what the government considered the asset’s value considering investors value their bids in terms of the expected discounted returns over the lifetime of the lease. Alienating massive public assets at net present value in the garb of monetisation can lead to very low returns, asset stripping and promotion of an oligopoly, said the report.

This also hinders national productive capacities. Intersectoral connections such as energy, capital goods, machine tools, material/natural resources processing allowed central public sector enterprises to remain effective and competitive, while furthering national self-reliance. Privatising PSUs and breaking these connections will rob them of their effectiveness and ability to contribute to national productive capacities.

Public assets such as CEL are the arms and legs of the manufacturing and infrastructure in India. According to the report, such enterprises were developed as a technology commons for “a latecomer catching up to be able to face foreign competition”.

“The NMP and privatisation thus threaten to dismember the development block, thereby adversely affecting the commons and hollowing out the manufacturing arm of the Indian state,” said the report.

On January 19, Finance Minister Nirmala Sitharaman spoke on the Antrix-Devas issue, condemning the previous Congress-government for robbing the people of India. However, if the sale of CEL is allowed, the current ruling regime will not only be robbing citizens but severely hurting the international standing of India in terms of defence and science.

According to The Wire, former directors and retired senior scientists of the Council of Scientific and Industrial Research already expressed shock at the government’s announcement on the sale.

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