1

Ancillary Development and Role of PSUs in India*

Public sector or state sector covers1 activities funded out of government budget and accounts for

approximately two-fifth of total gross investment (or gross capital formation) and contributes a

quarter of gross domestic product (GDP). Public sector as an instrument of economic

development was conceived to ensure law and order and protection of individual property since

attainment of political independence, particularly so in developing economies, It acquired a

prominent place and witnessed phenomenal growth over the years as the governments assumed

an obligation to regulate private entrepreneur’s tendency to make monopolistic profits; eliminate

social, economic and regional inequalities; investment in socially profitable ventures, either in

industry or infrastructure; speed up the rate of economic growth and technological development,

so as to achieve self-sufficiency and self-reliance; become main instrument of entrepreneurial

activity; and provide manifestations of political independence and modernization and so on.

Public sector normally takes following three forms namely,

Government administrative departments;

Unincorporated enterprises, like, railways and postal, operating as ‘commercial

departments’; and

Incorporated enterprises (termed as Public Enterprises) set up under a statute like,

Companies Act.

The government administrative departments generally cover activities relating to fiscal services,

general administrative services, community services and economic services.

Commercial departments are controlled by public authorities, are generally engaged in

production of goods and services, are suited for adoption of principle of ‘commercialisation’ to

charge for their goods and services and are in the nature of ‘limited access projects’; railways,

postal services, dairy and milk supply units, ordnance factories, state electricity boards, water

and sewerage works are some of the examples.

……………………..

Prof. Nand Dhameja , Indian Institute of Public Administration, New Delhi 13/2/15

1 . drawn from the authors paper Public Enterprises in India : Growth & Policy Perspective, included in Public Enterprises Management: Issues and Challenges (Ed) (IIPA Publication 2011)

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Public enterprises include government companies wherein government holds 51 percent or more

of equity, these include BHEL, ONGC, BEL, MTNL, SAIL, IOC, OIL. There are 259 Central

Public Enterprises (CPEs) wherein the Union Government holds 51 percent or more of equity

and they have capital employed of Rs. 1510,373 crore and employ 14.04 lakh employees (having

total emoluments of Rs. 116,375 crore and per capita emoluments of 828,882). In addition, there

are approximately 837 public enterprises (SPEs) in various states, having financial investment of

Rs. 333,441 crore and 18.7 lakh employees. Over the years there has been a tendency, world

wise, to transform government administrative departments to commercial departments or to

incorporated enterprises with an objective to grant autonomy; separation of telecom from postal

and setting-up of MTNL, VSNL, BSNL; or conversion of Indian Airlines or Air India, statutory

corporations under the Civil Aviation Act to joint stock companies under the Indian companies

are some of the examples.

Major objectives of Public Enterprises

The vast development of public sector in India has been guided by social and economic

philosophy spelt out in the Five Year plans and the Industrial Policy Resolution of 1956 which

assigned the public sector a strategic role in the economy. The Second Plan document stated that

“The public sector has to expand rapidly. It has not only to initiate developments which the

private sector is either unwilling to undertake; it has to play the dominant role in shaping the

entire pattern of investments in the economy, whether it makes investments directly or whether

these are made by the private sector” The Third Plan document carried this argument further and

stated that, “As a decisive instrument which the state can employ in preventing concentration of

economic power and growth of monopolistic tendencies, the rapid expansion of public sector

serves a twofold purpose. It helps to remove certain basic deficiencies in the economic structure

and at the same time it reduces the scope for accumulation of wealth and large incomes in private

hands. As the relative share of the public sector increases, its role in economic growth will

become even more strategic and the state will be in a still stronger position to determine the

character and functioning of the economy as a whole”.

As such, major objectives of setting up public sector enterprises in India are described as:

to help in the rapid economic growth and industrialisation of the country and create the

necessary infrastructure for economic development;

to earn return on investment and thus generate resources for development, promote

redistribution of income and wealth;

to create employment opportunities;

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to promote balanced regional development;

to assist the development of small-scale and ancillary industries and

to promote import substitutions, save and earn foreign exchange for the economy.

The Industrial Policy Resolution 1956 had given primary responsibility to the public sector

where the State progressively assumed a predominant and direct responsibility for setting up of

new industrial undertakings, and all industries of basic and strategic importance or in the nature

of public services were set up in the public sector. However, the Industrial Policy 1991 abolished

monopoly of any sector or of any individual enterprise in any field of manufacturing, except the

units set up on strategic or military considerations. The industrial licensing had been abolished

for all projects, except for a short list of industries, the list of areas reserved for public sector had

been pruned to eight industries (from 17 as per the Industrial Policy Resolution of 1956) of

strategic, high-tech and essential infrastructure nature, and public sector has to run on business

lines. In other words, the Industrial Policy Statement 1991 was an attempt towards liberalization

of the economy, was designed to unshackle the economy from the cobwebs of unnecessary

bureaucratic controls.

Public Enterprises: Size and Growth

Public sector in India has witnessed a phenomenal growth during the last six decades since

independence and public enterprises at the Centre (CPEs) have increased from five units

involving a capital employed of Rs 30 crore in 1950 to 259 units with a capital employed of Rs.

1510,373 crore at the end of year March 2012. (see Tables I, II, and III for details)

Further, the net profit of the profit-making Central Public Enterprises (CPEs) (149 in number)

stood at Rs. 98,488 crore, and net loss of loss making enterprises (79 in number) stood at Rs.

14,621 crore. The foreign exchange earnings of CPEs during 2012-13 was Rs. 138,150 crore and

these were overtaken by the foreign exchange outgo of Rs. 646,262 crore. As such, public

enterprises are involved in all sectors of the economy and contribute significant output in respect

of petroleum, lignite, copper, primary lead, coal, zinc, steel and fertilizers. Central public

enterprises listed on a stock exchange numbering 46 had a total market capitalization of Rs.

1116,817 crore as on March 31, 2013, and accounted for approximately 17.6 percent of Bombay

Stock Exchange (BSE) market capitalization. (five CPEs namely, NTPC, BSNL, CIL, SBI,

ONGC included in the Sensex of BSE account for approximately 11 percent of total corporate

market capitalization). According to the World Bank Report2 on Reform of Public Sector

2. World Bank (September 1991), Reform of Public Sector Management, the World Bank Study

18 Washington, DC

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Management (1991), the State in a developing country has tried to do too much through the

public sector or has assigned to public agencies tasks for which they were ill-suited, or has

retained activities in public sector when conditions justifying public management have changed.

The Report continues “experience demonstrates that public enterprises’ performance can be

improved without changing ownership by assessing the firms clear commercial goals, imposing a

hard budget constraint, giving managers the means and power to attain these goals exposing the

enterprises to competition, rewarding the managers who achieve objectives and sanctioning those

who do not allow persistent poor performance to go out of business”.

TableI

Central Public Enterprises

Year No. Capital Employed (Rs. billion)

1950 5 0.30

1974-75 120 66.00

2004-05 236 2020.00

2009-10 249 9101.00

2012 -13 259 15103.00

Table II

Central Public Enterprises: Profit Making and Loss Making

2001-2 2003-4 2004-5 2005-6 2009-10 2012-13

CPEs 231 230 227 225 249* 259$

CPEs- profit making

120 139 138 157 158 149

CPEs Loss making

109 89 79 58 59 79

217 units were in operation while 32 were under construction $ 229 units were in operation while 30 were under construction Sources: Economic Surveys & Ministry data

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Table III

Performance of Central Public Enterprises (CPEs) (Rs. Crore)

2012 -13 2009-10 2008—09

Capital Employed (net fixed assets + working capital)

1510,373 910,120 793,240

Total Turnover 1931,499 1235,060 1271,529

Profit of Profit Making CPEs 143,559 108,435 98,488 Loss of Loss Making CPEs 28,260 15,842 14,621

Net Worth 851,245 660,245 665,686 Dividend declared 49,701 33,223 25,501 Contribution to Exchequer 162,761 139,828 151,529

Foreign Exchange Earnings 138,150 77,745 74,206 Foreign Exchange Outgo 646,262 420,415 433,332

Sources: Economic Survey & Public enterprises Survey 2012-13 Vol. I

Public Enterprises in States

State Level Public Enterprises (SPEs) form an important part of state economy and have played

an important part in the development of economies of various states after independence. SPEs

are set up in areas such as mining, public distribution/trading and marketing, warehousing,

tourism, handicraft & handloom development, forests & fisheries development, financial

services and housing etc. In addition, in some states, enterprises have been set up as co-

operatives under the Societies Act 1912 with majority shareholding by the state governments. As

mentioned earlier, there were 837 State Public Enterprises involving financial investment of Rs.

333,441 crore and employed 18,7 lakh employees; they had received government grants and

subsidies of Rs. 31,54,812 crore as on March 31, 2007. Table IV gives an overview of SPEs

Table IV

Overview of State Public Enterprises (SPEs) (Rs. Crore)

2006 -07

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1 No. of SPEs 837

2 Investment

a). Paid-up Capital

b). Term Loan

Rs. 333,441

111,658

217,783

3 Employment 1871,805

Source: C&AG (GOI) State Audit Reports (Civil Commercial) Various

Issues

Managerial Autonomy and Accountability

Public enterprises in India, no doubt, are autonomous, have their Boards of Directors as their

policy making body, but are subjected to various types of controls including different forms of

audit and also parliamentary control. To quote from the Arjun Sengupta Committee Report, “It is

recognized by all that, on paper, management of public enterprises enjoy large autonomy,

sometimes much more than even by the private sector management. However, in practice,

informal and formal involvement of Ministers and Departments take place in areas wholly within

the decision making powers of public enterprises”

Public enterprise evaluation system in Sweden3 also followed in countries like, Norway, Korea is

a decentralized system. Supervisory Board of professionals is vested with the power to manage

the enterprises and to report to a Committee of elected representatives belonging to various

political parties; it protects the directors and management from undue political maneuvering and

also enables it to exercise effective control over public enterprises.

Public Enterprises : Maharatnas/Ratnas & Mini Ratanas

In order to give more operational freedom and to facilitate decision making, central public cnterprises are

classified in various categories as Ratnas, Mini-ratnas and Maharatnas. Originally, the term Navaratna

meant a talisman or ornament composed of nine precious gems. Later, this symbology was adopted in the

courts of Emperor Vikramaditya and the Mughal emperor Akbar, where the Navaratnas were a group of

nine extraordinary men in their respective courts

3. Ayub, Mahmood A, & Hegstad Sveno (1987) Management of Public Industrial Enterprises, The World Bank Research Observer, (Vol. 2 No. 1 January)

7

Accordingly, the Central public enterprises are divided into three categories as :

Maharatna Navratna Miniratna CPSEs

o Category I o Category II

Maharatna status : In 2009, the government established the Maharatna status, which raises

a company's investment ceiling from Rs. 1,000 crore to Rs. 5,000 crore. The Maharatna firms can now decide on investments of up to 15 per cent of their net worth in a project; whereas the Navaratna companies could invest up to Rs 1,000 crore without explicit government approval.

Navratna status : Navratna was the title given originally to nine central public enterprises

(CPEs), identified by the Government of India in 1997 as having comparative advantages, which

allowed them greater autonomy to compete in the global market. The number of CPEs having Navratna status has been raised to 16.

In addition, the government created another category called Miniratna. which could also enter

into joint ventures, set subsidiary companies and overseas offices but with certain conditions. In 2002, there were 61 government enterprises that were awarded Miniratna status. However, at present, there are 66 government enterprises that were awarded Miniratna status. Two categories

of Minirana are as:

Miniratna - Category I are public enterprises that have made profits continuously for the

last three years or earned a net profit of Rs. 30 crore or more in one of the three years.

These miniratnas granted certain autonomy like incurring capital expenditure without government approval up to Rs. 500 crore or equal to their net worth, whichever is lower

Miniratna - Category II included public enterprises which have made profits for the

last three years continuously and should have a positive net worth. Category II

miniratnas have autonomy to incurring the capital expenditure without government approval up to Rs. 250 crore or up to 50% of their net worth whichever is lower.

In short, 77 central public enterprises enjoy the status of Maharatna, or Ratana or Miniratna, out of 158

profit making enterprises

Disinvestment of Government Shareholding

The Statement of Industrial Policy 1991, as a part of economic reforms, laid down that

Government holdings in selected CPEs were to be disinvested with the objective to provide

further market discipline to the performance of public enterprises. The Finance Minister in his

budget speech to the Parliament stated that in order to raise resources, encourage wider public

participation and promote greater accountability, upto 20 percent of Government equity in

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selected CPEs would be offered to mutual funds, investment institutions in public sector and also

to workers in these enterprises.

Disinvestment of Government shareholding started in 1991-92 as a step towards economic

reforms, yielding collection of Rs.41,242 crores till 2003-04 against a target of Rs. 92,800 crores.

Disinvestment process is analysed by categorizing the disinvestments into three phases as:

Phase I 1991-92 to 1998-99

Phase II 1999 – 00 to 2003 -04

Phase III 2004 – 5 onwards (till February 11, 2015)

Disinvestment proceeds as well as targets for individual years from 1991- 92 till date for the

three phases are given in Tables V and VI respectively

Table V

Disinvestment in Central Public Enterprises (CPEs)

Year Target (Rs.

crore)

Achievement

Cr.) (Rs. Crore) 1991-92 2,500 3,038

1992-93 2,500 1,913

1993-94 3,500 0

1994-95 4,000 4843

1995-96 7,000 168

1996-97 5,000 380

1997-98 4,800 910

1998-99 5,000 5,371

1999-00 10,000 1,585

2000-01 10,000 1,871

2001-02 12,000 3,268

2002-03 12,000 2,348

2003-04 14,500 15,547

2004-05 4,000 2,765

2005-06 NIL 1,570

2006--07 0 0

2007 -08 0 4,181

2008-09 0 0

2009 -10 25,000 23,553

2010 -11 40,000 22,763

2011 –12

12 40,000 14,035

2012 -13 24,000 23,857

2013 -14 19,027 21,321

2014- 15 43,425 24,338*

TOTAL 329,225 179,625

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Upto February 11, 2015

Source bsepsu.com

Table VI

Period Targets Actual Receipts

(Rs, Crore) (Rs, Crore)]

Phase I

1991-92 to 1998-99 34,300 16,623

Phase II

1999-00 to 2003-04 58,500 24,619

Phase III

2004-05 to 2015* 236,425 138,383

TOTAL 329,225 179,625

Upto February 11, 2015

To quote V. K. R. V. Rao4, ‘Public enterprises have been a significant part of the Indian

economy even before the advent of independence …. Public sector enterprises have come to stay

in India. They are also growing in size and stature and increasing their profitability. They are

certainly going to become more and more important not only in the growth and functioning of

the Indian economy but also in shaping the future of the Indian society. I regard public

enterprises as the army of the constitutional advance of this country into a socialist democracy.

To my mind they constitute the pioneers. They are the sappers and miners of our socialist army.

It is they who can help government in concrete terms in taking the country forward to the

establishment of democratic socialism. If my view is accepted, then I would urge it is high time

4 Rao. V. K. R. V , , The Role of Public Enterprises in the Indian Economy, included in the Public Enterprises Management : Issues and Challenges (Ed). By Nand Dhameja & Pranab Banerjee( IJIA Publication, 2011)

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we started examining the subject of public enterprises in the Indian economy from this angle,

initiate studies, collect comparative data, make enquiries, garner relevant experience from

abroad, and finally chalk out a concrete and detailed plan of policy and operation for public

sector enterprises that will help them to fulfill the social and economic philosophy behind their

establishment and expansion”.

Ancillary Development

As mentioned above, public enterprises having greater significance for economic development,

their objectives also include promotion of balanced regional development; and assistance

towards development of small-scale and ancillary industries. Moreover, public enterprises enjoy

operational freedom and autonomy to invest in projects so as to compete in the global market. In

this process, the enterprises set up subsidiaries, joint ventures and have memorandum of

understandings to meet their requirements relating to procurement of material, parts, components

and services.

Further, requirement for companies, (whether public or private) under the Indian Companies Act

to disclose in their balance sheet all total outstanding dues to small scale industrial undertakings,

giving name(s) of small scale industrial undertakings(s) to whom the company owe any sum

together with interest outstanding for more than thirty days, highlights the protection of the

interest of small and ancillary units.

Similarly, government guidelines relating to procurement of material and equipment by inviting

tenders, would also tend towards preference for small industrial establishment.

Industrial development and also the setting up of big industrial units would require units for the

supply of raw material, components and services. As an enterprise procures a part or raw

material from outside, it is usually subcontracted and in most cases the sub-contractor is an

ancillary unit. Sub-contracting is the work of procuring the fabricated parts and components from

outside sources. Sub-contracting is being practiced to a much greater degree now than in the past

primarily because of price competitiveness and low investment. This necessitates the

development of small and ancillary units. As such, along with industrial units, a cluster of tiny,

small and medium industrial units come up in that region.

Ancillary development takes the form of setting up of subsidiary units or a joint ventures for

provision of raw material or services, it generates employments and leads to manufacturing of

parts and components and also leads to import substitution and generates employment. Examples

are that automobile manufacturers world-wide procure parts and components from outside which

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lead to development of industrial clusters and these are increasingly recognized as an effective

means of industrial development and promotion of small and medium-sized enterprises.

Thus ancillaries are considered as a bigger value chain mechanism (raw material, intermediaries,

finished products and marketing) where the value chain extends beyond geographically defined

boundaries.

A study5 has reported that in India clusters account for 40 percent of the country’s industrial

output, and 60 percent of the manufacturing exports of India come from cluster, and as per

UNNIDO survey, there are 330 small scale industries clusters and 2000 rural and artisan clusters

in India. Development of clusters need not be based on geographical preferences and that would

impart a new strength that individual firm would find it difficult to acquire. However,

development of clusters would put forth the following challenges:

Achieving competitiveness in the global market through cost-cutting,

Productivity improvement, supply chain management, R&D, public

infrastructure etc.

Achieving better access to global markets through quality up-gradation, better

reach to the customers, branding, certification, networking and other

marketing strategies.

Creating better patent regime through improved legislation, better

enforcements and better IPR culture.

• Creating an innovation culture and a vibrant eco-system through networking,

attracting better talents in all fields

Industrial clusters are increasingly recognized as an effective means of

industrial development and promotion of small and medium-sized enterprises. In India,

there are around 7000 clusters in traditional handloom, handicrafts and modern SME

industry segments. It is estimated that there are about 2500 unmapped rural industry

clusters in the country6

It is appropriate to refer to the example of Italian Clusters which highlight the need for

appropriate policies such as trade policy, exchange rate policy etc. to combat the low pricing

policies adopted by the competing countries which hinder competitiveness of manufacturing

5 P. Bala Bhaskaran, A Frame-work for Cluster Initiaves in the Indian Context 6 Report of the Working Group on Clustering and Aggregation for the 12 th Five Year Plan, (Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, GOI, Oc tober 2011)

12

entities. In order to survive, some of the Italian firms have started to diversify from the

traditional business while others seek to face the challenge with the help of regional

authorities, creation of a group trade mark and peer pressure to retain the skills in the

sector. It is argued that clusters and aggregation will result in cost advantage due to a

number of factors which are well known. The Study seems to bring out that while it may

be true in most cases, it may still not make the cluster units competitive. What the Italian

clusters seem to be facing is not a problem of technology or quality but one of price

competitiveness due to the pricing policies adopted by the competing countries.

Report7 of the Industrial Committee for Boosting Exports from MSME sector highlights the

importance of medium and small units. As per that Report, in OECD economies, MSME account

for over 95 percent of the firms, 60-70 of employment, 55 percent of GDP and generate the

largest share of new jobs. In developing countries, more than 90 percent of all firms, outside the

agriculture sector, are MSMEs generate a significant portion of GDP. As per the Report, in India

MSMEs account for a large share of industrial units which can be seen from the fact that

in the year 2011-12, the total number of enterprises in MSME Sector was 447.73 lakhs

with total employment of 1012.59 lakhs. MSMEs are accordingly also effective vehicles

of employment generation. The estimated numbers of enterprises and employment

have increased at an annual compound growth rate of 28.02% and 26.42%

respectively. MSMEs’ contribution to rural development can be observed from the fact

that 200.19 lakhs of the working enterprises were located in rural areas, which

accounted for 55.34% of the total working enterprises in MSME sector; whereas 161.57

lakhs (44.66%) of the working enterprises were located in urban areas.. The sector

currently produces more than 6,000 quality products, ranging from handloom saris,

carpets and soaps to pickles, auto and machine parts targeting both domestic and

international markets.

Accordingly, public enterprises in India have set-up subsidiaries and joint ventures and

have entered into memorandum of understanding for energising resources and

optimizing production processes, to illustrate the role and the contribution of public

7 . Report of the Inter-Ministerial Committee for Boosting Exports from MSME Sector, Ministry of Finance GOI, July 2013

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enterprises in the development of small and ancillary industries, we present in Annexure

A, details in brief, relating to subsidiaries and joint ventures set up by certain public

enterprises.

To conclude, subsidiaries, joint venture and memorandum of understanding developed

by public enterprises and also facilitating of various norms relating to procurement of

material and components highlights the important role of public enterprises in

development of ancillary industries. However, to guard against the limitation of finance

and availability of easy credit, technical knowhow and facility of marketing their

products, government agencies and also public enterprises should take measures

towards policies development for strengthening of small and medium industrial units.

In short, public enterprise should take responsibility to provide technical knowhow and

management guidance to small and ancillary units as regards the following:

Production process/method, equipment selection and layout.

.Management guidance relating to design, detailed manufacturing drawing,

tooling, jigs and quality control procedure and equipment.

Manpower planning.

Organization and procedure for production planning, progressing and control.

Management aspects, like cost-accounting, industrial engineering, product

diversification and marketing.

Sources of financing and procedures for obtaining them.

In addition, the public enterprises should also assume responsibility for

providing:-

• Imported raw materials and components, scarce/critical indigenous

raw materials and drawings.

Tooling, jigs and fixtures to the extent that these are outside the

capability of ancillary unit.

• Process quality control, training facilities for the development of

supervisory and artisan skills.

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Sub-contracting to ancillary industry brings in advantage of spread of entrepreneurial

base, promotes industrial development and ensures regular supply of right quality of

components at low cost.

Lastly, though the government has a role to play, a catalytic role, the public enterprises

and private participants also have their role; the ancillary industrial units should look

into the following aspects:

• Have a clear mission and identify their goals ;

• Develop strong Business Association, which will act in the

interests of the whole cluster and engage in a constructive

dialogue process with the Government

• Develop semi-private institutions such as research and advisory

centers and knowledge transfer centers

• Undertake market studies that will be useful for alliance participants

• Have open mind to invest in technology and innovation

• Improve the capacity of specialized input and service providers

• Undertake joint promotion of specific products in the local, regional

and international markets

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ANNEXURE A

Subsidiaries and Alliances by Certain Public Enterprises

SAIL8

(i) A Joint Venture Company “SAIL RITES Bengal Wagon Industry Pvt. Ltd.” was

incorporated to manufacture 1500 wagons per annum (manufacture of 1200 wagons

and rehabilitation of 300 wagons) which would include BOXN-type wagons, specialized

high-end wagons and modern stainless steel wagons at Kulti, West Bengal.

(ii) (ii) The Steel Complex Limited (SCL), a Government of Kerala undertaking, was

converted into a Joint Venture Company between SAIL and Government of Kerala in

February’ 2011 by acquisition of 50% of the shares held by the Government of Kerala

(GoK) in SCL. Management Control of the Joint Venture Company (JVC) was vested with

SAIL for synergizing the resources and optimizing production process at SCL. Towards

accomplishing the intent to bring an early turnaround and revival of the JVC, the

Company has sanctioned working capital assistance to the JVC and GoK has issued

directives to the State PSUs to provide necessary raw material (i.e. scrap) and order for

the finished product (TMT 500 and above grade) to SCL. These interventions have

resulted in improving the performance of the Joint Venture Company.

(iii) Renewable Energy Purchase: In line with Electricity Act,2003 and National Electricity Policy,

various State Electricity Regulatory Commissions have notified that certain minimum

percentage of electricity consumed by various users of captive power should come from

renewable energy sources. The Company is taking action to meet this obligation by having long

term arrangements for such power from renewable energy based power plants in Joint

Venture.

(v) Titanium Project: The Company was planning to diversify into new and related areas as its

growth strategy and as a step towards this direction has accepted Government of Kerala’s offer

to jointly explore the possibility of working on a Titanium Sponge Project.

Strategic Alliances:

(i) Kobe Steel Limited, Japan: In pursuance to signing of Memorandum of Understanding

between SAIL and M/s Kobe Steel Limited, Japan (KSL) in March, 2010, a prefeasibility study 8 . Sail , Annual Report 2011-12;

16

was jointly carried out to assess the economic and technical viability for setting up an ITmK3

(Iron making Technology mark Three) Plant in Joint Venture for production of Iron Nuggets

from Iron Ore Fines. SAIL has signed a Term Sheet with M/s Kobe Steel for preparing DPR for

setting up a 0.5 million tonnes ITmk3 technology based plant at ASP, Durgapur for which a Joint

Venture Company “SAIL-Kobe Iron India Private Limited” has been incorporated on 25th May,

2012.

(ii) Revival of Sindri Project: Cabinet Committee on Economic Affairs (CCEA) in its meeting held

on 4th August, 2011 approved the proposal for revival of the closed unit of Fertilizer

Corporation of India Limited (FCIL) with the stipulation that the BIFR proceedings be expedited

and, thereafter, the matter including changes, if any, required in bid parameters, be placed

before the Committee for a final decision. As per the Cabinet approval, the consortium of SAIL

and National Fertilizers Limited (NFL) has been nominated for revival of the Sindri Unit of FCIL.

A new Special Purpose Vehicle (SPV) Company namely “SAIL-Sindri Projects Ltd” has already

been incorporated on November 8, 2011 as a subsidiary of the Company. A firmed-up proposal

on revival of Sindri Unit has been submitted to Ministry of Fertilizer (MOF) detailing the

business plan & structure for the SPV.

(iii) Hajigak Iron Ore Deposits owned by Government of Afghanistan: The SAIL-led consortium

AFISCO (Afghan Iron & Steel Consortium), which had submitted its bid for mining exploration

rights at Hajigak, won the status of ‘Preferred Bidder’ for Blocks B, C and D of the mines with an

estimated reserve of 1.28 billion tonnes of high-grade magnetite iron ore (with 62-64% Fe

content). The Consortium will now have the opportunity to enter into a Hajigak Project

Contract with the Ministry of Mines of the Islamic Republic of Afghanistan after formal

negotiations, and to receive a licence to further explore, develop and exploit the Hajigak iron

ore deposits.

Memorandum of Understanding (MOU) / Commercial Agreements entered into with various

companies:

(i) On 16th June, 2011, SAIL signed an MOU with M/s Mishra Dhatu Nigam Limited (MIDHANI)

for exploring synergetic business opportunities in production of value-added products,

enhanced research & development activities, exchange of technical know-how and joint

investment between the two companies. A Joint Task Force Team (TFT) had been constituted to

identify special steel products which can be jointly developed by utilizing the R&D facilities of

both companies based on assessment of market demand and subject to techno-economic

viability and commercial prudence.

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(ii) On 23rd May 2011, SAIL and Burn Standard Co. Ltd. (BSCL), a PSU under the Ministry of

Railways, entered into an MOU for setting up a Wagon Components Manufacturing Facility

(WCMF) as a 50:50 Joint Venture (JV) for the manufacture of Cast Steel Bogies, Couplers and

related products for use on the Wagons running on Indian Railways. The project is planned to

be set up on leasehold land under the possession of M/s Burn Standard Co. Ltd. (BSCL) at

Jellingham, West Bengal. The Techno Economic Feasibility Report (TEFR) has been prepared by

M/s RITES (Consultant) & the project activities have commenced.

Conversion Agents: In addition, SAIL has Conversion Agents, SPUs and Wet Leasing Agents

for TMT Bars for Regions: Eastern, Northern, Western , Southern

Maruti Suzuki India Limited an automobile manufacturer in India:

{Maruti was a public enterprise and after disinvestment of its shares, it ceases to be public enterprise)

Sales and service network : As of 31 March 2014 Maruti Suzuki has 933

dealerships across 666 towns and cities in all states and union territories of India.

It has 3,060 service stations (inclusive of dealer workshops and Maruti

Authorised Service Stations) in 1,454 towns and cities throughout India. It has 30

Express Service Stations on 30 National Highways across 1,436 cities in India.

Service is a major revenue generator of the company. Most of the service stations are

managed on franchise basis, where Maruti Suzuki trains the local staff. Other

automobile companies have not been able to match this benchmark set by Maruti

Suzuki. The Express Service stations help many stranded vehicles on the highways by

sending across their repair man to the vehicle.

Maruti Insurance: Launched in 2002 Maruti Suzuki provides vehicle insurance to its

customers with the help of the National Insurance Company, Bajaj Allianz, New India

Assurance and Royal Sundaram. The service was set up the company with the

inception of two subsidiaries Maruti Insurance Distributors Services Pvt. Ltd and Maruti

Insurance Brokers Pvt. Limited[

18

Maruti Finance: To promote its bottom line growth, Maruti Suzuki launched Maruti

Finance in January 2002. Prior to the start of this service Maruti Suzuki had

started two joint ventures Citicorp Maruti and Maruti Countrywide with Citi Group

and GE Countrywide respectively to assist its client in securing loan. Maruti

Suzuki tied up with ABN Amro Bank, HDFC Bank, ICICI Limited, Kotak Mahindra,

Standard Chartered Bank, and Sundaram to start this venture including its

strategic partners in car finance. Again the company entered into a strategic

partnership with SBI in March 2003. Since March 2003, Maruti has sold over

12,000 vehicles through SBI-Maruti Finance. SBI-Maruti Finance is currently

available in 166 cities across India.[61]

Citicorp Maruti Finance Limited is a joint venture between Citicorp Finance India and

Maruti Udyog Limited its primary business stated by the company is "hire-purchase

financing of Maruti Suzuki vehicles". Citi Finance India Limited is a wholly owned

subsidiary of Citibank Overseas Investment Corporation, Delaware, which in turn is a

100% wholly owned subsidiary of Citibank N.A. Citi Finance India Limited holds 74% of

the stake and Maruti Suzuki holds the remaining 26%.[62] GE Capital, HDFC and Maruti

Suzuki came together in 1995 to form Maruti Countrywide. Maruti claims that its finance

program offers most competitive interest rates to its customers, which are lower by

0.25% to 0.5% from the market rates

Maruti TrueValue: Maruti True service offered by Maruti Suzuki to its customers.

It is a market place for used Maruti Suzuki Vehicles. One can buy, sell or

exchange used Maruti Suzuki vehicles with the help of this service in India. As of

31 March 2010 there are 341 outlets

N2N Fleet Management: N2N is the short form of End to End Fleet

Management and provides lease and fleet management solution to corporates.

Clients who have signed up of this service include Gas Authority of India

Ltd, DuPont, Reckitt Benckiser, Doordarshan, Singer India, National Stock

Exchange of India and Transworld. This fleet management service include end-

19

to-end solutions across the vehicle's life, which includes Leasing, Maintenance,

Convenience services and Remarketing.

Maruti Accessories: Many of the auto component companies other than Maruti Suzuki

started to offer components and accessories that were compatible. This caused a

serious threat and loss of revenue to Maruti Suzuki. Maruti Suzuki started a new

initiative under the brand name Maruti Genuine Accessories to offer accessories like

alloy wheels, body cover, carpets, door visors, fog lamps, stereo systems, seat covers

and other car care products. These products are sold through dealer outlets and

authorized service stations throughout India.[

BHEL9

BHEL is an integrated power plant equipment manufacturer and one of the

largest engineering and manufacturing company of its kind in India engaged

in the design, engineering, manufacture, construction, testing,

commissioning and servicing of a wide range of products and services for the

core sectors of the economy, viz. Power, Transmission, Industry,

Transportation (Railway), Renewable Energy, Oil & Gas and Defence with

over 180 products offerings to meet the needs of these sectors.

Establishment of BHEL in 1964 was a breakthrough for upsurge in India's

Heavy Electrical Equipment industry. Consistent performance in a highly

competitive

BHEL achieved a turnover of ` 40,338 Crore and a net profit of ` 3,461 Crore during 2013-14

and has attained coveted 'Maharatna' status in 2013.

9 BHEL Annual Report BOD Report 2013 -14

20

BHEL, procures materials and components on a regular basis from suppliers

spread all over the world. For this purpose, BHEL is backed by a strong

supplier-base which is continually updated.

New suppliers and traders (only those who are sole/authorized

representatives of OEMs) both from within India and abroad, who would

give BHEL competitive inputs, are added to the list of existing suppliers. For

an initial assessment and empanelment with BHEL, suppliers may get

registered by submitting completed forms to respective unit's Contact Person

Subsidiary Companies

BHEL Electrical Machines Ltd, a subsidiary Company was incorporated on 19th January 2011

Joint Venture Companies

BHEL-GE Gas Turbine Services Pvt. Ltd. (BGGTS): BGGTS is a Joint Venture Company of BHEL &

GE USA, formed to take up repair & servicing of GE designed Gas Turbines.

NTPC – BHEL Power Projects Pvt. Ltd. (NBPPPL): BHEL along with NTPC Ltd. has promoted a

joint venture company “NTPC BHEL Power Projects Private Limited” for carrying out EPC

contracts for Power Plants and other Infrastructure Projects in India and abroad. The JVC has

acquired land in Mannavaram, AP and is in the process of implementing Phase-I of the

investment for carrying out EPC and manufacture of Balance of Plant (BoP) equipment for

power plants.

Raichur Power Corporation Ltd: BHEL has promoted a joint venture company with Karnataka

Power Corporation Limited (KPCL) for setting up of a 2x800 MW Supercritical Thermal Power

Plant at Yeramarus, Raichur, Karnataka and 1x800 MW Supercritical Thermal Power Plant at

Edlapur, Raichur, Karnataka on build, own and operate basis. The JVC was incorporated on April

15, 2009 under the name of “Raichur Power Corporation Limited”.

Dada Dhuniwale Khandwa Power Limited: BHEL has promoted a joint venture company with

Madhya Pradesh Power Generating Company Ltd (MPPGCL) for setting up of a 2x800 MW

Supercritical Thermal Power Plant at Khandwa, Madhya Pradesh on build, own and operate

basis. The JVC was incorporated on February 25, 2010 under the name of “Dada Dhuniwale

21

Khandwa Power Ltd”. The initial authorized and paid up equity of the JVC was ` 5 Crore

subscribed to equally by MPPGCL and BHEL.

Latur Power Company Ltd: BHEL has promoted a Joint venture company with Maharashtra

State Power Generation Company Ltd. (Mahagenco) for setting up a 2x660 MW Thermal power

plant or 1500 MW gas based Combined Cycle Power Plant (CCPP) in Latur, Maharashtra. The

JVC was incorporated on April 6, 2011 under the name of “Latur Power Company Ltd”. The

present paid up equity of the JVC is ` 5 Crore, subscribed to equally by both the partners. The

JVC has reviewed the viability of various fuel options to set up a coal based or gas based

project. Due to non availability of coal linkage and domestic gas also not being available till

2015, the JV partners were considering the option of setting up a Solar PV Plant. However,

Mahagenco has not agreed to sourcing of PV Modules from BHEL on nomination basis. Since

Mahagenco is not agreeable to buying out BHEL’s shares, voluntary winding up of the JVC by

mutual consent is under consideration.

Power Plant Performance Improvement Ltd.:The Joint Venture Company, Powerplant

Performance Improvement Ltd. (PPIL), has been promoted by BHEL with Siemens, Germany for

plant performance improvement of old fossil fuel power plants. Since sufficient business to

ensure viability of the company has not been forthcoming, the promoter partners have

mutually agreed to gradually wind up the company. PPIL is in the process of settlement of

outstanding issues, collection of withheld payments and closing of two pending contracts.

ONGC10

Oil and Natural Gas Corporation Limited (ONGC) is an

Indian multinationaloil and gas company, largest oil and gas exploration and production

company. It produces around 69% of India's crude oil (equivalent to around 30% of the

country's total demand) and around 62% of its natural gas.

Subsidiaries

ONGC Videsh Limited OVL): ONGC Videsh Limited is the international arm of

ONGC. It was rechristened on 15 June 1989. It currently has 14 projects across

16 countries. Its oil and gas production reached 8.87 MMT of O+oEG in 2010, up

10 ONGC Annual Report 2013 -14

22

from 0.252 MMT of O+OEG in 2002/03. ONGC holds 100% stake in ONGC

Videsh Limited.

Mangalore Refinery and Petrochemicals Limited: It is an oil refinery at Mangalore.

The refinery was established after displacing five villages of Bala, Kalavar, Kuthetoor,

Katipalla, and Adyapadi.

Joint Ventures

ONGC Tripura Power Company: ONGC Tripura Power Company Ltd (OTPC) is a joint

venture which was formed in September 2008 between ONGC, Infrastructure Leasing

and Financial Services Limited and the Government of Tripura. It is developing a 726.6

MW CCGT thermal power generation project at Palatana in Tripura which will supply

electricity to the power deficit areas of the north eastern states of the country.[17] OTPC

have 2 no 9FA MAchines Supplied by GE USA. A 400 kV D/C Transmission system

connecting Palatana (generation project site) in Tripura to Bongaigaon in Assam over a

distance of around 650 km for the evacuation of power from the generation project.

The development and operation of the transmission system would be undertaken by

North-East Transmission Company Limited (NETCL) a joint venture of

OTPC, PowerGrid Corporation of India Ltd (PGCIL) and the North Eastern Region

beneficiary states.OTPC has been granted in-principle approval for Mega Power Project

(MPP) status by GoI on July 27, 2006 for the Project. The company is applying to MoP,

GoI for final approval of MPP status and the same is expected to be obtained shortly.

The Generation Project is being domiciled in ONGC Tripura Power Company Ltd.

(“OTPC” or “the Company”), a Special Purpose Vehicle promoted by ONGC, IL&FS

Limited and Government of Tripura (GoT

ONGC Mangalore Petrochemicals Limited (OMPL) is promoted by Oil and Natural

Gas Corporation Ltd (ONGC) and Mangalore Refinery and Petrochemicals

Limited (MRPL) both of whom hold a total equity of 49%. OMPL was incorporated on

19.12.2006.

23

Coal India Ltd11

Coal India Limited (CIL) is the single largest coal producer in the world. Operating

through 81 mining areas CIL is an apex body with 7 wholly owned coal producing

subsidiaries and 1 mine planning and consultancy company spread over 8 provincial

states of India. CIL also fully owns a mining company in Mozambique christened as

'Coal India Africana Limitada'. CIL also manages 200 other establishments like

workshops, hospitals etc. .

Subsidiary Companies

Coal India is a holding company with seven wholly owned coal producing subsidiary

companies and one mine planning & Consultancy Company. It encompasses the whole

gamut of identification of coal reserves, detailed exploration followed by design and

implementation and optimizing operations for coal extraction in its mines. The

producing companies are:

Eastern Coalfields Limited (ECL), Sanctoria, West Bengal

Bharat Coking Coal Limited (BCCL), Dhanbad, Jharkhand

Central Coalfields Limited (CCL), Ranchi, Jharkhand

South Eastern Coalfields Limited (SECL), Bilaspur, Chattisgarh

Western Coalfields Limited (WCL), Nagpur, Maharashtra

Northern Coalfields Limited (NCL), Singrauli, Madhya Pradesh

Mahanadi Coalfields Limtied (MCL), Sambalpur, Orissa

Coal India Africana Limitada, Mozambique

The consultancy company is Central Mine Planning and Design Institute Limited

(CMPDIL), Ranchi, Jharkhand.

North Eastern Coalfields (NEC) a small coal producing unit operating in Margherita,

Assam is under direct operational control of CIL.

11 Coal India Limited, Annual Report 2013 -14

24

Indian Oil Corporation12

IOC is India’s flagship national oil company with business interest straddling the entire

hydrocarbon value chain –from refining, pipeline transportation & marketing of petroleum

products to exploration & production of crude oil & gas, marketing of natural gas &

petrochemicals. It is the leading Indian corporation in the ‘Fortune ‘Global 500’ listing, ranked

at 96th position in the year 2014. Its group companies- Indian subsidiaries and joint ventures are

listed below:

GROUP COMPANIES

Name Business

Indian Subsidiaries

Chennai Petroleum Corporation Limited Refining of petroleum products

IndianOil - CREDA Biofuels Limited Plantation of Jatropha and extraction of oil for

Bio-diesels

Indo Cat Pvt. Limited Manufacturing of FCC catalyst / additive

Foreign Subsidiaries

IndianOil (Mauritius) Ltd., Mauritius Terminalling, Retailing & Aviation refuelling

Lanka IOC PLC, Sri Lanka Retailing, Terminalling & Bunkering

IOC Middle East FZE, UAE Lube blending & marketing of lubricants

IOC Sweden AB, Sweden Investment company for E&P Project in

Venezuela IOCL (USA) Inc., USA Participation in Shale Gas Asset Project

IndOil Global B.V., Netherlands Exploration & Production

JOINT VENTURES

Name Business Partners

Avi-Oil India Pvt. Ltd. Speciality lubricants NYCO SA, France and Balmer

Lawrie & Co. Ltd. 12 Indian Oil Corporation Annual Report 2013-14

25

Delhi Aviation Fuel Facility Private Limited Setting up and operation of Aviation DIAL and BPCL Fuel

Facility at Delhi Airport.

Green Gas Ltd. City gas distribution GAIL

GSPL India Transco Ltd. Setting up of Natural Gas Pipelines GSPL, HPCL, BPCL

GSPL India Gasnet Ltd. Setting up of Natural Gas Pipelines GSPL, HPCL, BPCL

IOT Infrastructure &. Terminalling services Oiltanking GmbH, Germany.

Energy Servics eLtd

IndianOil Petronas Pvt. Ltd. Terminalling services and parallel Petronas, Malaysia.

marketing of LPG

IndianOil Ruchi Bio Fuels LLP Bio Fuel related activities Ruchi Soya

IndianOil Skytanking Ltd. Aviation fuel facility projects IOT Infrastructure & Energy

Services Ltd., Skytanking GmbH,

Germany.

Indian Synthetic Rubber Limited Manufacturing of Styrene TSRC Taiwan and Marubeni

Japan Butadiene Rubber

at Panipat

Lubrizol India Pvt. Ltd. Lube Additives Lubrizol Inc., USA

NPCIL – IndianOil Nuclear Energy For setting up Nuclear Power Plant Nuclear Power Corporation of

India Limited

Petronet LNG Ltd. LNG Imports/distribution BPCL, ONGC, GAIL, GDFI and ADB

Suntera Nigeria 205 Limited Oil exploration activities. Oil India Ltd. and Suntera Resources

Ltd., Cyprus

IndianOil Adani Gas Pvt. Ltd. City gas distribution Adani Gas Ltd.