The roadmap for the revival of the Hindustan Paper Corporation mills

The-roadmap-for-the-revival-of-the-Hindustan-Paper-Corporation-mills

The National Company Law Tribunal (NCLT) in early June this year had issued the notice for e-auction of the two Hindustan Paper Corporation (HPC) mills in Assam quoting the reserve price at rupees 1139 crore. The liquidation was to be on the basis of “as is where is”. Now that the last date for deposit of the earnest money of rupees 55 crores to participate in the bid has expired on 15 June without any submission, the fate of the auction scheduled for 30 June is uncertain and legally over. It adds another fact to the near impossibility of the survival of the two mills even though the paper industry has prospects and has been witnessing an annual growth of almost 8% in the last few years.  


 


The present liquidation of assets was initiated when the creditors of HPC approached the NCLT for its outstanding dues. The search for strategic buyers who could revive the mills yielded no result prompting NCLT to go for liquidation. It should be noted that the Cachar Paper Mill at Panchgram ceased production in 2015 while the Nagaon Paper Mill ceased production in 2017. The two mills directly employed 3000 workers while 5000 workers were attached to the mills on contract basis. The supply chain of bamboo directly sustained another 2 lakh individuals. With the closure of the units, these employment opportunities will be lost forever. As it is today, many of the mill workers have died due to forced poverty as they have not received their salaries for more than 58 months now. Many more have committed suicide as both the union and the state governments have effectively let them down.


 


Two possibilities seem to be more feasible in the current scenario to revive the mills as the auction route might not yield any outcome as has been observed- in both cases the union or the state government has to intervene and involve itself. The assets will not yield anything to the government under the current circumstances. While the minimum amount of rupees 1143 crores that the bid is supposed to fetch in, there are outstanding liabilities to the tune of rupees 1200 crores that include payments to creditors,  vendors and Assam government  for electricity dues as also the employees salaries dues of rupees 350 crores. To plants and machinery will require repairs and replacements due to their non use for years and that would add to another rupees 250 crores as per an estimation.


 


The union government, as it makes special cases for the north east region for many areas, takes the responsibility to try a public private partnership for a period of five years. Some thinking on these lines were there and an assessment and valuation was also done in 2018. The assurance and participation of the union government is very crucial to give confidence to any potential investor as the past history of mismanagement and the local interference of politician mafia nexus that led to the closure of the mill creates worry and fear. This despite the NCLT defined process being undertaken as otherwise these assets over substantial tracts of land will yield nothing even to the government. If not the union government, the state government takes up the role of an investor and gets the mills running and in a couple of years’ time can start taking back part investments. Last year the Kerala government has already initiated steps to acquire the Hindustan Newsprint Limited plant at Veloor which is also a subsidiary of HPC. The Assam government has now committed investments of over rupees 2000 crores in the Numaligarh refinery recently enhancing its stake to 26% and while the situation is different in the case of NRL, even HPC will be revenue generating and paying dividends in the next few years as the demand for its papers is there.


 


Both these routes are very crucial to get moving on these mills as it would be difficult to get deep pocket investors easily and having the mills in running condition helps the overall ecosystem of the region as besides being the only heavy industry in the state, it also provides the scope for bamboo supplies from Dima Hasao district as well as neighbouring states of Mizoram and Manipur. Many ancillary industries also survive on the operations of these mills.


 


It would be interesting to note that the Prime Minister had earlier stated that public sector industries that were essential for the development of the north east region would be revived. During the recently conducted Assembly Elections, the union home minister had also reassured the people of Assam that the two mills would not be allowed to shut down. Even the manifesto of the ruling party had mentioned the revival of Nagaon Paper Mills though strangely Cachar Paper Mills did not find a mention. It is therefore interesting that within just about a month of the Assam assembly results, the mills were put up for liquidation. It is also unfortunate that the people’s representatives from the region have not done enough to fight for the revival of the mills and explain to the central leadership and state leadership of the need and potential of the mills. Both the members of parliament of Barak valley have done little to create the right awareness among their own party leadership in Delhi to understand the ground reality of the region and the importance and need of running the Panchgram plant to keep the economy of the Barak valley from sagging further. Even the state leadership has gone back on the efforts ever since the much hyped media stories of investor BR Shetty of the UAE investing in the HPC moved nowhere.


As the new government has indicated, Assam needs a strong and deliberate push towards industrialization and in my opinion the revival of the two paper mills will be strategically important for the state to achieve this objective. The simple truth is that producing bamboo based paper can never be a loss making business as long as the management maintains fiscal prudence and focuses on labor intensive production processes. The added advantage of direct and indirect employment and increased urbanization can never be lost sight of. So despite all efforts to deal with the whole HPC issue with an arms length approach, the government has to weigh in the special circumstance and the potential before giving up on the two mills. Needless to say the people’s representatives have to now do the extra leg work to make that happen.



Subimal Bhattacharjee

Subimal Bhattacharjee

Total 2 Posts. View Posts

Subimal Bhattacharjee

Subimal Bhattacharjee

Total 2 Posts. View Posts


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