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Minutes of the 27th Meeting of the Board for Reconstruction of

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					Minutes of the 74th meeting of the Board for Reconstruction of Public Sector
Enterprises (BRPSE) held at 2.30PM on 27.10.2009 (Tuesday) in Room No. 515, Block
No.14, CGO Complex, New Delhi

Present
BRPSE:
     1      Dr. Nitish Sengupta                  Chairman
     2      Dr. T.S. Vijayaraghavan              Member
     3      Shri Arvind Pande                    Member
     4      Shri R.S. Sharma                     Permanent Invitee & Chairman, ONGC
     5      Shri C. Phunsog                      Permanent Invitee & Chairman, PESB
     6      Shri Arup Roy Choudhury              Chairman, SCOPE & Permanent Invitee
     7      Mrs. Stuti Kacker                    Secretary, BRPSE
     8      Shri K.D. Tripathi                   Joint Secretary, D/o Public Enterprises
                                                 representing      Ex-officio Member &
                                                 Secretary D/o Public Enterprises
     9      Smt. Kalpana Mittal Baruah           Joint Secretary, D/o Disinvestment
                                                 representing Ex-officio Member &
                                                 Secretary, D/o Disinvestment
     10     Ms. Dipali Khanna                    Additional Secretary & Financial Adviser,
                                                 M/o Information & Broadcasting
                                                 representing Special Invitee & Secretary,
                                                 M/o Information & Broadcasting
     11     Shri Ambuj Sharma                    Joint Secretary, D/o Heavy Industries
                                                 representing Special Invitee & Secretary,
                                                 D/o. Heavy Industries

Also present:

     1      Shri V.B. Pyarelal        Joint Secretary, M/o Information & Broadcasting
     2      Shri R. Asokan            Director, M/o. Heavy Industries & Public Enterprises
     3      Shri Vikram Gulati        Director, D/o. Heavy Industries
     4      Shri V.K. Jindal          Director, Deptt. of Public Enterprises
     5      Shri P Samba Siva Rao     Deputy Director, Deptt. of Public Enterprises
     6      Shri Ajai Kumar           CMD, Scooters India Ltd.(SIL)
     7      Ms. Nina Lata Gupta       MD, National Film Development Corporation(NFDC)
     8      Shri P. Muthusamy         Director(Fin.),SIL
     9      Shri P.P. Sarkar          Director(Tech.),SIL
     10     Shri P. Sathyanarayanan   Director(Fin.),NFDC

          Chairman, BRPSE welcomed the members and initiated discussions on the agenda
items.
Ms. Mi
2         Agenda Item No.1: Confirmation of the Minutes of the 73rd meeting of BRPSE
          held on 22.9.2009

2.1     The Board considered the minutes of the 73rd meeting of BRPSE held on 22.9.2009
circulated vide BRPSE OM No.BRPSE/2(73)/2009 dated 6.10.2009 and confirmed the same.


3.   Agenda Item No.2: Consideration of the present status of revival of Scooters India
     Ltd.(SIL)
3.1    The Board considered the present status of revival of Scooters India Ltd. (SIL). Joint
Secretary, D/o Heavy Industries briefed the Board on the status of revival of SIL.CMD, SIL
made a presentation on SIL before the Board. The details of the deliberations are given
below:

3.2      CMD,SIL informed the Board about the historical background of Scooters India Ltd.
(SIL) and its products, market, available infrastructure, details of revival package sanctioned
by BIFR and its impact, present physical & financial performance of the company, reasons
for incurring losses, SWOT Analysis, present progress in revival of company, etc. He
informed the Board that SIL was incorporated in 1972 in Lucknow by purchasing of used
plant and machinery and design, document, copyright, etc from M/s Innocenti of Italy for
manufacturing scooters to bring relief to common man in the controlled two-wheeler market.
It started its commercial production of scooters in 1975 under the brand name of “Vijai
Super” for domestic market and “Lambretta” for overseas market. It further introduced three
wheelers under the brand name of “VIKRAM/LAMBRO”. For various reasons, it became
sick and referred to BIFR in 1991. After implementation of the revival plan, sanctioned by
BIFR in 1996, of Rs.642.00 crores approximately from GOI and deferment of trade tax for 5
years by Uttar Pradesh State Government, SIL turned around and came out of BIFR in 2000.
He further stated that SIL discontinued its two-wheeler production in 1997 and concentrated
on three wheelers production under the brand name of “VIKRAM” in diesel, petrol, CNG &
electric for passenger & load carrier applications.

3.3     CMD, SIL further apprised the Board that the turn around of SIL was not sustained
and it started incurring losses again from 2006-07 mainly due to (i) non fructification of
technology agreement/collaboration, (ii) change in market scenario to buyers market, (iii)
high manpower cost, (iv) lack of investment in capacity addition and market promotion, (v)
unresolved employee issues, (vi) failure to rationalize manpower through VRS, etc. The
manpower cost of SIL is about 30% as against industry norm of 6%. As a result company was
not able to (i) upgrade its technology to introduce new products, (ii) avail advantage of
economies of scale to produce the products at competitive cost like competitors, etc. Severe
competition also dwindle its market share to 3.22% in 2008-09 and put pressure on
company’s profit margins. As a corollary, capacity utilisation of three-wheelers, turnover
have fallen from 94.74% and Rs.166.68 crores respectively in 2005-06 to 61.25% and
Rs.135.58 crores respectively in 2008-09 and SIL has again started incurring operating losses
and cash losses and posted a net loss of Rs.27.65 crores in 2008-09 as against net profit of
Rs.1.56 crores in 2005-06 and networth of the company as on 31.3.2009 stood at (-)Rs. 2.99
crores. The company contributed Rs.29.46 crores to Ex-chequer in 2008-09. In spite of
difficulties, company was able to pay principal & interest to banks, FIs, Govt. However, due
to cash losses, it could not pay GoI loan from Feb.2009 on wards.

3.4      CMD, SIL further informed the Board that (i) integrated manufacturing facilities,(ii)
good payload capacity, easy & low cost maintenance and repair, (iii) established vendor
network for items, (iv) experienced skilled manpower,(v) large existing dealer net work, etc
were some of the strength of the company. He further stated that (i)outdated machinery and
layout, (ii)inconsistent quality, old design, out dated technology, (iii) multiplicity of unions,
(iv)aging manpower with average age of 54 years,(v) sub-optimal volumes for establishing
vendors & locational disadvantage, (vi) high operating cost due to old machines, low capacity
utilisation and high manpower cost were the disadvantages of the company.

3.5   CMD, SIL, while dwelling on opportunities for SIL, stated that (i) availability of
avenues for technological up-gradation, (ii) growing automobile market, (iii) growing need

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for intra city transport & rural market, (iv) availability of LPG/CNG for auto sector, (v)
alternative fuel vehicles will provide opportunity to SIL to grow. However, severe
competition, lack of technology collaboration, substitutes for products, cheaper imports,
progressive stringent anti pollution and safety rules, growing expectation of customers for
quality & service, locational disadvantage and financial condition of the company are
threatening its survival.

3.6    CMD, SIL further apprised the Board that (i) technological obsolescence, (ii) falling
market share, (ii) improving financial position, (iv) manpower related issues need to be
addresses to strengthen the company. He also stated that SIL appointed M/s Pricewaterhouse
Coopers for addressing the issues and to prepare a comprehensive business plan to put SIL in
growth trajectory. He further added that final report is expected by end of November, 2009.
He clarified to the Board that SIL could not out source much, even it is a common practice in
automobile industry, due to low volumes as it is not economical for vendors. He also clarified
that company has the facilities and capacity to manufacturing electric vehicles. However, the
production is unviable due to high cost of production and high operating cost of such
vehicles.

3.7     Chairman, ONGC stated that rural segments, intra city transport, product substitution
areas like replacing rickshaws, etc provide ample opportunity for SIL but company is lacking
its foresight in market research. He stressed that company needs to undertake market research
to identify the niche segments of the market where it has edge and position the product to
stand apart. It should accordingly align its marketing, production activities. It should also tie
up with better manufacture for technology. He further stated that since green technologies
products are the order of the day in future and company was already in manufacturing electric
vehicles, it should explore its potential in this area by tying up with developing agencies to
push the products by exploiting various subsidies available.

3.8     SCOPE, Chairman, while supporting the views, stated that company also needs to
address technological up-gradation, modernization of plant & machinery, increase in
capacity, as it is capped at 18000 vehicles, for economies of scale, etc.

3.9     Chairman, PESB agreed to the suggestions of Chairman, ONGC. He, however, added
that given the inherent causes, SIL may explore the feasibility to switch to non-transport
products. It was clarified that business plan should be self-sustainable with realistic
assumptions.

3.10       Joint Secretary, D/o Heavy Industries informed the Board the views of their
department that in the existing environment SIL survival is difficult. He, while stating that
consultant was already appointed to prepare a business plan for SIL, apprised the Board that
if it requires a fresh investment as a green field project, SIL should look at alternative
place/shifting location instead of investing at the present manufacturing facilities since it is
very hinterland having the disadvantage in terms of procurement, marketing, workforce,
transportation, etc. However such proposal needs to be examined from techno-financial
feasibility in view of tough competition from private manufacturers. He further stated that,
department is also looking at other option as an alternative to make SIL an auto component
company with a little investment so as to utilise its existing infrastructure and brand name.

3.11    The Board noted the following financial position of SIL:
                                                                        (Rs. In crores)
                                               2005-06  2006-07  2007-08    2008-09
       Production of 3-Wheelers (In Nos)          15632    15162    11512       10107

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       (in bracket-capacity utilisation)           (94.74)     (91.89)     (69.77)      (61.25)
       sales(In Nos)                                 15182       15239       12221        11139
       Market share(%)                                 4.22        3.77        3.35         3.22
       Turnover                                     166.68      190.20      152.15       135.58
       Net profit/loss                                 1.56    (22.50)     (22.47)      (27.65)
       Net worth                                      65.20       45.37       24.58       (2.99)
       Paid up capital                                43.00       43.00       43.00        43.00

3.12     Recommendations of the Board:

3.12.1 The Board noted the present status of the revival of the company as apprised by
CMD, SIL and DHI. The Board also noted that a consultant has been appointed to prepare the
business plan for SIL and its report is expected shortly. Board, therefore, advised DHI/SIL to
submit a comprehensive plan to the Board by December, 2009 for its consideration.


4.    Agenda Item No.3: Consideration of the present status of revival of National
Film Development Corporation Ltd.(NFDC)

4.1     The Board considered the present status of revival of National Film Development
Corporation Ltd.(NFDC).Additional Secretary & Finance Adviser, M/o Information & Broad
Casting apprised the Board on the status of revival of NFDC.MD,NFDC supplemented the
briefing. The details of the deliberations are given below:

4.2     Additional Secretary & Finance Adviser, M/o Information & Broad Casting informed
the Board on the background that National Film Development Corporation Ltd. (NFDC) was
incorporated in1975 with an objective to plan, promote and organize an integrated and
efficient development of the film industry in accordance with the national economic policy
and objectives laid down by the Central Government from time to time. She also informed
the Board that they have appointed SBI Capital Markets as consultants for bringing out a
financial plan for revival of NFDC. Their Department had also taken a policy initiative by
making NFDC eligible to work as an agency of Government for publicity as is being done by
Directorate of Advertising &Visual Publicity (DAVP) which would benefit NDFC to
generate recurring income in ensuring years. She further stated that department will submit
shortly revival plan to the Board on receipt of report from the consultant.

4.3     MD, NDFC apprised the Board that NFDC is engaged in providing services in the
field of financing / producing / distribution / export / import of quality feature films with
socially relevant themes, creative and artistic excellence / experimental in form etc. It acts as
a nodal Agency to spread awareness of the Indian films and undertakes promotional activity
by regularly participating in international film markets. The company operates through three
Regional offices in Chennai, Delhi and Kolkata and one Branch office at Trivandrum. NFDC
also aims at to promote the growth of Indian Cinema through other activities such as script
development, promotion of films made by independent filmmakers in markets abroad and
creation of platforms for greater interaction between Indian filmmakers and members of the
film fraternity abroad. In order to assist independent filmmakers to promote their films in
international markets, the Corporation invites filmmakers to assign marketing rights of their
films to NFDC. These films are also being sent for entry to film festivals around the world.
NFDC has also been promoting and selling documentary films from Films Division’s
catalogue in accordance with directions of the Ministry of Information & Broadcasting. She
explained to the Board the work done by NFDC in its various activities. She further stated
that NDFC earns mainly from distribution of films through TV, export of film, foreign film
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distribution, projects, etc. However, the income is not enough to meet the expenditure
resulting in losses. She also stated that manpower cost is high which needs to be reduced. She
expressed the need to address the issues like restructuring of past liabilities, accumulated
losses, etc of NFDC so as to enable it to start on clean slate basis. She further apprised the
Board that in order to have sustainable business plan, SBI Caps has been entrusted the work
and the report of the consultant is expected by 1st week of December, 2009.

4.4     Chairman, ONGC, based on the submission, stated that the business plan being
prepared by consultant should address/develop core competence and to make the corporation
on self sustaining basis. In this context of developing business, he suggested to NFDC that
the Corporate Social Responsibility (CSR) work of CPSEs may be available as a captive
business for it. However, it should be capable of delivering in time with high quality. Shri
Arvind Pande, Member, BRPSE stated that at first instance, the mandate of NFDC should be
clarified. In case the mandate of NFDC is that of developmental nature, it becomes a social
obligation which needs to be funded by Government. Commercial activities should be
separated and may be carried out as normal business operations.

4.5    Chairman, SCPOE pointed out that only 3.79% of employees of NFDC were
professionally qualified and around 32.70% of employees were under the age of 51 and
above and suggested to them to hire domain experts either on retainer-ship/contract basis
which is crucial for content development for diversified business activities.

4.6    The Board noted the following financial position of NFDC:
                                                                       (Rs. In crores)
                                          2005-06        2006-07      2007-08       2008-09
      Turnover                                 11.80         22.46        30.16          14.32
      Net profit/loss                           2.40        (5.27)       (2.76)        (11.12)
      Net worth                                 4.86        (0.20)       (2.75)        (16.86)
      Paid up capital                          14.00         14.00        14.00          14.00

4.7     Recommendations of the Board:
4.7.1 The Board noted the present status of NFDC as apprised by M/o Information & Broad
Casting and MD, NFDC. The Board advised M/o I&B/NFDC to submit a comprehensive
plan to the Board by December, 2009 for its consideration

5.     Agenda Item No. 4: Consideration of the status of the implementation of the
revival package sanctioned by the Government to Hindustan Copper Ltd. (HCL) and its
post revival performance was deferred to the next meeting to be held on 26.11.2009 in
view of the request of M/o Mines’ vide their OM No.1 (1)/2008-Met.III dated 22.10.2009
that their senior officials were pre-occupied.

6.     Agenda Item No.3 Other Items

6.1      Scheduling of 75th meeting of BRPSE: It was decided to hold the 75th meeting of
BRPSE on 26.11.2009 at 3.00PM to consider, inter alia, the status of the implementation of
the revival package sanctioned by the Government to Hindustan Copper Ltd. (HCL) and
its post revival performance.

7.      The meeting ended with a vote of thanks to the Chair.
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