Voice from the Rooftop

Blog of Vincent Augustine D'Souza

Stop corporate debt restructuring

There is a conspiracy of silence about money lost to the people of India due to corporate debt restructuring (CDR). TV channels don’t talk about CDR. Companies borrow crores of rupees from banks and financial institutions and when they say they are unable to pay the loan they are referred to CDR cell. Over the years more and more companies have defaulted on payments.

In F. Y. 2009-10, 256 companies defaulted on payment of 1,15,990 crores rupees, 215 of them got CDR for 1,04,299 crores rupees. In F. Y. 2010-11, 305 companies defaulted on payment of 1,41,158 crores rupees, 242 of them got CDR for 1,10,914 crores rupees. In F. Y. 2011-12, 389 companies defaulted on payment of 2,05,692 crores rupees, 286 of them got CDR for 1,50,286 crores rupees. CDR cell rejected requests of 56 companies for CDR of 19,589 crores rupees and decisions on requests of 47 companies for CDR of 35,878 crores rupees are pending. For three years CDR amount is 3,65,438 crore rupees which may go up to 4,01,316 crores rupees.

If a man borrows a few lakh rupees as housing loan or car loan and defaults on payment he will lose his flat or car. Companies that borrow crores of rupees and default do not lose anything. On the contrary, under CDR they get extension of time for payment and cut in interest rates. It is profitable to default on payment and ask for CDR then to pay as per schedule. GTL Group wants CDR for 17,000 crore rupees. Hindustan Construction Company wants CDR for 8,300 crore rupees. Bharati Shipyard wants CDR for 5,600 crore rupees. Hotel Leela wants CDR for 4,300 crore rupees. No wonder the number of defaulters is increasing.

India’s economy is said to be booming while EU economy is faltering. We hear reports of India’s growth rate. How is that Indian companies are making losses?

CDR cell decides cases when many banks and FIs are involved and the amount is not less than 10 crore rupees. When 75% banks/FIs by value and 60% by number approve CDR is granted and the decision is binding on the 25% banks/FIs by value and 40% by number which is unfair.

Many times under CDR, loan is converted to shares for more than market value. Later the value of shares goes down further. Kingfisher’s loan from SBI was converted into shares at Rs.64.48 per share when the market value was Rs.48 per share or less and now the value is around Rs.16 per share.

What IAC members have to say about CDR? CDR is robbing the poor and paying to the rich. Many banks/FIs belong to the people of India. India’s 121 crore people are robbed so that those who can borrow 10 crore rupees or above become more rich.

What Left Front MPs have to say about CDR? Congress, BJP, BSP, SP, TMC, DMK, JD (U) and MPs belonging to many other parties may have corporate connections and may not raise the issue of CDR but Left Front MPs are not supposed to have any corporate connection. Left Front MPs have not opposed CDR.

Many industrialists have become MPs. Some of them got elected to Lok Sabha but many of them have become Rajya Sabha members. Recently Election Commission countermanded a Rajya Sabha election because 2.15 crore rupees were found in a car. That amount was supposed to be for MLAs to vote for an independent candidate. What about industrialists who pay money to party presidents and become party candidates and Rajya Sabha members? Will Election Commission countermand a Rajya Sabha election if it comes to know that an industrialist got a party ticket by paying 2 crore rupees to a party president?

What Baba Ramdev has to say about CDR? He wants to bring black money stashed away outside India but what about the loot within the country?

CDR cell should be disbanded. Defaulters should approach banks/FIs individually and each bank/FI should decide for itself. If extension is granted it should be for a short period not exceeding six months and interest rate should go up. After that there should be no extension. Property of defaulters should be confiscated.

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