The Uttar Pradesh factor apparently clinched the issue at the Union Cabinet meeting on Thursday in extending a Rs.202 crore package to revive the sick Scooters India Limited(SIL) located in Lucknow.
When the matter came up for consideration at the Cabinet, Union Finance Minister P. Chidambaram wanted the company to be closed seeing no future for it, according to sources.
Heavy Industries Minister Praful Patel, who favoured selling it to a private player in 2011, responded “you all decide what you want to do and I’ll execute that.”
But Prime Minister Manmohan Singh not only shot down the idea of closing the SIL but forcefully pitched for its revival and settled the issue allowing a Rs.202 crore package.
The Union Cabinet in 2011 had decided to divest its entire stake (95.38 crore) through a strategic sale to a private party but put the decision in the cold storage under pressure from its party leaders from Uttar Pradesh ahead of the Assembly elections there.
With eyes on the Lok Sabha elections, the Cabinet approved the package. Both the Congress President and Vice-President represent Lok Sabha constituencies from Uttar Pradesh.
The Union Cabinet’s strategy is to infuse Rs.90.38 crore as capital expenditure and working capital and the second component of Rs.111.58 crore will be used for financial restructuring waiving loan and interest liabilities.
The 1,200 employees will now get the 2007 pay scales and their age of superannuation has been raised from 58 years to 60 years.
The government now hopes to improve the productivity of the Scooters India, in the red since 2002-03, through this revival package aimed at improving the sales of the three-wheeler used for transporting goods and passengers.
Established in 1972 to manufacture two wheelers, Vijai Super for the domestic market and Lambretta for exports, Scooters India moved over to the three-wheeler segment in 1997 producing Vikram before incurring losses in 2002-03 and being put on the list of sick units in 2009.