J&K walks disinvestment path post-Article 370

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By Our Special Correspondent

New Delhi, October 9: In a first decision that could signal the Jammu and Kashmir administration embracing disinvestment to attract private capital, the Administrative Council (AC) has decided to go for divesting the state’s ownership of the Jammu and Kashmir Cements Limited. The decision though small in size nationally could be a big step on the part of the J&K administration to bring the private investment in the Union territory.

“After exploring all possibilities for revival of the Jammu and Kashmir Cements Limited, the Administrative Council (AC) which met here under the chairmanship of the Lieutenant Governor, Manoj Sinha, approved the proposal for disinvestment of Jammu and Kashmir Cements Limited. The disinvestment in the JK Cements was necessitated as the company was not able to sustain and manage its finances properly and maintain efficiencies of operations over the period of time,” said the UT administration in an official statement.

Incidentally, the company is stated to have not been able to fully exploit the potential and sustain stiff competition in the market despite having dedicated limestone mining leases at its disposal.

“In spite of enjoying economy of scales, the company failed to show requisite growth and generate cash flows and operating margins during the last more than two decades. The company despite having assured demand from Government against advance payments has not grown even marginally over the long period of time and has rather shown sharp decline in its production and revenues from 2012-13 onwards,” added the UT administration.

The decision has come at a time when aggressive consolidation is taking place in the cement sector in the country with the Adani Group of Companies wrapping up the acquisitions of Ambuja Cement and ACC cements.

“Managerial and financial inefficiencies, coupled with failure to exploit locational advantage, has made the company defunct, further depreciating plant and machinery without any resultant productivity. The company had not only accumulated losses but is also burdened with liabilities on account of salaries and outstanding wages and payments in addition to default in statutory deductions like CP fund, GST, etc,” added the UT administration in its statement.

Earlier also the Administrative Council in 2021 had given in-Principle approval for complete sale of JK Cements Limited by exploring the option of ascending e-auction and an authorization to utilize 240 kanals of land adjacent to Khrew Plant at Industrial Estate.

“The interested bidder should have a minimum net worth of Rs 250 crores, besides a net positive EBITDA in at least three out of the immediately preceding last five financial years. Key principles and actions underlying the recommended disinvestment modality includes 100 per cent ownership in JKCL in favour of a private company/consortium. Further all the assets of JKCL on an as-is-where-is basis, along with approvals and licenses (including mining license) will be transferred as part of the share purchase sale,” added the J&K administration.

The J&K administration will take over all employees of JKCL and the acquirer will be responsible for staffing requirements to get the plant operational.