India asks state-owned firms to consider insolvency court to shut units

FILE PHOTO: A general view of Mumbai's central financial district

By Nikunj Ohri

(Reuters) - India has asked state-owned firms to consider moving the country's insolvency court to shut loss-making units, hoping for speedier resolutions as the government looks to slim down its public sector holdings.

Public sector companies will have to file an insolvency application under the Insolvency and Bankruptcy Code (IBC) for the resolution of a loss-making unit within three months of approval from a committee comprising top cabinet ministers, according to guidelines released by the government on Monday.

The government is looking to close loss-making units in nearly nine months from the day a firm seeks approval to do so.

State-run firms can also opt to close their units by approaching the Ministry of Corporate Affairs, as is currently the norm, the government added.

The move is a renewed push by the Narendra Modi administration to slim down the public sector, an effort often hampered by land-related delays and disputes.

The board of parent companies have been asked to demerge land assets of their subsidiary companies to ensure that land disputes do not hamper shutting down units from now onwards.

The firms have been also been asked to write off any compensation due from state governments for the land granted to them on a lease.

(Reporting by Nikunj Ohri; Editing by Savio D'Souza)