The political imperative to save Satyam Computer Services has crystallised into a Rs 2,000 crore headache for the Manmohan Singh government.
The political imperative to save Satyam Computer Services has crystallised into a Rs 2,000 crore headache for the Manmohan Singh government.
According to a source familiar with the ongoing discussions on a bailout package for the beleaguered software company, this is the projected financial requirement to prevent Satyam from sinking under stunning disclosures of fraudulent dealings.
The source said the government is working on a scheme to make the funds available to the company. The most likely route is a soft loan from a consortium of nationalised banks with the central government standing guarantor for Satyam. Details of the kind of loan that would be given were not available but the source said the terms would be easy.
The figure of Rs 2,000 crore has been calculated keeping in mind the need to provide Satyam with working capital for three months to help it tide over its present difficulties. The monthly salary bill and other establishment costs are pegged at around Rs 520 crore.
The central government is considering making available an additional amount of Rs 400 crore as a cushion for any unexpected expenses, as part of a financial bailout for Satyam.
A high-powered meeting chaired by prime minister Manmohan Singh on Tuesday evening is believed to have discussed the Satyam bailout package. It was attended among others by home minister P Chidambaram, who has been entrusted with the task of working out the finances of the bailout, and commerce minister Kamal Nath, who is emerging as the government’s pointman for the management of this particular crisis.
Another proposal under consideration is a roadmap for a long-term settlement that could see Satyam being sold off to the other IT majors. Given the economic slowdown, it is unlikely that one company alone would be willing to put up the financial outlay necessary to buy Satyam over. One suggestion that has emerged is to break up the company into smaller units for easier sale.
The process could take up to one year as it will require major restructuring, asset valuation, cleaning up the books and other processes before the company is put on the market.
While the political imperative for central government intervention is obvious, given the Congress party’s high stakes in Andhra Pradesh, politics is not the sole concern. IT has become the international face of the India story and the government is extremely worried about the implications of letting an IT major sink because of fraud.
By stepping in aggressively to rescue Satyam, the government hopes to send a clear message to investors and clients worldwide that its faith in India’s IT sector is unshakeable.
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