Modern Foods: Disinvestment and After

Its products were bread, oil, flour, fruit pulp, fruit juice drinks, beverage concentrates and energy food. In the early 1990s, the bakery units accounted for 82% of the turnover of MFIL. In the early 1990s, due to labour trouble, decline in market demand and the closure of a plant, capacity utilisation remained low, between 19% and 30% at the Ranchi unit, between 31% and 53% in the Calcutta unit, and below 50% in the Jaipur, Kanpur and Delhi-11 units. (Refer Exhibit III for unit-wise capacity, production and profits). Consequently, many bakery units were running at a loss. MFIL fixed a norm of 0.50% of total production as defective production. In addition, a norm of 0.50% for bread returned from the market was also allowed.

Upto 1993-94, the cumulative losses of MFIL's Roller Flour Mill, Fruit Juice Bottling I Plant, Fruit Pulp Processing Plant and Oil Plant were Rs 11.85 million, Rs.64.4 million, Rs.32.40 million and Rs.81.94 million respectively. In 1997, MFIL was referred to the Disinvestment Commission.⁴ In February 1997, the Commission recommended 100% sale of the company. While making this recommendation, the Disinvestment Commission identified some of MFIL's weaknesses: under- utilisation of the production facilities, large work force, low productivity and limited flexibility in decision-making. In September 1997, the government approved 50% disinvestment to a strategic partner through competitive global bidding...