The company had planned to raise funds to meet expenditure on its voluntary retirement scheme (VRS) for 585 employees to be announced shortly. Mysore Acetate has 560 employees at its manufacturing facility in Mandya and 25 employees at its corporate office in Bangalore.

Government officials said here on Tuesday that banks were reluctant to offer term loans as the company has not been operational for quite some time. In fact, the government's game plan was to raise money from financial agencies and repay the funds with the help of realisation from sale of land and machinery. It is learnt that majority of Mysore Acetate workmen were willing to take up the VRS.

Subject to the success of this fund-raising programme the state government will sell the company's building, machinery and land. Discussions are on with twoleading firms form the same sector, a ranking government official said.

Earlier the Karnataka government had shelved its plans to find a prospective buyer for the loss making state-owned Mysore Acetate. The decision follows the findings of the nodel agency -- Karnataka State Industrial Investment & Development Corporation Ltd (KSIIDC) -- that the company's produce is unviable in the present market conditions.

It had appointed KSIIDC as the nodel agency to frame the nitty gritty for finding buyers for Mysore Acetate and Mysore Electricals. The government had planned to retain a small stake in these companies after the proposed privatisation.

The state government has around 80 per cent and 76 per cent share holding in Mysore Electricals and Mysore Acetate respectively. The share capital of Mysore Electricals currently stands at Rs 4.18 crore and that of Mysore Acetate is Rs 8.67 crore.

Interestingly, the plan to offload the Karnataka government stake in both Mysore Electricals and Mysore Acetate hadgone into rough waters with the nodel agency having found it difficulty to get a buyer. The government had put an advertisement in early November last year seeking the buyer and revised two times the advertisement, extending the stipulated time to submit formal applications.

But the response from many companies was not encouraging. The companies, which were in the race to acquire Mysore Acetate, were not keen to absorb the workmen of the firm.