The proposal assumes significance in the light of the international bidding being invited to offload the government stake in NGEF. It was felt that the companies which may come forward to pick up a 51 per cent government stake in NGEF would be reluctant to absorb the liabilities of the company.

The authorised share capital of NGEF stands at Rs 40 crore, paid-up capital of Rs 37.70 crore including preference shares of Rs 17.70 crore, comprising of 17.70 lakh shares of Rs 100 each.

NGEF Ltd managing director Vijay Gore said, ``The state industries department has given the green signal for the proposal and is presently under the consideration of the finance department. The dues to the state government including certain other earlier waivedinterest plus deferred liabilities is to the tune of Rs 105 crore.''

Industries and commerce department principal secretary N Viswanathan and Gore had held preliminary discussions last week on this account. ``The implementation of the restructuring programme is, of course, subject to final approval from the state cabinet,'' he added.

Gore is of the view that once the company hike its authorised capital, the entire programme will help NGEF wipe out liabilities, which in turn, will facilitate the company to hit the market with its disinvestment plans.

The company has already reduced its excess flab through a series of voluntary retirement package over the last two years. It is also in the process of selling its excess land.

However, the hiking of authorised capital has raised many eyebrows in the industry circle. NGEF Ltd is a 23:77 per cent joint venture between Elektro Holding Gesellschaft (EHG) of Germany and the state government. If the state government injects additional funds to hike authorisedcapital, the shareholding of EHG will come down.

It is learnt that EHG, a part of Daimler-Benz Industries, is not willing to pump in more funds at this point of time as the company worldwide is pulling out of the electrical business.

In fact, EHG has been waiting for a suitable partner to offload their stake in the venture. Recently EHG has sold its manufacturing facility in Bangalore to GE Electrical Distributors & Control India.

On being asked about the impact on the relations between the two companies due to the proposed plan, Gore said: ``I do not find any reason why there should be a negative effect on the relations between EHG and NGEF.''

``After all in the last rehabilitation package it was the state government which gave Rs 20 crore cash and Rs 57 crore sales tax deferment whereas EHG gave nothing,'' he added.