According to TN government's industry secretary Shaktikanta Das, the restructuring of state agencies is in pursuance of the Raghavan Committee recommendations published in 1997-98, which said that most government agencies were duplicating each other's efforts. In the new scheme of things, each state agency will have a clear-cut role : while area development is SIPCOT's mandate, TIDCO will look after infrastructure development in the state and TIIC will be responsible for term-lending, he said.

However, SIPCOT, which was financing its development work with the returns on its term-lending, including interest and principal repayment, is now bereft of working capital, according to Qudsia Gandhi, managing director of SIPCOT. "The government should reconsider its decision or give us enough grants to tide over the crisis," she said.

The state agency was originally envisaged in 1971 to do only project financing and later moved into infrastructure development for industrial parks. While its working capital requirements for development was around Rs 75 crore per annum, its returns from term-lending were around Rs 50 crore. With the term-lending taken away from SIPCOT, it is now headed towards a heavy cash crunch, as marketing and selling the land in its complexes is a long-term proposition, said Gandhi.

The term lending function has been given to TIIC as it was already financing small and medium projects in the state and has a huge loan recovery network in place, said Das. However, SIPCOT will continue to hold its existing loan portfolio as well as finance projects in the already developed industrial parks, he said. SIPCOT can finance its development work from the budgetary support sanctioned to it.