The Communist art of redistributing poverty

8216;8216;Despite having constituted a separate Department in 1972 to tackle the problem of industrial sickness in the State, the Government failed even to develop a system for identification of sick and closed units on regular basis even after the expiry of 27 years. Without any study of their viability and without formulating any criterion for taking over the units, 20 sick units were taken over for revival. It is only in 1994 that Government adopted a policy to revive the sick units with suitable policy packages. But no plan of action was prepared to implement the policy.

8216;8216;As a result, even in the case of 20 taken over units there was complete erosion of capital base of Rs 65.60 crore in 18 units with an accumulated loss of Rs 703.78 crore up to March 1998. All the 4 units discussed in the review the CAG8217;s Report for the year ending March 1999 were sick mainly due to technological obsolescence and shortage of working capital. But no concrete step was taken to remove bottlenecks by making adequate capital investment. The Government8217;s investment in these units up to 31 March 1999 amounted to Rs 121.67 crore of which Rs 9.68 crore was plan assistance and the balance amount of Rs 111.99 crore was provided in the form of loan for payment of salaries and wages to the workers which the companies were never able to repay. The insignificant plan assistance given to such units was also not effectively monitored by the Government resulting in unfruitful and idle investment by the managements.

8216;8216;Hence, without a systematic and planned approach towards revival of the sick units, the Governmet was spending money in the name of protection of employment of workers of a few selected units in an unsuitable manner.8217;8217;

And then the final sentence:

8216;8216;These matters were reported to the Government and the managements in May 1999; their replies had not been received so far September 1999.8217;8217;

And now, their ideological commitment and example determine what the Centre will do!

The next year

As nothing but nothing had changed, the CAG8217;s report for the next year, namely the financial year ending 31 March 2000, had but two sentences on the whole question:

8216;8216;The Government has not formulated any policy in regard to disinvestment, privatisation and restructuring of PSUs so far September 2000. No disinvestment, privatisation and restructuring had taken place during the year 1999-2000.8217;8217;

The Report did, of course, record that the aggregate investment of the Government of West Bengal in its PSUs had risen to Rs 13,805.83 crore by 31 March 2000, and that in return, 8216;8216;During the year 1999-2000 the State Government received no dividend from any of the undertakings.8217;8217; Quite the contrary, the PSUs were being yoked to meet the current expenditures of the Government. The CAG observes,

8216;8216;During 1999-2000, West Bengal Infrastructure Development Finance Corporation Limited WBIDFC raised funds aggregating Rs 1,567.93 crore at interest rates of 13 to 14 per cent per annum for the purpose of infrastructure development in the State. Of these funds, as of December 2000 a sum of Rs 1,101.93 crore was parked in the Deposit Account maintained by the Pay and Accounts Officer, Calcutta. Thus, 70 per cent remained unutilised in the non-interest bearing Deposit Account thereby merely helping to ease the ways and means position of the State Government and this is also indicative of poor financial management of the Company.8217;8217;

Of 69 Government companies, only 14 have finalised their accounts. Accounts of others are in arrears from one to 16 years, the CAG observed. Observations of the CAG have been paid no heed, he lamented8230;

And the condition of each enterprise that was taken up for review revealed the same sordid state of affairs. Subsidies received, not utilised. Loans procured, diverted to other uses. Capacity woefully underutilised. Raw materials purchased, unaccounted for. The State Electricity Board subsidising the operations of a private company to the extent of Rs 266 crore 8212; 8216;8216;Despite such undue revenue enrichment, CESC defaulted in payment of its dues of Rs 684.69 crore March 2000 to the Board.8217;8217; Vehicles of the State Transport Corporations mysteriously gobbled up fuel, yet, the CAG found, 8216;8216;none of the Corporations even attempted to investigate the reasons for the extra fuel consumption8230;8217;8217;

The same squalid story in one company after another, in one project after another8230; 8216;8216;The satellite-based Communication Project, scheduled to be commenced in June 1998, could not be completed till date even after incurring expenditure of Rs 33.03 crore and the entire expenditure remained largely unfruitful. Moreover, the entire project may be redundant in view of the ongoing feasibility study of fibre-optic communication system8230;8217;8217;

What would our committed Marxists have been declaiming had such observations been made by the CAG about the conduct of governments and companies other than the ones in their thrall?

A class unknown elsewhere

The next year8217;s Report educates us to a category of 8216;8216;enterprise8217;8217;, and a vocabulary, that in all probability are unknown elsewhere. The Report talks at length about 8216;8216;non-working PSUs8217;8217;. As of 31 March 2000, there were three non-working PSUs in West Bengal, we learn. The total investment in them was Rs 2.28 crore. Within the year, the number doubled to six, and the investment in them rose almost twenty three times 8212; to Rs 47.05 crore. Two of these six companies are 8216;8216;defunct8217;8217;, says the CAG. One of them 8212; a Company in the name of which money had been 8216;8216;invested8217;8217; 8212; had suspended production thirteen years earlier; its assets had been seized by a Government financial Corporation for default twelve years earlier. The Board of that Corporation had recommended the 8216;8216;expeditious liquidation8217;8217; of that Company five years earlier. Not only was the Company still around, money, the CAG found, has been appropriated in its name as 8216;8216;investment8217;8217;! The CAG proceeds to furnish details of what he calls 8216;8216;the sordid state of affairs in the remaining four companies.8217;8217;

Webel Carbon and Metal Film Resistors Ltd. was incorporated in 1980 8212; as, Marx forgive them, a joint venture with a private company. It was to manufacture carbon and metal film resistors. Soon it came out that production of resistors would not be viable. Thereupon the Company entered into an agreement with another private company 8212; Pertech Computers Ltd. of one Dadan Bhai. By virtue of this agreement, Dadan Bhai acquired the right to use the infrastructure of the company for a computer project. This was in 1995. A year later, management control of the Company too was transferred to Dadan Bhai.

The Industrial Reconstruction Bank of India was persuaded to advance a loan of Rs 5 crore for that computer project. Even as it sanctioned the loan, IRBI took a precaution 8212; the loan would become effective when Dadan Bhai8217;s Pertech Computers put in Rs 2 crore that it had promised. The latter investment never came. And then we have the nugget: in September 1996, that is within weeks of management control being transferred to Dadan Bhai, the Company agreed to allow Pertech Computers to sell 8216;8216;with the knowledge of WCMFRL8217;8217; machinery of WCMFRL valued at Rs 71.29 lakhs for Rs 13 lakhs! Having done this good deed, Pertech Computers promptly became insolvent and left the project! 8216;8216;Moreover,8217;8217; records the CAG, 8216;8216;WCMFRL remained non-functional since sic. April 1996 and Rs 1.98 crore was paid towards idle wages up to 31 March 2001. Further, raw materials, semi-finished and finished goods valued at Rs 29.68 lakh lying since 1996-97 became obsolete resulting in total loss. Thus, failure of WBEIDC to ascertain the financial viability of PCL led to a loss of Rs 2.86 crore on the above accounts.

Costs that exceed price, wages to workers who are not working, plans that do not exist

Webel Video Devices was set up in 1980 to manufacture black and white picture tubes. It started incurring losses from the beginning 8216;8216;mainly due to low capacity utilisation, production bottlenecks, labour troubles, high cost of production, etc.,8217;8217; observes the CAG. Having failed completely in the businesses for which it had been set up, in November 1990, the company hit upon a new, by now familiar, strategy 8212; an 8216;8216;expansion-cum-diversification scheme8217;8217;. It spent Rs 8.39 crore on a plan to produce 2.70 lakh picture tubes and 85,000 computer monitors every year. The entire outlay was funded by other PSUs of the state, the State Government and the IDBI 8212; another one of those 8216;8216;autonomous8217;8217; institutions that always ends up doing what governments want it to do.

As you would expect by now, Webel Video Devices did not bother with bourgeois formalities 8212; the CAG records that the entire 8216;8216;expansion-cum-diversification scheme8217;8217; was decided upon and commenced 8216;8216;without undertaking a market survey and analyzing cost data8230;8217;8217; After persisting with this new loss-making initiative for five years, the Company decided to discontinue production 8216;8216;as production cost was higher than sale price.8217;8217;

But the Company, committed as its principals were to the interests of labour, continued to pay wages to workers even though production had been totally stopped. By March 2001 it had paid Rs 5.98 crore as wages to non-working workers. Further losses were incurred in going on accumulating raw materials, 8216;8216;work-in-progress8217;8217;, finished goods and stores and spares8230; The final paragraph of the CAG on this sorry firm tells a tale by itself. The CAG observes,

8216;8216;The Committee on Public Undertakings COPU in its 55th Report observed July 2000 that a revival plan was stated to be under active consideration of the State Government in October 1999. Consequently the COPU recommended July 2000 that the Government should take positve steps for revival of WVDL. No such plan was, however, prepared September 2001.8217;8217;

Dead, but alive

In 1974, the State Government set up the West Bengal Livestock Processing Development Corporation Ltd. The Corporation set up an abattoir at Durgapur in 1982. The abattoir had to be closed down in 1984 as the Government was not able to persuade local butchers to use its facilities and because of 8216;8216;lack of coordination among the officers to achieve organisational goals.8217;8217;

The second abattoir project of the Corporation had an even earlier demise: around Rs 19 lakh having been spent on commencing the construction of an abattoir at Howrah, the project was abandoned as the Corporation owned by the State Government was not given permission by the State Government to proceed. This process of not giving permission, however, took from 1977 to 1991! Employees who remained non-working between 1983 and 2000 were given 8216;8216;idle wages8217;8217; of Rs 1.25 crore. The number of such employees was 11. Some way to keep 11 jobs going!

Ten years after it had ceased to function, the Corporation sold the Durgapur abattoir and gave the land on long lease to a private company. The Principal Secretary directed the Corporation to send the names of the employees to the Labour Department so that their rehabilitation could be organised. 8216;8216;However,8217;8217; notes the CAG, 8216;8216;no action was taken.8217;8217;

8216;8216;Thus, failure of the Government to wind up the Company even after closure of its activities for the past 17 years,8217;8217; CAG observes in conclusion, 8216;8216;led to payment of idle wages of Rs 1.25 crore to its employees till 1999-2000 and shall continue till its liquidation.8217;8217;

8216;8216;The matter was reported to the Government and the Management April 2000,8217;8217; records the CAG, and adds, 8216;8216;their replies had not been received so far September 2001.8217;8217; So much for accountability!

Social responsibility!

The Sundarban Sugarbeet Processing Company Ltd. started commercial production of alcohol in 1988. But, even though distilleries are designated as a 8216;8216;Red8217;8217; industry, that is one of the most polluting of industries; even though enforcing anti-pollution regulations is a duty of the State Government; even though the Company was owned by the same State Government, the Company did not install the effluent treatment facility in its plant. Accordingly, the State Pollution Control Board filed an objection. Doing so, of course, took two years. Instead of abiding by the instruction and installing the effluent treatment plant, the Company stopped production.

That was in December 1990. For the next 11 years its employees continued to get 8216;8216;idle wages8217;8217;! Eight years after it stopped production, the Company applied to the State Government for a loan of Rs 62 lakh to install that effluent treatment plant. The Government did not give the loan for constructing the effluent treatment facility. But the same Government gave a loan of Rs 87.43 lakh to incur current expenditure 8212; that is, to pay wages and salaries to the employees, each of who was idle!

8216;8216;Thus,8217;8217; observes the CAG, 8216;8216;without attempting to systematically plan the revival of SSPCL, the Government merely channeled Rs 87.43 lakh of funds to SSPCL for payment of salary and wages to idle employees.8217;8217;

What did the Government do after the matter was brought to its attention? The CAG answers: 8216;8216;The matter was reported to the Government and Management May 2001; their replies have not been received so far September 2001.8217;8217;

Talk of priorities, of accountability!

The exemplary precedent

The CAG8217;s Report for the year up to end-March 2002 records that the Government8217;s investment in 8216;8216;non-working8217;8217; companies, which was Rs 47 crore in 2000/01, swelled to Rs 143.62 crore in 2001/02. Establishment expenditure on these enterprises, which had been Rs 20 lakh in 1999/2000, swelled to Rs 11.61 crore in 2001/02.

And what improvement did all this effort and outlay accomplish? The paid-up capital of these companies was Rs 11 crore. Their net worth fell to minus Rs 248.81 crore. During the year they incurred a cash loss of Rs 28.64 crore. Their accumulated loss rose to Rs 179.70 crore.

And what did the Government do?

It set up another Committee! In February 2001.

The Committee on Public Sector Restructuring. This Committee was tasked to study 8216;8216;the problems/ prospects of each undertaking separately and to prepare an action plan for revival of potentially viable units or to determine the modality best suited for recovery of Government8217;s investment in unviable units.8217;8217; The Committee was asked to submit its report by May 2001. In October 2001 8212; the Committee still pondering 8212; the Government announced that it had decided to categorise loss-making manufacturing enterprises into three classes: i structurally unviable enterprises which may not continue indefinitely in the public interest; ii unviable enterprises that require capital investment from private partners; iii potentially viable enterprises that are to be retained under Government control so that they can be restructured.

The CAG8217;s comment on what has come of the new Committee and the classification is laconic: 8216;8216;The recommendations of CPSR though called for September 2001/August 2002 had not been received so far September 2002. However, no disinvestment, privatisation or restructuring had taken place during the year 2001-2002.8217;8217;

And now both 8212; the idea of the triple-classification as well as the Committee 8212; have been proclaimed at the Centre! Except that, as befits the status of the Central Government, the Committee has been made into a Board!

PSUs categorised into navratnas, profit-making, sick, chronically loss-making. Things to be done selectively, on a case-by-case basis. And, 8216;8216;As a first step,8217;8217; declares Chidambaram in his Budget Speech, 8216;8216;I propose to establish a Board for Reconstruction of Public Sector Enterprises BRPSE. The Board will advise the Government on the measures to be taken to restructure PSEs, including cases where disinvestment or closure or sale is justified.8217;8217;

Our own Bourbons 8212; who forget nothing, who learn nothing.

Concluded

PART I

PART II