PSU reforms, disinvestment take backseat in Karnataka

Disinvestment and reform of public sector undertakings (PSUs) are forgotten concepts for the Karnataka government. It has been nearly five years since disinvestment and reforms of the state PSUs began, but there is nothing to show.

On the contrary, "disinvestment" has become a political tool. Similarly, top jobs in the PSUs have become attractive berths for political personalities who head them as chairpersons.

The disinvestment and reforms process were initiated in 2002 when the Congress was in power. Subsequently, the mood in the political circles has been against disinvestment. The erstwhile Congress-JD(S) government and the present Karnataka Development Front (KDF) have announced plans for the "rejuvenation" of PSUs, including those on the verge of closure.

The opposition to disinvestment and reforms is such that the Department of Disinvestment and State Public Sector Enterprises Reforms had been "headless" for quite some time. It is only recently, after a long gap, that an IAS officer has been posted to lead the department. But it has made no headway since.

In 2002, as many as 29 of 82 PSUs were identified for disinvestment and liquidation. Of the 29 PSUs, 17 non-working and four working companies were slated for closure. The remaining eight working PSUs were to be privatised.

The Karnataka Silk Industries Corporation Ltd, Karnataka Soaps and Detergents Ltd, Mysore Electrical Industries Ltd, Karnataka Vidyuth Karkhane Ltd, Mysore Minerals Ltd (MML), Mysore Sugar Company Ltd, Mysore Paper Mills Ltd and Sree Kanteerava Studios Ltd were shortlisted for privatisation.

But the privatisation programme has seen little success. According to sources in the Legislature Committee on PSUs, none of the bids from private firms were attractive. "Besides, we were shocked to find that profit-making companies like MML were put on sale. Today, MML is a leading iron ore mining company. It has paid dividends to the government. It is evident that the government lacks clarity in its approach," the sources said.

The case of non-working PSUs is no different. So far, the government has issued orders for the closure of Karnataka State Textile Ltd, Karnataka Agro Proteins Ltd, Chamundi Machine Tools Ltd, Karnataka Small Industries Marketing Corporation Ltd, Vijaynagar Steel Ltd, Karnataka Telecom Ltd, Karnataka Tungsten Moly Ltd and The Mysore Acetate and Chemicals Company Ltd. In addition to these, Mysore Cosmetics Ltd, Mysore Chrome Tanning Company Ltd, Mysore Lamp Works Ltd, Mysore Match Company Ltd, NGEF Ltd, Karnataka Agro Industries Corporation Ltd, Karnataka State Veneers Ltd, Karnataka Pulpwood Ltd, Karnataka State Construction Corporation Ltd and Karnataka Film Industry Development Corporation Ltd (KFIDCL) are also in the line.

However, the process of their liquidation is on. None of the 17 non-working PSUs selected for closure has been completely shut down.

Employees of at least three PSUs like the NGEF, Mysore Lamp Works and KFIDCL have refused to accept the voluntary retirement scheme (VRS) owing to various reasons. The Comptroller and Auditor General (CAG) has pegged the combined loss of these 17 PSUs at Rs 840.08 crore.

But the CAG report indicates that spending on PSUs has gone up. The total investment in working PSUs increased from Rs 33,697.10 crore (2003-04) to Rs 37,680.84 crore (2004-05). The total investment in non-working PSUs increased from Rs 536.93 crore to Rs 575.42 crore during the same period. Much of this amount has been utilised for VRS.

The budgetary support in the form of capital, loans, grants and subsidy disbursed to the working PSUs increased from Rs 3,663.61 crore in 2003-04 to Rs 5,387.68 crore in 2004-05.

According to the latest finalised accounts presented to the CAG, 37 working PSUs earned an aggregate profit of Rs 740.35 crore. One company alone, the Mysore Minerals Ltd which produced iron ore earned a profit of Rs 145.06 crore. Only five companies declared dividend aggregating to Rs 14.95 crore.

At the same time, as many as 21 working PSUs incurred an aggregate loss of Rs 174.30 crore. Their accumulated losses stood at Rs 722.21 crore exceeding their aggregate paid up capital of Rs 558.80 crore.

"But such figures do not bother the government. All they do is install a party man to head the PSU. In fact, the KDF government has shortlisted 40 PSUs to be headed by politicians. If this is the approach, disinvestment and reforms will remain a stranger to PSUs," a senior bureaucrat lamented.