A K Bhattacharya: Milking reforms

RAISINA HILL

After selling Great Eastern, Buddhadeb plans to do the same with five state-owned dairy units that cost the state Rs 60 crore a year.

West Bengal Chief Minister Buddhadeb Bhattacharjee is now all set to spring another surprise. Having already facilitated the sale of Great Eastern Hotel to Bharat Hotels and raised many an eyebrow among his Marxist colleagues, he is now setting his eyes on the dairy units in the state.

His advisors have drawn his attention to the fact that the state-owned dairy units in West Bengal are incurring huge losses, forcing the state government to cough up an annual subsidy of Rs 60 crore. Five of these units in the state incur Rs 20 for procuring, processing and marketing a litre of milk. And their net realisation from sales is Rs 12 a litre. Needless to say, the gap is met by the government by way of subsidies.

In stark contrast, all the private sector dairies in the state make substantial profit. So, Bhattacharjee has been asking his colleagues why, if the private dairies can make money, should the state-owned dairy units be failing to generate cash profit. The reasons are obvious. There are about 5,000 workers employed in these five state-owned dairy units and they supply a little less than a lakh litres of milk a day. There is thus, huge over-manning in these units and low productivity complicates the situation further.

PriceWaterhouseCoopers has already been entrusted with the responsibility of assessing how the five dairy units could be privatised. Preliminary talks have already been held with private sector companies, which may be interested in taking over the loss-making units.

The short point is that the West Bengal government is not content with just the Great Eastern Hotel privatisation. It is now holding talks with workers and other Left Front organisations in the state to reduce its subsidies on loss-making units and give the private sector an opportunity to make them profit-making enterprises. It has even roped in the UK Department for International Development (DFID) to extend loans to the state government which could be used to pay lumpsum compensation packages to employees rendered surplus after privatisation.

In short, it is doing all that the United Progressive Alliance (UPA) government should be doing at the centre, but is reluctant to do either because of the pressure from the Left parties, or because some of its other constituents are not ready to bite the bullet. Privatisation of even sick public sector understanding units is off the UPA government's agenda. But there is no dearth of PSU units, which are ideally suited for privatisation in the dairy sector itself. Take a look at what is happening to Delhi Milk Scheme (DMS), a division that sells about three lakh litres of milk every day. Mind you, it has got only 1,500 workers on its rolls and it is not as over-manned as the five loss-making state-owned dairy units in West Bengal. Yet, it has been incurring average annual losses to the tune of Rs 19 crore in the last five years and its accumulated losses are over Rs 650 crore. The Union government has now taken a decision that DMS would now run on commercial principles and should stand on its own financially.

The question is why the UPA government cannot take a bolder decision on either DMS' financial restructuring to make it profitable or its privatisation. There are several other loss-making central PSUs which can be restructured and made into profitable enterprises. But the UPA government's initiatives on public sector reforms have failed to yield any positive results. All that the government managed to do in the last two and a half years is to provide some more loans and equity to a few of these loss-making PSUs. There might be some relief for them as a result. But it will be naive to believe that such loans or fresh equity infusion will bring about any positive change in the financial performance of these PSUs over the medium term.

The way forward is the path chosen by Buddhadeb Bhattacharjee. And the fact that such a path has been chosen by the leader of a Left Front government should perhaps inspire the UPA government to experiment with some bold PSU reform measures.