A K Bhattacharya: Reconstruction or privatisation?

RAISINA HILL

Four years ago, the Left Front government in West Bengal embarked on a policy of reconstructing its ailing state-owned companies. The policy arose from the Left Front's realisation that there were a large number of unviable and loss-making state-owned companies on which the government's resources were being wasted for years to simply pay the wages of employees who were not engaged in any productive activity.

What did they mean by reconstruction of sick and unviable state-owned units? Well, this essentially meant that all the sick units would be grouped under three heads "" those that could be revived and made profitable with some technology and funds infusion, those that could be closed down after the sale of assets and finally those in which the state government could reduce its stake to 26 per cent with the remaining 74 per cent to be sold to private sector bidders.

In short, the Left Front government decided to say good bye to the policy of pumping in tax-payers' money to keep alive some loss-making companies. The sale of 74 per cent stake in these companies to private sector bidders was nothing but privatisation or strategic sale of units. However, the Left Front government decided to call this the "joint venture route to reviving sick units".

There was another key element in this restructuring policy. A generous voluntary retirement scheme was framed for employees of companies which were to be closed down or to be revived through manpower downsizing and technology induction.

A safety net was also created which was used to provide consultancy and financial assistance to employees who had accepted VRS and wanted to start new ventures on their own. And the money for all this came from the Department for International Development (DFID), the British government arm that offers financial assistance to developing countries to fight poverty.

The logic of using foreign government's money to restructure state-owned companies was that the exercise would eventually free up the government's resources that were previously locked in these sick units and which could in future be used for social sector schemes like education and health.

A department for reconstruction of public sector undertakings (PSUs) within the industry ministry was entrusted with the responsibility of overseeing the implementation of the reconstruction plan.

With less than a year to go to the next Assembly elections, the West Bengal government seems to be fairly satisfied with what it has achieved on this front in the last four years. Two units have been closed down. Four companies have been revived with the induction of fresh capital and technology, and they are now making profit and no longer a drain on the state exchequer.

More significantly, 10 units have been identified where the state government will sell off its 74 per cent stake to private bidders. The process of such strategic sale or privatisation (nobody in the West Bengal government, however, wishes to use this phrase for obvious political reasons) has begun.

A decision on handing over the management of one such company has already been taken. Many more decisions including the one on the high-profile Great Eastern Hotel will be taken in the next few months. Over 3,000 employees have accepted VRS from these sick and unviable units.

If you quiz officials in the West Bengal government about the future of this policy, they sound very optimistic. According to them, the key issue is to take care of the employees who are becoming redundant and being given VRS.

There must be a generous VRS and a safety net to provide them advice and assistance to explore new options or avenues to earn a livelihood. The next phase of this policy will see some major state undertakings from the departments of power and transport being referred for such reconstruction. Those will be difficult cases, but the state government has so far shown no sign of any nervousness on this front.

With as many as 116 loss-making central PSUs (many of them would be unviable as well) continuing to survive on Union government's budgetary support year after year, the question that comes to one's mind is why the UPA government cannot take a leaf out of the West Bengal government's book and push ahead with public sector reforms by selling the controlling stake to private parties. Nobody can complain. Not the Left parties at least!