The department of sericulture has decided to close the loss making unit, Karnataka Silk Marketing Board (KSMB). The board has been making losses since its establishment in 1979 except for one year, 2003-04, when it reported a net profit of Rs 11.65 lakh.
State minister for small-scale industries and silk Venkataramanappa told reporters, here today, the decision to close the board was taken following recommendations of a consultancy firm, A F Ferguson and Company. The government had asked the consultancy firm to study the activities of KSMB and suggest ways and means to revive it. However, the firm recommended the closure in its report.
He said, the KSMB had been making losses due to the free trade in silk, imports and competition from the private sector. During the year, KSMB sold 163 tonnes of silk yarn. “Though it was much higher when compared to the previous years, it could not make profits. Despite reducing the operational expenditure of the board and cutting the facilities for its employees, its turnover is not sufficient to keep it alive,” he said.
For 2009-10, KSMB reported a loss of Rs 3 crore and Rs 3.6 crore during the previous year.
Even if the board sells 500 tonnes of silk yarn, it would be difficult to keep it running, as its operational expenditure is much more than the income, Venkataramanappa said adding that the department has decided to wind it up. “We are submitting a report to the state cabinet for approval and once it is approved by the cabinet, we will wind up the board,” he said.
Presently, the board has two IAS officers as MD and chairman respectively, apart from 99 other staff. They will be offered voluntary retirement scheme (VRS) and those who do not want the VRS will be shifted to other state government departments, he said.
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Subsequent to the consultancy firm’s report, the KSMB’s board of directors at its 149th meeting had passed a resolution for its closure.
He said even the Comptroller and Auditor General of India had recommended in its audit report dated July 6, 2008, “An early decision of the government in this regard (i.e., closure) could have avoided further losses to the company. Ten months have already elapsed since the decision of the board for closure of the company has been conveyed to the government. Since then, the company suffered a loss of Rs 2.8 crore up to February 2009.”
Venkataramanappa said, the board had approached the finance department for a financial assistance of Rs 20 crore. But, till now there has been no response from them. Considering all these issues, it has been decided to close the KSMB, he added.