The Andhra Pradesh government will decide on restructuring the 38 state public enterprises after the completion of the state electricity boards recast.
The Andhra Pradesh State Electricity Board is a huge organisation, with a work force of 72,511. The state government wants to study the impact of its recast and privatisation before taking up similar exercises for other public enterprises.
The SEB is being split into two subsidiaries one will handle generation while the other will look after transmission. Distribution will be handed over to private parties.
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The government also has to devise a policy with regard to deployment of the funds accruing from the disinvestment. It is being debated in the state bureaucracy whether the funds should go into the general kitty or be kept aside for voluntary retirement schemes and strengthening of other state public enterprises. At the moment, the government is hard-pressed for funds even to pay the monthly establishment bills. But relaxation of the prohibition is expected soon and this should ease the situation to some extent.
A three-member cabinet standing committee, headed by state major industries minister Basheeruddin Babu Khan, was set up last week to examine the sickness in state public enterprises and oversee disinvestment. Earlier, a cabinet sub-committee under finance minister Ashok Gajapathi Raju was looking into disinvestment and restructuring of the enterprises. A commissionerate of public enterprises official told Business Standard in Hyderabad: We are in the dark whether the sub-committee headed by the finance minister still functions. We have asked for clarifications from the government.
The sub-committee headed by Gajapathi Raju has been in office for 18 months and has failed to tackle the problem. The setting up of the cabinet standing committee is being interpreted in industry circles, as well as in the bureaucracy, as indicative of a lack of political will to push through the reforms.
A state industry ministry official said that the Naidu governmentHaving set the restructuring process in motion, lacks the political will to complete the exercise. Nor is it able to wriggle out of it. He however expressed optimism that disinvestment in state public enterprises would not be abandoned since there was pressure from the World Bank, whose assistance in financial restructuring was essential.
Sources in the Chief Ministers Office maintain that the restructuring and disinvestment programme is high on our agenda.
A political advisor to the Chief Minister said: If it is not done now, when we still have three years to go before elections, it will never be done and the state public enterprises will remain a drag on the states finances.
While disinvestment in public enterprises at the national level commenced only after the reforms process was set in motion in 1991, it had started much earlier in Andhra. In 1988, the Telugu Desam government had hived off the auto division of Hyderabad Allwyn Ltd and handed it over to Mahindra & Mahindra. Later, the refrigerator division of Allwyn was privatised by sale of assets to Voltas Ltd. However, subsequent efforts to privatise the watch and the auto body divisions of Allwyn, as well as the Bharat Forge Ltd, did not meet with success.
Lack of transparency, inadequate support from bureaucrats and lack of experience, knowledge and appreciation of practical issues in restructuring and privatisation had hampered the privatisation drive in the state.
In 1995, after the Telugu Desam returned to power, the N T Rama Rao government set up a committee of bureaucrats to reassess the role of state public enterprises, review the need and resources to provide continued subsidy, and consider the dimensions of divestiture. The committee recommended wind-up and sale of assets of nine state public enterprises, merger of five to form a single corporate entity, privatisation of three, restructuring and merger of two, and restructuring and continuance as separate entities of two others.
Of the remaining 17 enterprises, the committee wanted 13 to be continued and one departmentalised. The remaining three were already before the Board for Industrial & Financial Reconstruction.
The committees suggestions were vetted by a working group of experts which finalised its recommendations in respect of 18 corporations.
The experts group wanted wind-up of two corporations fisheries and textiles 100 per cent disinvestment in two others leather and technology services and partial disinvestment (10 per cent to 50 per cent) in eight.
It wanted the Industrial Development Corporation, the Industrial Infrastructure Corporation and the Mineral Development Corporation to be converted into joint ventures with 50 per cent disinvestment. In regard to the Nizam Sugar Factory, the group suggested trifurcating the company by selling the sick units and 50 per cent disinvestment in nine others.
The N T Rama Rao cabinet approved the recommendations, but soon after there was a change of government, with Rama Raos son-in-law N Chandrababu Naidu taking over as the Chief Minister.
Naidu referred the matter to the cabinet sub-committee headed by the state finance minister.