Nepa's divestment plans bring gloom

The residents of Nepa Nagar, the town where the country's oldest newsprint mill is situated, are a gloomy lot these days.

The Union Government's decision to introduce a Bill in the winter session of Parliament to privatise Nepa Ltd is the cause of their anxiety.

While the residents are unsure of the mill's future once it passes into private hands, several of the 1,400 Mill employees Business Standard spoke to were apprehensive of losing their jobs. None of them wanted to be quoted in this article, lest they be identified as trouble mongers by the new owners.

Yet, they all wanted their jobs to be secured. "If privatisation is imminent, the strategic investor must be told of the liabilities towards workers as well as the mill and the responsibilities towards the town. Our jobs must be secured," said one such worker.

Some were hopeful that the government will not go ahead with the privatisation of the mill and will instead offer a bail-out package. Some have even written to the trade unions affiliated to the Communist parties to stall the process. "We are trying our best. The government must help us in the interest of the entire town," says Rajendra Chouhan, a worker who came to Nepa 14 years ago from Indore.

In better times, Nepa Mills was thriving and had over 5,000 people on its rolls. Over the years, once it started slipping into the red, the jobs became scarce. Old timers said that almost half the people from the town have migrated to other industrial towns and cities.

The company was established by Nair Press Syndicate Ltd in January 1947 as National Newsprint and Paper Ltd. The Madhya Pradesh government took over the company's management in 1949. It started commercial production in April 1956 and became an undertaking of the Union Government in 1959.

Old hands in the company said the company's downturn began immediately after liberalisation in 1991 when newspaper companies were no longer required to place orders with Nepa Mills.

According to SK Mutreja, the chairman and managing director of Nepa Mills, things took a turn for the worse ten years back. "Nepa Mills was designed to produce paper by using virgin salai and bamboo fiber. But, from March 1997, it switched from virgin fiber to recycled or waste paper without any de-inking facility," he said. As a result, the newspaper it made lacked brightness. Naturally, there weren't too many takers for its product.

In the late-1990s, the government tried to privatise the mill. But there were few takers. The cost of reviving the sick mill was not small "" the de-inking facility alone would have cost Rs 100 crore. So, most large paper mills stayed away.

Since then, Nepa Mills' financial position has only worsened. The company's liabilities stand at Rs 320 crore. The wage arrears of the 1,400 employees are piling up in the absence of wage revisions since 1992.

The accumulated losses of the company are likely to swell to Rs 389.17 crore during 2006-07, up from Rs 344.70 crore in 2005-06. Despite improvement in performance during the last two years, the mill is working at only half its capacity of 80,000 tonnes per annum.

Obviously, whoever acquires the mill will have to spend large sums of money to get it back into shape.

"A detailed project report is needed. Earlier, the government had appointed consultants to assess the sum which the mill requires for modernisation. One consultant put it at Rs 24 crore, while the other said it was Rs 350 crore," said Mutreja adding, "If one could hazard a guess, it will stand somewhere in range of Rs 65 crore to Rs 350 crore."

Meanwhile, employees hope against hope that the privatisation of the mill does not happen "The government is still indecisive. It will take another two years for it to finalise its decision and find a private partner," said a mill hand.