Success pushes Bengal to speed up PSE reform

The Left Front ruled West Bengal government has set a scorching pace in the drive to restructure the state-owned public sector enterprises (PSEs) and has achieved foreclosure of its funded early retirement scheme (ERS) in the first phase.

"The aim behind the entire process is not to disinvest but actually to attract fresh investments and revive the enterprises using necessary skills and investments from outside", Sunil Mitra, principal secretary of the department of public enterprises and industrial reconstruction (DPE&IR) of the government of West Bengal (GoWB) told Business Standard.

"The social safety net programme in the first phase of restructuring enjoyed funding tio the extent of Rs 200 crore from DFID of the British government, and this programme was closed ahead of schedule on March 31, 2005", Mitra said.

Except in the case of hugely loss-making enterprises, sick government companies were being restructured with as much as 80 per cent weightage being given to inflow of fresh investments, Mitra pointed out.

Buyers picking up these units were still not getting the incentives normally given to greenfield units, but because the government was following a pre-closing and closure process, they were getting developed assets with reasonable liabilities.

In case of some units, the DPE&IR would hand over free land, assets and infrastructure to the West Bengal Industrial Development Corporation (WBIDC), which was was continuously receiving requests from investors for land and infrastructure.

"Assets from DPE&IR would ideal for WBIDC's needs", Mitra said.

Encouraged by the success of the first phase of PSE restructuring, GoWB was negotiating with fresh donors like the World Bank, Asian Development Bank and some other institutions for fresh funding to accelerate and expand the restructuring exercise.

The GoWB would be taking up, as the second phase of this exercise, restructuring of PSEs losing Rs 665 crore every year, involving 80,000 employees across 10 state departments.

According to government planners, the bleeding could be stopped with injection of Rs 1700 crore of funding.

Most of these losses were caused by transport and power sector utilities and the funding would go towards insulating the workers from the pain of closure while simultaneously retaining the service aspect of these PSEs.

A preliminary study of the transport PSEs was being improved, while a similar survey of all the power PSEs was expected to be completed by 2007.

Underlying the PSE restructuring programme would be the harmonisation of donors, so that loans relating to structural adjustments, or PSE reform were harmonised and handled properly, said Mitra.

The DPE&IR had set up an internal cell to spearhead the reform process and concentrate the skills gained in the first phase of restructuring. Simultaneously, the GoWB had constituted an inter-departmental empowered committee to keep the process on track.

While most PSEs were being restructured with the aim of getting in fresh investments, in the case of the bleeding enterprises, stoppage of the government's losses had a weightage of up to 60 per cent in the decision-making process.

Some PSEs have bounced back, like Gluconate India, Saxby Farmer and Durgapur Chemicals Ltd (DCL).

DCL in fact is going for a capital reduction programme under government stewardship after swapping its outstanding loans for equity, thanks to its now-profitable status.

In the case of a company like Engel India, the assets were being transferred to one of the industry leaders in the crucibles business, so that fresh investments and technology would come into the ailing firm.

Under the social safety net pro gramme (SSNP), former workers of the closed PSEs, or their nominees, were trained in vocational skills and through the vocational training college at Belur Math run by the Ramakrishna Mission.

Some thousand candidates have received training in fields as diverse as radiology and beauty treatment.

To win over workers, the government will showcase the success stories of the SSNp and vocational training programme so that workers and their families did not feel that the world had ended because PSEs were being restructured.

Almost 60 per cent of the trained workers were placed in jobs by Ramakrishna Mission, which had a vibrant placement service.