Onmanorama
Govt mulls closing some loss-making state firms
Monday 15 September 2014 10:46 PM IST
New
Delhi: Government officials will meet on Tuesday to discuss proposals to shut
down some loss-making state-owned companies, risking a conflict with powerful
trade unions. After two decades of halting privatisations, the central
government still owns about 260 firms and thousands more at the state level,
involved in activities ranging from generating nuclear power to making condoms.
Some of them, including Oil and Natural Gas Corporation and Steel Authority of
India are successful, but there are dozens more that have been bleeding cash
for decades and kept afloat by budgetary support each year.
On
Tuesday, Cabinet Secretary Ajit Seth has called a meeting of top officials to
consider what to do with the 10 firms that make the biggest losses. They had a
combined net loss of 245 billion rupees ($4 billion) in 2012/13.
The list
includes Bharat Sanchar Nigam, Mahanagar Telephone Nigam, Air India, Hindustan
Photofilms and Hindustan Fertilisers Corporation, according to a note prepared
by the Department of Public Enterprises. Officials at the department have drawn
up proposals to close some. They include Hindustan Photofilms, a company set up
in 1960 to make film rolls and take on the likes of Kodak but declared a sick
company in 1996 and recommended for closure by the department in 2003 on the
grounds that it could not compete with private players. The company, based in
the southern town of Ottacamund in the Nilgiri hills, went to court and won a
stay order on any further proceedings that could lead to its closure. In 2010
the firm proposed a recovery plan but the government has been sitting on it,
with no decision having been made since about the company's future. In the
meantime the company's accumulated losses have piled up to 82.32 billion
rupees, about 40 times its paid-up capital. "There is no future for this
company in the current environment. It is a fit case for winding down,"
said a government official at the Department of Public Enterprises, which is
overseeing the privatisation of state firms. The official did not wish to be
named due to the sensitivity of the matter. The department will be making a
presentation at Tuesday's meeting. The government is also considering a
proposal to wind down the watch-making division of HMT Machine Tool Limited
after years of losses that have forced it to borrow from the government to pay
wages.
UNIONS
Trade
unions are opposed to any moves to shut down state firms and the Bharatiya
Mazadoor Sangh (BMS), a body affiliated to the ruling Bharatiya Janata Party,
said it would work with other unions to block the move. "We are
co-ordinating with all central trade unions on the matter. We are fortunate
that all trade unions are on the same page when it comes to these issues,"
said Vrijesh Upadhyaya, general secretary of the BMS.
Prime
Minister Narendra Modi's administration, which took office in May pledging to
reignite growth, has embarked on a cautious course of shedding stakes in state
firms although it has eschewed big moves. The government increased its
privatisation target for its fiscal year 2014/15 budget to 630 billion rupees
from the interim budget's target of 480 billion. The target is nearly four
times larger than total government divestments in the past four years.
Officials
said the government was also looking for ways to revive some of the sick
companies through capital infusion, joint ventures and by bringing in new
management.
