Thousands crores wasted in Reviving Sick PSUs

"Corruption in India" Article no 2


Thousands crores wasted in Reviving Sick PSUs

To tackle corruption one has to have a clear understanding of the various dimensions of corruption. Corruption can be of various types with varying impacts on any given society. It is a well known fact that in India PSUs and government departments have become major breeding ground of corruption . In the name of running the government and PSUs thousands crores are pumped in each year with no results whatsoever.

In the important disclosure made under RTI Act by Department of Heavy Industies it revealed that even after the government of India pumped thousands of crores for reviving sick PSUs nothing tangible happened and turn around of these PSUs could be made. Mostly these units were closed down ultimately or are under the process of liquidation. This was tax payers money which was given to these sick units . Financial support is not only for VRS but money was given in the form of equity, interest free loan, waiving off of loan etc. with the hope that these units would be revived. Even after spending huge money in these sick units these units could not be revived. At the time of making proposals for revivals of these units a lot of promises in the form of high turnover and decent profits in few years are made. These promises are given on paper just for taking money from the government of India. Their promise and plans which are bound to be failed never materialize. After a year or so every body including CMD, secretary get change in the fast changing scenario of industry. Money is taken and siphoned off with impunity. In name of doing business and reviving the company those projects where personal interest of higher management and ministry officials are involved are taken . After some time these projects fail and so the money . But who cares for this.
If we analyse the data we will find that only one out of ten PSUs are revived with the efforts of government. In nine cases where money worth thousands of crores are invested go waste. Who is to blame for the scam which is going on since many years. We do not know any name of official who has been made responsible for the failure. In the collective responsibility no body is responsible. In the working of PSUs we find ministers take utmost interest in the reviving of company. These ministers who do not have a business sense of doing a small business take the decisions worth thousands crores . In PSUs thousands of employees work. In the name of helping these employees for which they also get the support from left parties money worth thousands crores get sanctioned from government of India. Once money is sanctioned first the arrears of employees are paid so that employees keep quiet. After distributing money to employees then work of starting projects begin . In the award of work of major projects the ministry dictate terms. Small works are kept for Directors or officers of the rank of GMs. Some directors who are left out in the award of works keep themselves satisfied by enjoying cars , air travels for self and family , free holidays at the expense of company. In a nutshell every body is satisfied except of tax payer whose money is actually spent in this process . .
Here are some the live examples of PSUs which were sanctioned revival plans but they could not be revived:
1. Hindustan fertilizers Ltd.
From the financial year 1998-99 to 2003-04 the company was sanctioned Equity/Plan/Non plan loan to the extent of Rs. 1275 crores. Now the company is under closure as approved by government of India.
2. Braithwaite & company Limited (BCL) Kolkatta
During 2005-06 Rs 4 crore was provided in the form of equity. Interest amounting o Rs. 43.61 crores was waived off on GOI loan till 31.05.05. Rs 69.30 crores of GOI loan was allowed into equity . Rs 167.30 crore was reduced from eqity capital by way of adjustment of accumulated losses. In addition From 2001-02 to 2005-06 the company was sanctioned Rs 57 crores but it could not be revived.

3. Braithwaite Burn & Jossop Construction Co. Ltd. (BBJ), Kolkatta

During 2005-06 Rs 4 crore was provided in the form of equity. Interest amounting o Rs. 30.73 crores was waived off on GOI loan till 31.05.05. Rs 13.88 crores of GOI loan was allowed into equity . in addition to this in 2005-06 the company was sanctioned Rs 2 crores but it could not be revived.
4. Hindustan Photo Films Manufacturing Co. ltd.
From 2001-02 to 2005-06 the company was sanctioned Rs 145 crores but it could not be revived.
5. Burn Standard Company Limited (BSCL)
From 2001-02 to 2005-06 the company was sanctioned Rs 251 crores but it could not be revived.
6. Bharat Wagon & Engg. Co. Ltd.(BWEL)
From 2002-03 to 2005-06 the company was sanctioned Rs 59 crores but it could not be revived.

7. HEC Ranchi

The company is engaged in manufacturing Iron casting , forging slab caster etc. HEC was referred to BIFR in 1994 and a revival package was approved in 1996. The revival package was declared failed by BIFR which on 06.07.04 recommended winding up of the company under SICA. Government went against the recommendation of BIFR and instead approved a revival package and financial restructuring of the company. GOI invested Rs 453.24 crore in HEC as on 31.03.04 with no concrete result. During 2005-06 government of India wrote off Rs1101.03 crore outstanding as loan and interest thereon. Plan loan as on 31.03.05 of Rs 15.27 crore was converted into equity capital. A non plan bridge loan of Rs 102 crore was released on 30.03.06 Even after spending so much the turnover of the company during 2005-06 was merely Rs. 171.53 crore.

8. HSL (Hindustan Salts Ltd. )
Outstanding loan and interest thereon amounting to Rs. 66.32 crore as on 31.03.05 was written off by government of India. During 2005-06 Rs 100 lac was also sanctioned for payment of pension to the pensioners of ex Salt Department.The turnover of the company during 2005-06 was merely Rs. 5.69 crore and net loss as Rs. 1.20 crore. Recently the CMD of the company was arrested while accepting a bribe of Rs 50000 from a contractor .
8. Cement corporation of India
From 2001-02 to 2005-06 the company was sanctioned Rs 366 crore by government but the company could not be revived.
Like above there are many other PSUs which after receiving financial support amounting to thousands of crore from government of India were closed down. In the attempt of reviving the companies government of India spent thousands of crore on them. Just pumping in the money is not the solution. Main area of concern is not lack of fund but inefficient management . If the government gives adequate thought on appointment of professional management the scenario can be changed. The present system of appointment through PSEB should be dispensed with. Instead PSEB should be totally revamped and appointing committee members should be taken from eminent personalities from corporate and management school. At present most of the appointments to the PSU board are political motivated. There is sufficient pull and pressure being exercised on PSEB members to select a particular candidate with political backing instead of selection on merit basis.
After the advent of globalization in India there are many industries which are facing intense competition from all over the world. PSUs of telecom, fertilizer industries are facing heat of the competition. With heavy baggage of surplus manpower and social cost these companies can not be expected to compete with thin private players. Pumping in huge money in these companies is like throwing money in bottom less pit. Had the government of India sanctioned smaller amount that too for making compulsory retirement of employees the government could have saved thousands of crore. Sooner these companies are closed the better.