Government considers closing some loss-making state firms like BSNL, MTNL, Air India
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 Rs
245 billion ($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.
//COPY// Source: http://articles.economictimes.indiatimes.com
