KERALA SHOWS THE WAY

KERALA SHOWS THE WAY   Dipankar Mukherjee
IN the cacophony since last 15 years as to why sick public sector units should be closed or privatised, LDF government in Kerala within a span of only one year (2006 – 2007) has shown “how sick PSUs can be revived to earn profit”. For those who have been creating hullabaloo over sickness in PSUs, whether centre or state, have been eloquently silent on the rise in sickness in private sector on much larger scale than PSUs, Kerala government’s performance on this front, should be an eye-opener.
During the span of ten years between 1996 to 2006, 3490 private sector units and 68 PSUs (both state and centre) have been registered as sick units in BIFR. Kerala model therefore should be a trendsetter not only for public sector but also for private sector who are more keen on greener pastures rather than on revival of sick productive assets of the country.
Turn around scenario of Kerala PSUs
A look at the performance of the 42 PSUs under industries department, government of Kerala, speak for itself.
Total No. of Units - 42 2005 – 2006 2006 - 2007
Production (in lakh Rs.) 176,219.86 199,845.33
Turnover (in lakh Rs.) 146,829.51 158,302.63
Total net profit (in lakh Rs.) - 6,277.01 9205.34
Sale Tax Paid (in lakh Rs.) 6,541.78 7,104.74

The above shows that against a net loss of Rs. 63 crore (approx) in 2005 – 2006, these units earned a net profit of Rs. 92 crore in 2006 – 2007. If the previous loss is taken into account, the actual gain of PSUs during 2006 – 2007 was worth Rs. 155 crore. What is more amazing, is that when the present trend of reviving or “restructuring”, invariably means reduction of man power, in Kerala, during last year state PSUs provided additional employment to as many as 719 hands. Further employment is clearly in the picture as some state PSUs, buoyed by their performance during the last year, have taken up plans for expansion and modernisation. Kerala Minerals and metal Ltd. (KMML), which produces titanium pigment, alone has provided additional employment for 482 persons during the last year.
Key to the Turnaround
The United Electrical Industries (UEI), a state PSU that suffered a loss of Rs. 3.12 crore in 2005 – 2006, earned a profit of Rs. 2.37 crore in 2006 – 2007. The sales turnover soared to an astonishing Rs. 47 crore from 4.97 crore. Selective and corrective interventions, regular performance monitoring at the level of the minister, inter-PSU resource optimisation, and strategic co-operation with central PSUs are the salient features of the resurgence of these industries. For example minister of Industries himself is evaluating the performance of each PSU under his control on a monthly basis. A special mechanism of evaluation has been put in place in the office of minister with a view to providing consistent support to the PSUs. In stark contrast to the carrying out of such evaluation through consultants mostly foreign, consultancy came from within. Workers cutting across trade unions have played a vital role in the dramatic changes that was witnessed in PSUs of the state. Take the case of UEI, cited above. In a bold innovative step, a memorandum of understanding was signed among Kerala State Electricity Board the major client of UEI, the industries department, management and trade unions of UEI. Apart from involvement of trade unions in the process, it also shows significance of inter-PSU co-operation or you may call it public-public-partnership instead of public-private-partnership, which has lately become a mantra in reformist circles.
Inter-PSU Co-operation
Under the present LPG (Liberalisation, Privatisation, Globalisation) regime, it is very difficult for public sector to exist without interlinking their activities, a fact totally ignored by the government at the centre for last 15 years to facilitate dismantling of public sector. What has been done by LDF government in Kerala for revitalising PSUs without much capital input? It has intervened in procurement decision – the Kerala State Electricity Board purchases energy meters from UEI and cables from the Traco Cables, another state PSU. The Kerala State Drugs and Pharmaceuticals, which was in the doldrums and facing closure is on the way of recovery, thanks to government’s decision to purchase drugs through health department. Inter-PSU co-operation is not restricted to state PSUs alone. Kerala Mineral and metals Ltd. (KMML) has entered into tie up with ISRO to produce titanium sponge at the rate of 500 tonnes per annum, with an investment of Rs. 95 crore.
Look at the other extreme – those who are parroting public-private-partnership at the centre. Since 1995 government at the centre has been time and again asked to ensure that for power projects coming up in the country, two navaratna PSUs viz. NTPC and BHEL should jointly bid to ensure full capacity utilisation of both PSUs with additional employment created within the country, instead of importing power plant equipment from outside. The reformers are not interested. Had there been a similar inter-PSU co-operation as being initiated in Kerala, public sector wagon industries like Burn Standard, Braithwaite would not have been sick, with order ensured from Railways. IDPL, SSPL or BCPL etc. in drugs industry would have thrived, instead of sickness or closure if drug orders were ensured by health department. Hindustan Cables can still revive, if government of India follows the path of LDF government in Kerala, asks BSNL to either take over or to ensure adequate order.
Political will
But then for the so-called reformists irrespective of their NDA or UPA colour, in centre or in states, public sector is an enigma and privatisation is panacea for all economic ills. “Sickness” of industry whether in private or public sector does not bother them as long as there are greener pastures for private capital to enjoy more profit in a tax-free regime. For them “government has no business to be in the business” is a gospel truth. For LDF government it is the other way round. Through the amazing turnaround of state PSUs within one year, it has shown that the Left governments mean business when they talk of alternative path to LPG. LDF government in Kerala has shown the political will to concretise the alternative through the performance of the state PSUs