NO one seemed surprised by chief minister N. Chandrababu Naidu's decision on April 24 to wind up three public sector units—Allwyn, Republic Forge and AP Fisheries Development Corporation. Not the Left partners, the CPI and the CPM. Nor the Opposition Congress which expected many such PSUs to figure in the closure list of 39 companies. The move rendered almost 1,02,563 jobless and the losses, if these sick PSUs were allowed to function, are estimated at a staggering Rs 600 crore.
Justifying the government's decision, finance minister Ashok Gajapati Raju said: "Our people can't be doomed to pay till eternity. We should learn from our past mistakes." Mistakes which have resulted in an overall loss of Rs 1,006.48 crore from 21 enterprises including Singareni Collieries (Rs 410.83 crore); Allwyn (Rs 184.73 crore); APSRTC (Rs 99.79 crore) and Housing Corporation (Rs 139.53 crore), besides the APSEB which has also incurred substantial losses.
The government's latest move comes in the wake of its earlier review of prohibition, rice subsidies and power tariff to the agricultural sector. Although Naidu denied that doing away with prohibition would ease the burden on the state exchequer, officials in the finance department and those in the liquor trade admit that additional revenue to the tune of Rs 1,200 crore will flow in per annum. The increase in the prices of subsidised rice from Rs 2 to Rs 3.50 per kg and in the power tariff to the agriculture sector from Rs 50 to Rs 100 have also helped. Yet, the government can't afford to be complacent about the growing demands of the neglected power and irrigation sectors. The dwindling power position is alarming and lack of proper irrigation in the north Telangana districts is threatening to revive the agitation for separate statehood.
As for the sick PSUs, closure was the only option as the government felt restructuring would only mean a drain on the exchequer. Says Raju: "Total restructuring, including VRS, would cost about Rs 100 crore. If the government cannot take steps to restructure, liability on these PSUs would shoot up to over Rs 1,000 crore in the next five years."
But though workers are being held responsible for the ill health of the PSUs, the problem really lies with the management. Says P. Janardhan Reddy, leader of the Congress Legislature Party and a senior trade union leader: "Short-sighted management policies always put the workers on a frying pan. They can't be held responsible for the drop in production or the lack of marketing. It's for the management to chalk out new strategies to meet the growing competition and to take the right decision at the right time." A classic example is Hyderabad Allwyns Limited (HAL). In January '92, a high power committee was constituted to consider the revival of the company by inducting a suitably large outfit with a strong resource base for managing its operations. Based on its recommendations, the government decided to lease HAL out to Voltas Ltd, which assured the retention of 5,000 employees in HAL's three divisions.
But soon after the takeover, the Mumbai giant, with wide interests in refrigerators, made its intentions clear. Since the operation of the auto and refrigeration divisions is identical (making sheets for bodies of buses or refrigerators), Voltas Ltd preferred to make bodies of buses as part of the latter. Clever management also ensured the newly-created Allwyn Auto used land and material taken over by them for a monthly rent of Rs 1 lakh. Says Naidu: "What can my government do now? The damage has already been done by my predecessors. The erstwhile auto division has nothing on hand to claim—neither land nor machinery."
The other two PSUs—Republic Force and AP Fisheries Development Corporation—have a similar tale to tell. There are 3,40,333 employees working in the 39 PSUs. Equity participation in these units is Rs 3,087 crore, government share totalling Rs 2,557 crore. Loans taken by PSUs total Rs 9,083 crore; government credit amounting to Rs 2,164 crore. The government guarantee on PSU loans was Rs 6,977 crore and interest to be paid Rs 554 crore. Accumulated losses therefore: Rs 1,308 crore.
Meanwhile, all is over for Hyderabad's oldest company, HAL. Naidu is in no mood to consider the employees' plea that given some more time, supported by good management, they could ensure bright figures for the company, as well as for the state. Naidu has a single-point agenda: putting the state economy back on rails. Even if it means closing down 39 companies.
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