The Hindu Business Line : Kerala Govt may dump PSU revival plans for ADB compliance

IF the State Government is to abide by the conditions imposed by the Asian Development Bank (ADB), revival packages for State level public sector enterprises (SLPEs) are unlikely to be considered. The packages have been submitted by some of the SLPEs, which have been identified by the Government's special inter-departmental Enterprises Reforms Committee (ERC) for closure/sale.To stall the privatisation/ sale of the units, Expert Committees constituted by the employees and officers of Transformers and Electricals Kerala Ltd , Steel Industries Ltd Kerala , Autokast Ltd, Kerala State Drugs and Pharmaceuticals Ltd (KSDP) and Keltron Counters have submitted proposals for reviving the respective units.

But these proposals continue to remain under the consideration of the Government and its sub-comittees, which according to an MLA, seems like tactics to delay the revival packages instead of rejecting them.

Expressing apprehension, official sources told Business Line that the Government, with an estimated pubic debt burden of around Rs 41,700 crore, might find it difficult to dole out funds for reviving the units, which have been identified as unviable by the ERC.

According to them, Autokast and KSDP together received Rs 6.5 crore from the State Government soon after the disinvestment policy was announced in 1991. These two enterprises in Alapuzha district have only about 600 employees. The ERC had pointed out that "such a huge amount would have made a substantial welfare impact in a district like Alapuzha if it had been spent judiciously on several sectors."

The State Government, which will be getting an ADB loan of $775 million for modernisation of government programmes, including restructuring/reforms of SLPEs, is said to have included the ERC's recommendations in its agreement with the ADB.

The ERC approach paper, approved by the Government as the framework for implementing SLPE reforms, has identified 11 manufacturing SLPEs as priorities. Such reforms will help reduce the fiscal burden of the public enterprise sector and thereby contribute towards achieving fiscal sustainability. The ADB funding to initiate reforms and enable the State Government to restructure, sell or close 11 SLPEs was approved by the Government on October 5, 2002.

According to the sources, SLPEs are vulnerable to national and international competition that has recently intensified as a result of India's WTO commitments. SLPEs' productivity has also declined owing to inadequate investment. Kerala has 111 SLPEs out of the 1,071 in the country, employing 1.25 lakh people. Sixty-three manufacturing SLPEs employ 53,270, while the traditional industries (coir, cashew and handloom) employ 22,234. In State-owned plantation and agro-industries, 8,850 people are employed.

According to Dr K. Ravi Raman of the Centre for Development Studies, Thiruvananthapuram, the ADB specifications are repressive. As part of the restructuring of SLPEs, the State will have to assure a minimum annual "net attrition rate of one per cent," and the approval and extension of a Voluntary Retirement Scheme and an Employee Separation Scheme to all categories of workers. It would have to implement the recommendations of the ERC to the effect of accepting "alternative systems of management, including privatisation, disinvestment, merger, management contracts and leasing."

The State would be well advised to first stop further borrowing from the ADB and to dispense with the ADB policy package, and, second, to renounce the path of externally driven neo-liberal reforms, he said.

ADB's $775 million loan — more than Rs 3,700 crore — as is envisaged now is meant to launch three sets of reforms :(i) modernisation of Government programmes and fiscal reforms with a quota of $375 million, including co-finance by the Netherlands for $75 million (ii) the power sector reforms (iii) the Urban Development, Environmental Improvement and Poverty Reduction Programme, each being apportioned $200 million respectively.

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