KG Kumar

Last week, the Kerala Industries Minister, Mr Elamaram Karim, announced a working profit of Rs 239.75 crore in 2009-10 for public sector undertakings (PSUs) under the State Industries Department, up from the previous year's Rs 222 crore. The Minister also told a press conference in Thiruvananthapuram that the number of profit-making companies has risen from 28 to 32 between 2008-09 and 2009-10. All the 37 units under the State Industries Department would rake in working profits during the current financial year, the Minister asserted.

In 2005-06, only 12 PSUs were generating profits. But, under the Left Democratic Front (LDF) government, the Minister pointed out, the number of profit-making units has grown steadily – 24 in 2006-07, 27 in 2007-08, 28 in 2008-09 and 32 in 2009-10. The total working profit also rose from Rs 56.38 crore in 2005-06 to Rs 239.75 crore in 2009-10.

The total turnover of Kerala's PSUs has also been burgeoning — Rs 868.13 crore in 2005-06, Rs 1,451.83 crore in 2006-07, Rs 1,533.66 crore in 2007-08, Rs 1,867.96 crore in 2008-09 and Rs 2,130.08 crore in 2009-10.

A day before the Minister's triumphant announcement, the State Cabinet sanctioned a capital investment of Rs 125 crore to start eight new public sector industrial units during the current financial year.

These are: Hightech Spinning Mill at Komalapuram (Rs 36 crore), Hightech Weaving Factory at Kannur (Rs 20 crore), a textile mill at Kasaragod (Rs 16 crore), a cable making unit at Kannur (Rs 12 crore), a tool room at Kozhikode (Rs 12 crore), a unit of Keltron at Kuttippuram (Rs 12 crore), a forging unit at Shoranur (Rs 12 crore) and a meter factory at Palakkad (Rs 5 crore).

Do these jubilant declarations of the Industries Minister indicate that the State's PSUs are finally finding their way out of the woods? Not quite. The State's own Planning Board admits: “Historically, the backbone of modern industry in Kerala was laid by PSUs. The performance of these PSUs has shown a fluctuating trend, some achieving a turnaround in recent years, while others running into recurring losses.”

And these losses – accumulated losses, resulting from high-interest loans – could well sound the death knell for Kerala's PSUs. The Draft Approach Paper to the Eleventh Five Year Plan of Kerala prepared by the State Planning Board admits as much: “Loss-making enterprises are ipso facto inefficient or constitute an economic millstone around the State's neck”.

And yet the solution, feels the LDF government, is not the customary one: “The State, which is already facing severe fiscal strain, cannot afford this loss for ever. At the same time, the State cannot simply close them down or sell their assets at whatever price they can fetch in the market, involving the neoliberal route of ‘privatising the PSUs'.

The Planning Board, therefore, believes in implementing a long-term plan for restructuring the loss-making PSUs on a case-by-case basis. Restructuring and revival packages have to be formulated for PSUs and for this we have provided funds for them.”

The State Planning Board's Economic Review 2009 adds: “The present government, in contrast to the previous government, has taken a very supportive stand, strongly backed by the State Planning Board, and had made financial provision in each year's budget. In the 2009-10 budget, Rs 50 crore has been provided for the rejuvenation and revival of viable PSUs.”

Thus, from what the Industries Minister has claimed, it can be inferred that the current improved performance of Kerala's PSUs – if unequivocally accountable to an honest auditor – can be sourced to some improved monitoring, control and surveillance mechanisms.

But, the way ahead is clear. As the State Planning Board itself admits, the solutions are fundamental: “The performance of the PSUs can be improved by initiatives like imparting professional management skills to managerial staff, regular monitoring of performance, systematic and scientific annual budgeting, strengthening of auditing, harnessing the synergy of PSUs through organising their operations on terms of mutual benefits, combined sourcing of raw materials and components, business collaboration with Central PSUs/government, and, merger and amalgamation.”

Apparently, managing – and even reviving – PSUs is no rocket science. Yet one caveat applies: interfere not politically, for that encumbrance has been the bane of Kerala's PSUs.

The writer can be contacted at kgkumar@gmail.com

(This article was published in the Business Line print edition dated May 3, 2010)
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