Bengal puts phase II of restructuring on hold

Bengal puts phase II of restructuring on hold
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First Published: Wed, Jul 22 2009. 09 28 PM IST
Updated: Wed, Jul 22 2009. 09 28 PM IST
Kolkata: West Bengal has indefinitely postponed plans to restructure 28 state-owned firms that could have potentially led to job losses, shuttering two of the companies and converting another nine into joint ventures with private partners.
The state government decided to suspend the second phase of the programme due to the current economic slowdown, a top official said.
“You can’t expect people to invest in restructuring at a time like now,” said Sumanta Chaudhuri, principal secretary of the state’s department of public enterprises and industrial reconstruction. “Our decision to stop restructuring our PSEs (public sector enterprises) was based on advice from our consultants.”
The restructuring exercise has Deloitte and Touche Consulting India Pvt. Ltd, PricewaterhouseCoopers Pvt. Ltd and Mott MacDonald Consultants (India) Pvt. Ltd as consultants. The UK’s department for international development (DFID) is funding the initiative.
“The downturn in the economy might have affected the state government’s plans,” a DFID spokesperson said. “The West Bengal government must decide its priorities on reforms.”
In the second phase of restructuring, the state government was to receive Rs184 crore in grants from DFID and was to sell, partly privatize or close down some 28 companies that included West Bengal Film Development Corp. Ltd, West Bengal Tourism Development Corp. Ltd and West Bengal Small Industries Development Corp. Ltd.
The restructuring of the state’s PSEs began in December 2003 and was scheduled to end in 2011. Of the 30-odd firms restructured in the first phase till December 2007, 21 were wound up.
Around 6,000 people were retrenched from these companies through a severance scheme. Half of them were later retrained and redeployed elsewhere, according to the website of the industrial reconstruction department. The government received Rs209 crore from DFID for the first phase.
“Our consultants had advised us to shut two unviable companies and to continue to run 15 companies (in the second phase). But the state government was told to reduce manpower in most of them,” said a state government official, who spoke on condition of anonymity. “It was almost impossible for the state government to retrench people at this juncture.”
The Left Front, led by the Communist Party of India (Marxist), suffered its worst poll debacle in 32 years in the recently held national elections. The alliance won 15 of the 42 Lok Sabha seats in West Bangal, compared with 35 it had won in the previous general election in 2004. Polling statistics show the Left Front trailed the opposition grouping of the Trinamool Congress and the Congress party in 195 of the 294 state assembly segments.
The Comptroller and Auditor General (CAG), which audits the accounts of government agencies and state-owned firms, in its latest report on the state’s finances released this month, has pointed out that till 31 March 2008, of the 60 state government-owned companies that were in operation, the 23 worst performing ones had an accumulated loss of Rs2,232 crore.
“Despite poor performance and complete erosion of their paid-up capital, the state government continued to provide financial support to these companies in the form of loans, conversion of loans into equity, subsidy, etc.,” the report said, adding that in 2007-08 the state government had provided Rs219 crore in financial assistance to these 23 firms.
In the 2007-08 financial year, only 27 state-owned companies posted profits. They together reported a profit of Rs368.27 crore, the CAG report said.
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First Published: Wed, Jul 22 2009. 09 28 PM IST