COMMENTARY
INTERVIEW
SPECIALS
CHAT
ARCHIVES

Furore over closure of 3 public sector units in Andhra Pradesh

M S Shanker in Hyderabad

The Nara Chandrababu Naidu cabinet's decision to wind up three public sector units -- Allwyn, Republic Forge and the Andhra Pradesh Fisheries Development Corporation -- has kicked up a storm. But most political parties including the Congress, the CPI and the CPI-M knew it was coming.

Justifying the decision, Finance Minister Ashok Gajapati Raju said, ''We can't afford to waste people's money any longer. The total loss incurred by 21 enterprises like Singareni Collieries (Rs 4.11 billion), Allwyn (Rs 1.85 billion), APSRTC (Rs 997.9 million) and Housing Corporation (Rs 1.39 billion) was Rs 10.06 billion.''

This is the third harsh decision taken by the cash-strapped government to augment revenue. The other two are lifting of prohibition and increasing the price of subsidised rice from Rs 2 to Rs 3.50 a kg. Officials in the finance department said the liquor trade would generate a revenue of Rs 12 billion. Another major decision was the hike in power tariff for the agriculture sector from Rs 50 to Rs 100.

Though the additional revenue generated by such decisions will improve the state's dismal power and irrigation position, one question that is haunting everyone is: Can't be the sick PSUs be revived? Who is responsible for the sorry state of affairs -- government's mismanagement or the indifference of the staff?

The finance minister said Rs 1 billion was needed to restructure the units and that the liability would shoot up to Rs 10 billion if they are allowed to function.

Congress legislature party leader and senior trade union leader P Janardhan Reddy, however, squarely blamed the government. ''Employees cannot be held responsible if the production falls or the sales graph drops. The management has to chalk out new strategies to meet the growing competition,'' he said.

Hyderabad Allwyn Limited is a classic case of mismanagement. Set up during the seventh Nizam's reign, Allwyn was considered one of the best auto body-building units in the country. In 1969, the Kasu Brahmanda Reddy government decided to take over the unit from the Birlas who were running it on lease. Soon the unit saw a spurt in its turnover.

Despite opposition from some quarters, then Allywn managing director Ajit Singh drew up ambitious plans, diversifying the unit into refrigerators and watches. However the workers's jubilation was short-lived, and by the late eighties Allwyn was in dire straits again. Some corrective measures, taken in the early nineties, improved its performance.

A high-power committee, headed by the then chief secretary, was set up in January 1992 to rope in a large company to manage Allwyn's operations. ICICI was retained as a consultant. After considering several proposals, it was decided that Allwyn would be leased out to Voltas Ltd, as it assured that all the 5000 employees would retained.

After taking over the unit in 1993, the Bombay giant created Allwyn Auto which paid a monthly rent of Rs 100,000 for using land and material. And Allwyn's erstwhile auto division, which now has neither land nor machinery, has been leased out to the government!

According to C Dayakar Reddy, convenor of the Allwyn Auto Employees Pariraskshaka Committee, ''Rehabilitation of 800 employees belonging to other divisions at the time of privatisation played havoc with the company's resources.''

All the 39 loss-making PSUs, listed by the cabinet last month, had to put up with such mismanagement. These units had an equity of Rs 30.87 billion, of which the government's share was Rs 25.57 billion. The accumulated loss was Rs 13.08 billion.

As some of these units like the AP State Finance Corporation, the AP Industrial Development Corporation, the AP Mineral Development Corporation and the AP Technological Systems can be turned around, they would be restructured, the government said.

However, four other companies -- the AP Agros, LIDCAP, ANRICH and the Meat and Poultry Development Corporation which have always been in the red -- would not be entitled to any such concession, implying that their fate is in the balance.