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Glorious past, bleak present

West Bengal has the largest number of PSUs under its fold. Unfortunately, most of these PSUs turned sick between the late ?70s and 2000, which transformed West Bengal from a highly industrialised state to an industrially backward one.

State that holds the largest number of PSUs has little to boast about

West Bengal has the largest number of PSUs under its fold. Unfortunately, most of these PSUs turned sick between the late ?70s and 2000, which transformed West Bengal from a highly industrialised state to an industrially backward one.

Industries like Jessop, Burn Standard, Braithwaite, Balmer Lawrie, Andrew Yule, Central Inland Water Transport Corporation (CIWTC), Hindustan Paper, Hindustan Steelworks Construction (HSCL), Tyre Corporation, Bengal Chemicals, Hindustan Fertiliser Corporation (HFCL) and many others turned sick one after another. Even a PSU like Hindustan Copper (HCL), which has own mines and smelters, started posting losses between 1997 and 2004.

Though the government could sell some PSUs like Jessop, there weren?t really takers for units like Braithwaite, Burn Standard and CIWTC. Braithwaite and Burn Standard, which make railway coaches, were almost closed after being referred to the Board for Industrial Financial Reconstruction (BIFR). But things started changing when, after a series of 100% disinvestment between 1998 and 2004, the government made renewed efforts to turnaround the sick PSUs on BIFR recommendations.

The Centre appointed consultants for each sick company to know which one could be revived and which couldn?t be. The Railways, which sought Burn Standard and Braithwaite for producing wagons for own use, finally took them over in 2010. Bharat Earth Movers, Coal India and DVC sought to take over Mining & Machinery Allied Corporation at Durgapur and the process of acquisition is still on.

The Centre has approved a revival package for HSCL and the company is in a revival mode now. Balmer Lawrie, Andrew Yule, Hindustan Paper and HCL worked out their own revival plans and are back on the profit path. But HFCL?s units at Haldia and Durgapur and CIWTC were identified as non-revivable and their land and assets were put on sale.

Indian Oil?s Haldia refinery has bought a parcel of the HFCL land to accommodate its expansion. CIWTC?s 33-acre Rajabagan Dock yard with 60 metres of water front has been sold to Garden Reach Ship Builders and Engineers (GRSE), the Kolkata-based defence PSU. With the purchase of Rajabagan Dockyard for R65 crore, GRSE became the country?s largest dockyard in 2008-09 but CIWTC lost its captive barge repair facility, while it still had a fleet of 120 barges.

Praful Tayal, CIWTC?s former chairman and managing director, who was a lone crusader against the government decision, said he had always insisted that the company required to prove its commercial viability if it had to go on sale. In FY10 the company?s net loss came down to just R65 lakh from a level of R114 crore in FY 09 and a possibility of turnaround came at this point. But since the company didn?t have its captive barge repairing facility, the opportunity was lost.

The Board for Reconstruction of Public Sector Enterprises recommended that the workforce of CIWTC be brought down to 45 from 2,800. ?The workforce has been downsized to 300 by now. But since it is a running company, we have no clue how can it run with less than the present number,? an official said.

Manish Jain, deputy chairman of the Kolkata Port Trust who has been given the additional charge of CMD, CIWTC, after Tayal quit, said: ?The company is lined up for disinvestment from 2005. It is for the government to take a call and I have nothing more to say about it?. He refused to share the company?s present financial figures.

HSCL, which last posted a net profit in 1979, got approval for a R1,440-crore revival package in 2011 from the then finance minister Pranab Mukherjee. The company is flushed with orders, and according to Moyukh Bhaduri, who got the additional charge of CMD on April 5, besides his responsibilities as director finance, HSCL?s present order book is worth R4,000 crore and it has grown at 28% CAGR (compound annual growth rate) in the last six years. In FY13 it bagged orders worth R1,900 crore. Its operating profit grew 16% CAGR in the last six years. It posted an operating profit of R86.64 crore in FY13, up from 3.94 crore in FY03, its first in 24 years. But the company is yet to make a net profit.

?We expected that HSCL would register a net profit in FY12 itself but somehow it didn?t happen. But it has turned around on the strength of its competence,? said Malay Chatterjee who was CMD till April 4.

The company executed major projects in the steel and power sectors and is now focusing on construction and road projects as well. The company has been identified by the external affairs ministry to execute construction projects abroad. The PSU has tied up with TPE Russia to take up project work in the steel sector, according to Bhaduri.

While many industry observers feel the government?s role is important in unleashing the real potential of a PSU, many others say the government?s hand-holding doesn?t work.

It is the leadership quality that matters in turning around and successfully running a company. There are not many people willing to take up the challenge of turning around a sick PSU, since CMDs in sick PSUs are not paid handsomely. But the government should create a pool of talents through a process of identification and adopt a pick-and-choose method to provide quality leadership to sick PSUs, an advisor in the department of public sector enterprises said.

He said the role of workforce was also important and a sense of belonging has to be inculcated into them, which only a good leader can do. While trade unions need to play a positive role in turning around a sick company, the government has to create an environment where workers are enthused to work.

?PSUs are categorised into schedule A, B, and C and normally sick PSUs are under schedule C, which have the least facility in terms of pay and perks. Such PSU workers need a bit more affection besides direction so that a willingness to perform develops in them,? the advisor said.

Andrew Yule chairman and managing director Kallol Datta said there was virtually no government hand-holding in reviving Andrew Yule, which came into profit in 2007. ?It is our own corporate plan that worked. We hived off some businesses like Disergarh Power Plant, abandoned some industrial products, which the market didn?t absorb and fully focused on quality control and delivery commitments. This gave a new life to the PSU,? Datta said.

Andrew Yule is now foraying into wind energy and is awaiting the Centre for Wind Energy Technology?s certification to introduce 5 kilowatt roof-top wind turbine. The PSU has also tied up with a Russian company for making big industrial fans. ?We expect a group profit of above R100 crore for FY13,? Datta said. Clearly, leadership does make a difference to a company’s fortunes.

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First published on: 22-04-2013 at 03:01 IST
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