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1657 hours
MR. CHAIRMAN: The House will now take up the Resolution on Rehabilitation of sick Public Sector Undertakings by Dr. Asim Bala
Before we take up the Resolution for discussion, we have to fix the time for it. Shall we fix it for two hours?
SEVERAL HON. MEMBERS: Yes, Sir, two hours should be fixed.
MR. CHAIRMAN: All right. So, two hours have been fixed for this Resolution.
Now, Dr. Asim Bala to initiate the debate.
... (Interruptions)
SHRI P.S. GADHAVI (KUTCH): Sir, what about the third Resolution of Shri Vaiko?... (Interruptions)... There is a third Resolution also in today's List of Business. That also is a very important Resolution. If you spare some time for it, say one hour for the second Resolution and one hour for the third Resolution, that will be better.
MR. CHAIRMAN: There are three or four speakers to participate in the second Resolution. I think, we will get the time for the third Resolution also.
SHRI P.S. GADHAVI (KUTCH): Sir, the third Resolution is of Shri Vaiko on Nationalisation of Inter-State rivers.
MR. CHAIRMAN: Let us see how the things progress.
Now, let Dr. Asim Bala speak.
1657 hours
DR. ASIM BALA (NABADWIP): Mr. Chairman, Sir, in 1954, Parliament accepted the socialistic pattern of society as the national objective and the industrial policy was revised in 1956.
Under the revised new policy, industries were specified in two schedules, Industries specified in Schedule A and Schedule B. Industries specified in Schedule A were such as arms and ammunition, Defence equipment, atomic energy, iron and steel, minerals, oil, aircraft, air transport, railway transport, ship buildings, telephone, electricity, etc.
Industries specified in Schedule B were such as ferro-alloy and tool steel, basic and intermediate products required by chemical industries, such as the manufacture of drugs, dye stuff and plastics, antibiotics, fertilisers, synthetic rubber, chemical pulp, road and sea transports, etc.
Sir, the concept of the public sector as envisaged by our first Prime Minister, Pandit Jawaharlal Nehru was that the public investment should be made in the core sectors where the infrastructure has to be built, and because of its long gestation period and low profitability, private investment would not be possible.
Sir, out of the 242 Central public sector units, 130 made profits and nearly 112 units are in the red book during the last few years.
Over 80 public sector units have transit facility. Only ten companies, including the Navratnas, have been contributing over two-third of the profit. Some of the companies originally set up by the Government have become sick over a period of time and their names have been registered with the BIFR. They are about sixty.
The nine top public sector units called Navratna are: Bharat Heavy Electrical Ltd., Bharat Petroleum Corporation, Indian Oil Corporation, Indian Petro-Chemicals Ltd., National Thermal Power Corporation, Oil and Natural Gas Corporation, Steel Authority of India, and Videsh Sanchar Nigam. These are called the Navratnas. Out of 242 Central public sector units, sixty are referred to the BIFR. As I mentioned, they were in the list as on 31.3.1997. Besides, about forty and odd public sector units are making losses for various reasons.
The total accumulated loss of some of the public sector enterprises in 1989-90 was Rs.9511 crore. The public sector could achieve several objectives in removing inter-regional disparities and earning a reasonable rate of return for generating surpluses for further investment, for building of infrastructure, generation of employment opportunities, diversification of the economy and promotion of rapid economic growth. Can we think of our economy without public enterprises today? If we close them, the economy may come to a halt. All the infrastructural services are provided by them, all the basic, key and strategic goods are manufactured by them. All the finances are provided by them. A large measure of managerial and technical talents are supplied by them.
The public sector units employed totally about three million of workers. Now only about twenty lakh of workers are working there after the reform process was set in in 1991. The compensation of the lossmaking and sick public sector units reveals that they can be the vital sector of the industrial economy comprising fertilizer, steel, coal, heavy electricals, engineering, textile, construction, wagon building, besides consumer goods. The products of most of the sick and loss-making public sector units are having active demand in the market. Many of them relate to food security of the country and input availability in the industrial sector. The Central public sector contributes nearly 100 per cent of the products like coal, petroleum, copper, primary lead and lignite, and more than 60 per cent of steel, aluminium and zinc. This clearly indicates that a key position is occupied by the public sector in the nation's economy.
Once a sick public sector undertaking is referred to the BIFR, from the date of registration with the BIFR it could be seen that the revival of most of the sick public sector undertakings are hurdled basically because of the negative stance of the concerned Government when it comes to acting as a promoter. There are many such cases. For example, there are the cases of Haldia Fertilizers and the IDPL. It is very much essential to revive the IDPL.
In Maharashtra, the National Textiles Corporation has about 606 hectares of surplus land valued by the Central Board of Direct Taxes at Rs.2,389 crore. Of this, over Rs.1,900 crore worth of land is located in Mumbai. Some industry is interested in the land of the sick but not in the company itself, which is the sad story of our country.
The plea taken by the Government and the anti-public sector lobby in the polity is that spending for revival of sick public sector undertakings is unproductive. It is totally unfounded. While considering the cases for revival of sick public sector undertakings, only their losses and liabilities are taken into account but not the opportunity cost and the replacement cost of the sick public sector undertaking considered for closure.
In most of the cases, sickness results because of the Government's failure to ensure timely modernisation. As on date, the Government wants to wash off their hands of the sick public sector undertakings by denying them support in a most unfair manner.
The Reserve Bank has studied the reasons for sickness about ten years ago and found that fifty-two per cent of sickness was due to bad management of the company; the embezzlement by the management such as diversion of funds, conflict between management and workers, etc. Only two per cent of the sickness was due to the workers and employees. This is the picture in most of the cases.
In many cases, restructuring of finances would help the sick public sector undertakings to come out of the BIFR and tide over the problem. But in most of such cases, the Government assumes a negative attitude. For example, the current Budget has demonstrated the totally negative attitude of the Government towards revival of sick public sector undertakings. The sick public sector undertakings were referred to in the Budget only while stating the provisions relating to closure, payments to be made on retrenchment and on voluntary retirement. Such an approach is injurious to the interests of the national economy. When the budgetary proposals indicate the path of abolition of the public sector undertakings, it is very dangerous for the nation.
If a public sector undertaking is referred to the BIFR, the banks and financial institutions stop giving advances even for the working capital. As a result, productive work suffers and loss gets multiplied, complicating the prospect of revival. It is a matter of record that while many of the sick and loss-making public sector undertakings have to suspend production owing to non-availability of working capital and various other reasons, the same products are being imported in increasing quantities, spending precious foreign exchange. The case of fertilizers is one example in this regard.
I have given the inputs.
Coming to raw jute, in 1995-96, 42,000 tonnes of raw jute was imported at the cost of Rs.48 crore. In 1996-97, 48,000 tonnes of raw jute were imported at the cost of Rs.76 crore.
As far as fertilizer and fertilizer mate is concerned, the quantity imported was 10585 tonnes at the cost of Rs. 5626 crore. During 1996-97, the quantity imported was 7045 tonnes at the cost of Rs.3235.
In the case of medicines and pharmaceutical products also, Rs.1358 crore worth of goods were imported during the year 1995-96 and during 1996-97 the value was Rs. 1089 crore. In the case of iron and steel also, the import has been increasing day by day. When the demand is growing, instead of making our public sector units sick, we should revive them. To meet the demand, we are importing these goods from other countries thereby wasting valuable foreign exchange. This in turn liquidates the public sector units.
Eight fertilizer plants are languishing in sickness. Side by side fertilizer import is increasing every year which is also provoking urea scam. For example, one fertilizer plant at Durgapur could be revived by investment of a few hundred crores of rupees while to have a new fertilizer plant like Durgapur it would cost more than Rs. 4000 crore.
Bharat Opthalmic Glass Limited, the only producer of flint button in the country could be revived by an investment of only few crores. But the Government prefers to close it down to indulge in imports. Government may argue that import is cheaper. But what about the social cost due to loss of productive employment. Unemployment not only affects the workers but also their families. The families are affected due to the closure of the public sector units. It has vitiated the socio-economic aspects also.
The Government is denying support to even wagon-building industry in public sector although the country is suffering from shortage of wagon supply affecting the goods traffic. Cost of closure and non-revival of wagon-building units would be much higher than the investment cost for revival which is not being taken into account. Many more similar examples can be cited to expose the ill-conceived idea of doing away with the sick Central Public Sector Units.
I know the Railways' share in the freight traffic has come down from eighty per cent to twenty per cent. We are not using wagons and we are importing containers. If we want containers, we can use these companies for manufacturing containers instead of wagons. In that way we can revive the wagon industry.
To summarise, the Government policies towards sick public sector undertakings are not only permanently blocking the prospect of revival of sick public sector undertakings, but also causing severe damage to the health of industrial economy of the country. The production capacity lying with the sick public sector undertakings and the employment therein, could in no way be recreated or compensated once they are closed down; and the market would be built by the foreign companies. Will it serve the national interest?
The Government must consider the social and employment costs, the opportunity cost and also the cost of over-dependence on import, while considering the cases of revival of the sick public sector undertakings with all seriousness and particularly in considering the above things and also the vital sectors represented by those sick public sector undertakings. The Government must take positive steps for revival of sick public sector undertakings. Minimum commitment to national interest warrants positive and expeditious steps for revival of sick public sector undertakings.
The Tewari Committee Report in 1985 on industrial sickness has argued that the primary effort should be rehabilitation which would inevitably require sacrifices from the State and the Central Governments, banks and financial institutions, management and labour.
The IMF pointed out that only petroleum companies were profitable, but not those producing textiles, fertilizers, steel, heavy engineering products. It is quite absurd, and the intention of the IMF and the World Bank is to dismantle our public sector. That is why they are saying all these things. Why are they telling all this? After the process of delicensing and industrial liberalisation which began in 1991, technology-driven-PSUs found themselves rapidly losing ground to multi-nationals. The public sector is one area of the economy because it is politically very sensitive in nature when liberalisation has failed to make an impact. Unless the PSUs are overhanded, India's economic growth may lose the momentum it has attained at present.
Certainly, the PSUs require changes in its modus operandi, but the causes of welfare - regional and sectoral balances - are rather in the names of public sector which is needed to our country. It also requires economic and fiscal developments of the PSUs which needs political will. It is lacking in our Government.
I also have some suggestions to make. We have to detect irregularities early, in any account and we have to take remedial measures. Lesser the time taken in having remedial measures, lesser the chances of sickness. Early detection and quick action are paramount in combating the problem of industrial sickness. Regular review statements and subsequent steps are essential for solving any problem in industries. Serious action should be taken against sticky accounts and persistent delays.
I have to mention one more point. Technological upgradation, modernisation, renovation, diversification, etc., on a continuous basis will prevent industrial sickness. Sometimes, the management itself makes the companies sick intentionally. It is due to the new economic policy of the Government as well as of the international trade situation. In developed countries, production and growth are very fast and they are not searching for a new market in Asian countries where huge demand is available for this market.
At the end, I would just read out a portion of the record of the Report of the World Health Organisation, November, 1997.
"It is thus clear that the Uruguay Round of negotiations were largely dominated by industrialised countries and that developing countries were constrained to accept commitments sometimes running counter to their economy and social development. According to the World Development Report for 1997, if the poor countries are very often the losers in globalisation, this is because the rules of the games, especially in international trade are not in their favour."
I know that the revival of the public sector is very important. If our public sector is not revived, then the production of our country will not improve. The previous Minister of Commerce gave free licence for import of some agricultural products and also some essential commodities which we need everyday. The New Economic Policy is in the interest of the multinationals and the big foreign companies. So, we should take into account our national interest and revive our sick industries by any means.
With these words, I conclude my speech.
(ends)
SHRI SHIVRAJ V. PATIL (LATUR): Sir, I thank you for giving me the time. Dr. Asim Bala has come before this House with a very important Resolution. You may allow me to say that he has presented the case in the best possible manner and we should congratulate him also. His Resolution reads like this:
"This House urges upon the Government to take concrete and effective steps to rehabilitate the sick Public Sector Undertakings under the control of the Central Government and formulate a comprehensive policy to improve the functioning of the Public Sector Undertakings."
This Resolution can be divided into two parts. One part relates to the sick industries and the other part relates to the policy of the Government of India to see that the public sector industries are encouraged. We shall have to look at this Resolution from these two angles. I think that, in India, we have public sector industries which are doing well. I am not going to give the statistics and all that. Dr. Asim Bala has done it very well and the hon. Minister also has statistics which I do not have readily with me. There are some industries which are not sick and are not doing very well also. And there are industries which are sick.
Public sector industries are sick. Now, it would be necessary for us to see that the industries which are doing very well are encouraged. About the industries which are not doing very well but which can do well or which can become sick, we shall need a kind of a policy. Sick industries will certainly have to be looked into and we shall have to take a decision either to continue with them or we have to discontinue them. That kind of a decision would be required. This is about the public sector industry.
What about cooperative sector industry? The cooperative industries are not really public sector industries nor are they private sector industries. They are industries which are run by the private individuals coming together for the benefit of all those who are members of the cooperatives. Fortunately in some areas, cooperative industry has done very well. The cooperative industry has not done very well in some other areas. In some areas, the cooperative industry has become sick. What is true about the public sector industry is also true about the cooperative sector industry. We do have private sector industry also in the country. We know that there are private sector industries which are doing extremely well and which can compete with the industries in any other part of the world which are doing well. But there are industries which are not doing well and which can become sick or which can improve their working. Certainly, there are many private sector industries which have not done well. Now, one of the sectors of the private sector industry is the textile industry. The textile industry in Maharashtra and Gujarat and in some other parts of India has not done well. It has become sick. That is exactly why the textile industry in private sector had to be taken over by the Government and had to be run as National Textiles Corporation mills.