While one gets to learn about Central PSEs quite often through news items and media articles, the state public sector enterprises (SPSEs) mostly remain beyond the radar of public scrutiny. For almost all States, SPSEs constitute a wasteland of the state economy with perpetual losses, lack of imagination and often, a raison d’être. They have been rendered helpless pawns in the hands of unimaginative and greedy bureaucrats and politicians, consuming huge resources, but delivering little.
While this article focuses on West Bengal, the story is the same for most states of India. Past Finance Commissions (FCs) and study groups have repeatedly highlighted their depressing performance and stressed upon the urgent need for their restructuring and reform. But all their recommendations have fallen on deaf ears so far. While the Public Enterprises Survey, brought out annually by the Department of Public Enterprises under the Union Ministry of Finance, and CAG Reports comprehensively report the performance of the Central PSEs, CAG reports remain the only source of information for PSEs, and even here, reporting lacks comprehensiveness and information remains scattered.
For West Bengal, since the TMC government, in blatant disregard of all constitutional norms and practices, consistently refused to place the CAG reports before the Assembly since 2021, without which the reports cannot be made public, all we have to assess the performance of the SPSEs of West Bengal is the CAG report pertaining to FY 2021; their present status remains unknown. On 31 March 2021, there were 85 SPSEs in West Bengal; of these 19 were dysfunctional and produced nothing. SPSEs are spread over several sectors ~ power, infrastructure, finance, manufacturing, services, agriculture, welfare, etc.
In FY21, the turnover of the 66 working SPSEs including eight statutory corporations was Rs 54,522 crore, equivalent to 4.2 per cent of the State GDP (GSDP); hence they are not insignificant actors in the state’s economic landscape. About 80 per cent of the total turnover came from three companies: WBSEDCL (40), WBSBCL (24) and WBPDCL (16). Accounts of most SPSEs are in arrears for several years, with only 23 SPSEs presenting up-to-date accounts. The rest have arrears ranging from one to 12 years.
As per their latest finalised accounts, during FY21, 33 SPSEs earned overall profit of Rs 692 crore and the remaining 33 working SPSEs reported losses totalling to Rs 1060 crore, led by transport sector companies ~ WBSEDCL (Rs 190 crore), CSTC (Rs 174 crore) and SBSTC (Rs 79 crore), followed by Durgapur Projects Limited (Rs 114 crore), a power sector company. The state spent about Rs 2,000 crore on SPSEs from its FY21 budget, of this Rs 796 crore went to service SPSEs and Rs 596 crore on power SPSEs as subsidy. The state has so far invested almost Rs 17,000 crore on them as equity; the dividend it got from them was a pitiable Rs 74 lakh, paid by only two companies ~ West Bengal State Warehousing Corporation and Saraswati Press Limited. SPSEs also owe the government over Rs 7,200 crore in debt.
Their performance mirrors the broader trajectory of the state’s economy that has long been marked by stagnation and decline. Forty one of the 85 SPSEs have negative net worth, meaning that their accumulated losses have completely wiped out their total equity capital, rendering them economically unviable, or non “going-concerns” in economic parlance. Twenty-one of these are in the manufacturing sector, followed by services (eight). Transport Companies lead the pack ~ CSTC (Rs 2,720 crore) and WBSTCL (Rs 2,674 crore), as a result of ageing fleets, declining demand, overstaffing and recurring losses.
Only the infrastructure sector – which comprises mainly three SPSEs, West Bengal Housing Infrastructure Development Corporation, WBHDCL and West Bengal Electronics Industry Development Corporation ~ remains somewhat vibrant amid the surrounding gloom. Most SPSEs defy all logic. For example, there is a West Bengal Industrial Development Corporation (WBIDC), which is supposed to promote industrial investment and infrastructure by acquiring land, developing requisite infrastructure and allotting the land to industries, besides implementing projects that contribute towards the state’s industrialisation.
Given that industries and investments have been fleeing the state unchecked during the last half a century, first during the Left rule as a consequence of their gherao culture and then under the TMC as a legacy of their Singur movement that crystallised the image of Bengal as an anti-industry state, one wonders whether this SPSE has any raison d’etre. Indeed, there is none ~ with a paid-up capital of only Rs 436 crore and net worth of Rs 2558 crore, it lacked the capacity and scale to promote any industry. Most of its projects remain on the backburner, and land acquisition was a singular failure.
There are some others, like the West Bengal Minorities Development and Finance Corporation, West Bengal Backward Classes Development & Finance Corporation, West Bengal Scheduled Castes and Scheduled Tribes Development and Finance Corporation, etc. which were doomed to failure from the beginning itself. These are the so-called “welfare” SPSEs, which only provide loans to eligible members of the respective communities, their only income being the interest from those loans.
Therse activities are traditionally done by banks with much more efficiency, because they possess the necessary expertise in project assessment lacked by these SPSEs. So instead of giving loans, they keep their meagre capital in FDs and earn interest on them, defeating the very purpose of their creation. There are development corporations for livestock, fisheries, seed, tea, handlooms and power looms, sugar and leather industries, and even films ~ indeed, the state claims to possess expertise in every possible activity under the Sun. The state even has a Textbook Corporation, opened during the TMC regime to publish textbooks on all subjects.
It relied mostly on the Saraswati Press, an SPSE that specialises in printing, not publishing. The result, the lucrative textbook publishing business was outsourced to a few favoured vendors, while the flourishing private publishing industry that employed many was almost finished. The actual reason behind the proliferation of so many SPSEs is easy to divine, almost all were headed by retired IAS officers as rewards for their unquestionable loyalty, or sitting MLA who could not be accommodated in the Ministry. They enjoyed the same salary, perks and privileges as Ministers at the cost of their loss-making corporations – bleeding the state further.
Specialised knowledge and expertise needed to run the respective industries was never a prerequisite for their appointment. The logic behind SPSEs to promote industry in a state chronically bedevilled with industrial sickness, as a social responsibility and as an economic toll, thus meets with mockery. Many countries have turned their PSEs into successful ventures by separating the roles of the government as their owner, policy maker and regulator. While the government lays down the policy in respect of PSEs, their ownership is transferred to a holding company created for that purpose, which prevents the government from directly interfering with the individual PSEs.
Professionalism is ensured through recruitment of qualified managers and engineers for all positions; some countries also exclude serving bureaucrats and lawmakers from occupying these positions to depoliticise them. Regulation is exercised through independent entities vested with adequate powers. This model has been prescribed by the FCs and other Committees for our PSEs also, but since they are milked by the politicians and bureaucrats for their selfish purposes, these recommendations have never been acted upon. The 14th FC recommended identifying PSEs as engaged in “high priority” activities where public ownership should predominate or simply in “priority” activities where just a majority public ownership would suffice. The rest ~ engaged in non-priority activities ~ should be closed and their activities left entirely to the private sector.
The 16th FC also recommended that any enterprise incurring losses in three out of four consecutive years must be reviewed for closure, privatization or continuation. But in a scheme of things where SPSEs exist to serve only political and no economic purpose, the government looks the other way. The new government has come with a promise of a new dawn and the finance minister faces a tough task in a state carrying a crushing burden of debt. Changing fiscal realities are compelling governments to demand greater efficiency from SPSEs all over India, expecting them to contribute to the state exchequer. Most SPSEs in West Bengal are unable to adapt to new economic realities, and they should be closed, with their employees redeployed to fill up vacant positions in the government. It is time for the state to withdraw from activities it does not know how to manage, and focus on what it should do, policy making and good, growth-oriented, governance.
(The writer is a former Director General of the CAG of India)