According to top sources, state tourism minister Manab Mukhopadhyay had recently asked the hotel's management to submit a report on the bakery's performance. The state government is not too keen to continue with the bakery if the current privatisation process fails. It had invited bids for the hotel from private partners in February.

Among the bidders for the hotel, situated at the heart of Calcutta's business locality, are the French Accor group's Accor Asia Pacifc and former Indian Hotels chairman Ajit Kerkar.

Hotel sources said that the report to the minister states that the bakery accounts for a loss of more that Rs 20 lakh every year, and it would be cheaper to close down operations and keep paying the 140 workers their salaries.

According to them, Great Eastern Hotel is likely to report a loss of around Rs 2 crore for1998-99.

The Great Eastern Hotel brand still has a good recall in the market. However these days most of the bakery's produce is used by the Calcutta Corporation for schools and the state health department for the hospitals.

The bakery had a prime position in the fifties when it was the only major bakery in the city other than Firpo. The situation has changed since as many more bakeries have come up successfully in Calcutta.

The report also mentions that some of the machines of the bakery have broken down and the unit is running with a makeshift arrangement. To make the bakery competitive would necessitate major investments.

The management has conveyed to the minister that the space occupied by the bakery can easily be leased out as retail stalls and generate huge revenues for the hotel.

"The bakery has also been used as punishment posting for erring hotel staff over the years and has led to a bad work culture in the bakery," said top sources.

The current chairman of the hotel, SK Ghose hadmentioned earlier in an interview that a decision on the bakery can be taken at the political level only. Given a free hand he would like to modernise it and run it on a much smaller scale.

Ghose, being out of the country, was not available for comment about the recent developments.

The question also involves voluntary separation of the workers of the bakery who constitute 25 per cent of the hotel's workforce. In that case the government will have to fork out that amount too.

The hotel has gone through a lot of renovation and refurbishment for the last two years after Ghose was brought in as the first executive chairman of the hotel since the government took it over in 1975.

However, vital components like central air conditioning are still missing and the state government hopes to hand over the hotel to a private party instead of going in for more investments.