Kerala drops plan to sell 5 PSUs

Thiruvananthapuram | Updated: Jan 2 2006, 05:32am hrs
Stumped by attempts to sell five loss-making state public sector undertakings (PSUs), the Oommen Chandy government is now toying with a troubleshooting strategy, soft enough to leave the voters feathers unruffled. The Kerala cabinet sub-committee on PSUs has, therefore, proposed to convert the five closed down units to IT parks.

Besides ducking the politically painful option of under-selling, the action plan also opens a window for Mr Chandy in his role as IT minister. The demand from investors for built-up space has been the biggest headache for the state IT ministry. At least two IT infrastructure developersL&T and the $5-bn Malaysia Multimedia Supercorridorhave been seeking land on par with the Thiruvananthapuram Technopark.

The five closed down state PSUs are Keltron Counters, Kerala Salicylites and Chemicals, Travancore Plywood Industries Limited, Kerala Detergents and Chemicals and Astral Watches. ICICI-Kinfra (as Kerala government proxy) had invited bids for their sale two years ago. Three of these are near the state capital, and have high real estate value. The staff of Keltron Counters (138) and Travancore Plywood Industries (149) have been promised Rs 6.8 crore and Rs 2.8 crore under the voluntary retirement scheme (VRS).

The government has decided not to go for sale, said Ebrahim Kunju, state industry minister. What he left unsaid was that the decision was dropped only when the state fell short of buyers with industrial intent and viable prices.

Two Gulf-based biddersAlukkas Jewellery Group and Holiday Grouphad logged expressions of interest (EoI) to buy 100% share in the five loss-making units. But the price they quoted was far below that of even the land-value, sources told FE.

The CPI-M, which is opposed to United Democratic Fronts PSU reforms, enjoys the distinction of introducing VRS to Kerala much before the West Bengal government tried it. In 1999, the Left Democratic Front government had given Rs 90 crore as one-time settlement and an additional Rs 35 crore. While the AK Antony government had engaged an expert panel to draw a PSU restructuring roadmap, the first step by Mr Chandy, when he took over the reins, was to shove the panel report under the carpet. He also announced a hidden subsidy of Rs 100 crore per year to PSUs, in what he termed as one-time assistance.

According to an AF Ferguson study, the Kerala government will have to fork out at least Rs 1,300 crore for restructuring 63 manufacturing units out of 113 PSUs (24,000 workers). The bleak side of reforms is that PSU workers in Kerala are not too responsive to the West Bengal model of re-training. However, the upside is that PSU production efficiencies are rising and three more units have joined the dozen profit-making ones in Kerala PSUs this year.