The Telegraph
Wednesday , January 15 , 2014
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In tea cup, first flush of privatisation

Calcutta, Jan. 14: The Mamata Banerjee government’s announcement yesterday that a “transaction adviser” would be asked whether to keep the state’s equity in five tea gardens is being seen as a sign that the chief minister is willing to consider a privatisation policy tied to job security.

If the move to appoint a “transaction adviser” eventually takes the government out of the gardens, it will mark a turning point in the chief minister’s career and a milestone in Bengal where such paths have always been pockmarked by pitfalls.

“The government has decided to bring in a strategic investor. A transaction adviser will also be appointed to advise the government on whether to keep its equity or not,” finance minister Amit Mitra had said yesterday. A strategic investor is an entity with the domain knowledge to run a particular business while the original owner, in this case the government, remains so.

Mitra’s statement need not mean that a strategic investor or a potential buyer in the future will necessarily have to be from the private sector or the government will indeed implement a recommendation to exit from the five gardens in north Bengal.

But the very fact that the Mamata government is willing to experiment with a model that does not foreclose the option of finding a buyer for a business that should be no government’s business is being taken note of.

“It is a welcome step, even though a baby step. It is a move in the right direction. I hope it is the beginning,” said a city-based industrialist who did not want to be named since the picture is not yet fully clear.

The five loss-making gardens are Rungmook-Cedars, Rangaroon and Pandam gardens in the Darjeeling hills, and Hilla and Mahua tea estates in the Dooars.

Central to the policy is a vow to protect jobs — the most sensitive aspect of any privatisation plan. “We are presenting this as a model. The workers would be offered government jobs. They will have the option. There are many, many vacancies in government offices. Karur chakri jabena (nobody will be jobless),” Mitra had said yesterday.

Not all employees of all loss-making companies can be given government jobs in the long run so that the firms turn attractive to potential buyers. But the Mamata government has taken the first tentative step on the basis of such an assurance, probably to ensure that the Opposition does not fish in troubled waters.

The Trinamul manifesto for the 2011 Assembly polls had left enough room for manoeuvre. It says private investors can be invited to revive sick industries but the state will have a role in the process and the interest of employees will be protected.

Bengal’s past makes it clear that any government trying to shed the millstones around its neck will require dexterous skills at negotiating treacherous curves.

The cookie literally crumbled on the Left Front government when it tried to dip its toe in the privatisation pool — albeit because of stiff opposition from within, something Mamata does not have to worry about.

In the mid-1990s, the CPM-led government had handed over Lilly Biscuit, a sick state-run unit, to a private investor. “But it was done in a hurry and the initiative was an unsuccessful one…. The private investor who had taken over the unit stopped producing biscuits,” a CPM leader said.

The resistance, particularly from the CPM’s labour wing Citu, had left the state government in a spot. The impact was evident when Citu forced the Centre to stay away from inviting investors to run two sick central PSUs — Cycle Corporation of India and Mining Allied Machinery — in the late 1990s.

“Just before the movement, Lilly Biscuit was handed over to a private partner…. The protest was a clear signal to the state government also on what it could face if it went ahead with similar policies,” said a retired IAS officer.

After Buddhadeb Bhattacharjee took over from Jyoti Basu, the state government had launched an industrial reconstruction initiative. In 2003-04, the government agreed to restructured 30-odd sick state PSUs with assistance of Rs 208.67 crore from the DFID.

It was decided that the government would try to run a majority of the units after restructuring them or it would try to find a private partner. The last option was to close down the units that cannot be revived.

As many as 21 units were shut down and four were retained after restructuring. Three were run on the joint venture model. Only one — the then Great Eastern Hotel — was handed over to a private investor. The refurbished hotel was formally unveiled in November last year as the Lalit Great Eastern.

But the effort to restructure the sick units had come to a halt in 2009 when the state government decided to take up another 28 PSUs, including the West Bengal Film Development Corporation, the tourism corporation, transport corporations and some dairies.

“Some prominent CPM leaders and Citu had mounted stiff resistance, saying thousands would lose jobs. The Left Front government had stalled the second phase of restructuring following the protests in 2009,” an official said.

Some industry sources suggested that the Mamata government was in touch with central public sector companies like Andrew Yule, which owns tea gardens in Bengal, to find out if they are interested in a role in the five estates. If PSUs take over the gardens, it cannot be strictly called privatisation.

But industry observers took heart from signals that the government seemed ready to let go of ownership and management control of loss-making firms. “In the current national atmosphere of playing to the galleries, any sign that prudence is taking precedence over political compulsions is welcome,” one analyst said.