How state watched its stake decline and lost the steering

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  • Published 10.12.11

Calcutta, Dec. 9: The Bengal government effectively lost administrative control over AMRI Hospitals four years ago when the state’s stake in the joint-sector company plummeted to 1.9 per cent, government officials say.

This, however, was merely the latest in a series of dilutions of the government’s stake, which was 26 per cent in 1998 but kept declining as the private promoters repeatedly pumped in more money while the state failed to do so.

Although government representatives continued on the board of directors — and occupied the chairperson’s post — in keeping with the earlier arrangements, the state lost its control over the hospital, a senior health department official said.

According to filings by the company, the Goenka and Agarwal families, which own the Emami group, have 66 per cent stake in AMRI Hospitals Ltd. The Todi family owns around 32 per cent while the Bengal government has 1.9 per cent.

The company’s operating income was Rs 184.52 crore in 2009-10 and its profit was Rs 11.10 crore, according to the filing. Its income was Rs 149.79 crore and profit Rs 2.09 crore in 2008-9. This means that while the company’s revenue grew by 23 per cent in one year, its profit jumped more than fivefold.

AMRI spent Rs 2.55 crore on building repairs in 2009-10 and Rs 1.23 crore on other repairs, the filings show.

“The company is one of the most profitable medical ventures in the city,” said a senior official of another private hospital.

Currently, AMRI was managing 1,000 beds across three hospitals: at Salt Lake, Dhakuria and Mukundapur. The company is setting up four new hospitals in Bengal with a combined capacity of 1,300 beds and is building three 300-bed hospitals outside the state: at Raipur, Patna and Ranchi.

“The controversy may come in the way of these expansion plans. It seems the Mamata Banerjee government was closely following the group’s activities,” the health department official said.

The state finance (internal audit) department recently conducted a special audit of the hospital and sent the report — of which The Telegraph has a copy — to the state health department.

The report tracks the induction of private players into the venture and the subsequent dilution of the government’s stake over the years as the private partners expanded the health care business. The finance department has observed in the report that the (erstwhile Left Front) government “mysteriously” allowed itself to lose control over the company.

“The entire scheme of things has frustrated the objective of the formation of the joint-sector company with a social cause,” the report says.

According to the report, the Left government had signed an agreement with the then Advanced Medicare & Research Institute (AMRI) Limited on June 17, 1994. The state agreed to provide 27.55 cottahs of land along with a five-storey building with existing hospital facilities in Gariahat Road to the private players against a yearly lease of Rs 6.4 lakh.

“It was also mentioned that 50 per cent of the board of directors will be nominated by the state government and the state would nominate one of its nominated directors as the chairman of the board,” the report says.

It adds: “The paid-up capital of the company was Rs 3 crore, of which the state’s share was 26 per cent, 25 per cent to the private promoter and the balance 49 per cent was to be raised through public issue of shares.”

But the balance — Rs 147 lakh — was not raised through a public issue, apparently because of the difficult market situation at the time. The private partners provided the money, raising their combined stake to 74 per cent.

In 1996, Emami joined the venture, buying the stake of Swapan Sadhan (Tutu) Bose and pumping more money into the venture.

“The paid-up capital was increased to Rs 5.3 crore from Rs 3 crore in 1996…. The state had leased out 2 bighas and 14 cottahs of land to the AMRI, which was located on 15 Panchanantala Road,” the report says.

It adds that though the finance department initially objected to the fresh infusion of private capital, it later allowed the proposal on condition that the government’s share would not be diluted. In later years, though, this condition was not adhered to.

“In 1998, the private promoter decided to increase the paid-up share capital of the joint-sector company from Rs 5.03 crore to Rs 8.53 crore to take up a new project on the leasehold land at 15 Panchanantala Road,” the report says.

“As the entire amount was invested by the private promoter, the equity holding of the state government came down to 15.33 per cent from 26 per cent.”

In 2006, AMRI proposed to increase the equity by Rs 10.32 crore when it bought Suraksha in Salt Lake and renamed it AMRI Salt Lake. The state did not contribute towards the purchase and its share dropped to 6.9 per cent.

In December 2007, another heavy infusion of private capital brought the state’s share down to 1.9 per cent.

State health secretary Sanjay Mitra said: “I don’t know whether it was 26 per cent or 16 per cent. Let me go through the papers first; only then can I comment on this.”