Fifteen years to nowhereKrishna Silicate and Glass went bankrupt and closed operations in the sixties. It went into liquidation in 1970. The Communists declared that they would not let its 1,000 employees become jobless. So they took over the Company in 1973.‘‘During March 1973 to September 1988, when the unit was under management of the State Government,’’ the CAG records, ‘‘no plan was formulated in pursuance of the objective of rehabilitation.’’

In October 1988, the predictable thing was done — a new beginning was proclaimed. Instead of being run as a departmental undertaking, the unit would be formed into a Company, and given full autonomy! Thus, the Krishna Silicate and Glass Ltd. was incorporated ‘‘to acquire and take over the business of the Company in order to rehabilitate and reconstruct it and to subserve the interest of the general public by augmentation of its production.’’

‘‘In the absence of any revival programme,’’ reports the CAG, ‘‘the Company’s production of glass and bottles decreased gradually’’ — from 25 per cent in 1989/90, capacity utilisation fell to 8.4 per cent in 1990/91. ‘‘Thereafter, production was stopped from July 1991,’’ the CAG observes, ‘‘due to labour problem.’’

But naturally the Government being of the Left held fast to its commitment to labour and directed the Company to continue to pay wages and salaries to the ‘‘non-working’’ employees. Hence, from July 1991, when all operations were shut down, till March 1999, when the CAG looked into its affairs, the Company had spent Rs 10.58 crore on paying wages and salaries to ‘‘idle labour’’.

By March 1998, the accumulated losses of the Company had risen to Rs 20.96 crore. Its net worth, which had been a negative Rs 15.07 crore at the time of take over in September 1987, had sunk to minus Rs 42.15 crore by March 1998.

At last, eight years after taking it over, that is in 1995, the Government appointed a consultant to prepare a revival plan. The consultant recommended that the Company diversify its operations — that it go in for a glass container project and a glazed tile project. The two were to cost Rs 7.85 crore. The consultant emphasised that, for them to be viable, the two projects must be undertaken together, and that they must be administered under ‘‘an integrated management’’.

Instead of the Rs 7.85 crore that were needed, the Government gave the Company Rs 2.67 crore, and asked it to go in for the glass container project alone. By June 1999 only Rs 33 lakhs had been utilised ‘‘indicating’’, says the CAG, ‘‘that the progress of work was far behind schedule.’’

‘‘From the above it would be observed,’’ concludes the CAG, ‘‘that even after fifteen years of direct management by the State Government no steps were undertaken for revival of the Company. Since takeover of the Company, the State Government invested Rs 20.39 crore in the form of working capital loan for disbursement of pay and allowances and Rs 2.67 crore were provided for project implementation which indicates that no serious efforts were made for revival of the Company.’’

2% of capacity, 1567% of paid up capital

The Carter Pooler Engineering Company Pvt. Ltd. had been quite successful. But for all the familiar reasons, it was closed in 1968. Government of India took it over as well as the management, and appointed Garden Reach Shipbuilders and Engineers India as the controllers. Yet the Company continued in its moribund state. In 1983, it went into liquidation. The assets of the Company were handed over to a Liquidator. Procedures he had to go through consumed five years. But the Left couldn’t just watch a Company sink into oblivion. After all, it was committed to labour. And so, in 1987 the Government of West Bengal purchased the assets of the Company from the Liquidator for Rs 35 lakhs.

As has been its custom, the Government formed a new Company — The Carter Pooler Engineering Company Ltd.

Examining its history since 1987, the CAG reports, ‘‘An analysis of the performance of the Company since its takeover revealed that the unit merely managed to exist with financial support from the Government and outlined no programme for its revival. During the 12 years from 1987-88 to 1998-99, against the installed capacity of (producing) 120 fork lift trucks per annum it produced only 25 (value: Rs 1.05 crore) which represented less than two per cent of the capacity.’’

In September 1992, the Government directed the Municipalities and the Directorate of Fire Services to get works done from Carter Pooler without inviting tenders. As a result, the CAG notes, the Company got orders for fabricated items — handcarts, vats, etc. — from the Calcutta Municipal Corporation. During seven years these orders amounted to all of Rs 2.57 crore. Even these were not paid for in full: the Company received only Rs 2.28 crore for its pains.

The Directorate of Fire Services placed some orders too: between 1993 and 1996, it asked Carter Pooler to supply 71 fire service vehicles and to repair a few others. The Company could not execute the work directly, and, therefore, it farmed the order out to a sub-contractor. That was quite convenient — for the sub-contractor! By the direction of the Government, the Directorate of Fire Services was to place orders on Carter Pooler without calling for tenders. In turn, Carter Pooler palmed the orders to a sub-contractor!

But a payment had to be made to get the sub-contractor going. No problem. The Government-controlled West Bengal State Cooperative Bank was told to help out — and so it advanced a loan of Rs 50 lakhs to Carter Pooler. In any event, the sub-contractor and Carter Pooler were able to supply only 27 of the 71 vehicles that had been ordered. About these vehicles, the CAG notes, ‘‘Against the sale value of Rs 1.61 crore, the Company spent Rs 1.95 crore... on the orders executed with the result that the Company lost Rs 34 lakh on the deal.’’

The result would pass the imagination of every management expert, at least of ones not familiar with the efficiency of committed governments. The CAG records it in the following words:

‘‘On 31 March 1999, the paid up capital of the Company was Rs 95 lakhs, and a loan of Rs 17.70 crore... was outstanding. The Company was incurring loss since its inception and the accumulated loss as on 31 March 1998 amounted to Rs 14.89 crore which represented 1567.37 per cent of the paid up capital...’’

Of course, it isn’t that the Government was not doing anything. After its own expertise and strenuous efforts spread over eight years had not quite turned the Company around, in 1995 the Government appointed a consultant to devise a strategy. He devised a plan. It required an outlay of a modest Rs 2.20 crore, and effort over two years. ‘‘However,’’ records the CAG, ‘‘the Government took no action on the report.’’

Instead, another turnaround plan was drawn up — this time by the Company itself. This was to be implemented over five years, and entailed an outlay of Rs 1.5 crore. Writing in September 1999, the CAG observed, ‘‘Approval of the Government was, however, awaited...’’

Asked, the Government informed the CAG that the Company had started executing jobbing orders and that it would be ‘‘manufacturing fork lift trucks of improved design with the plan to diversify into other products like portable bridges, disaster management equipment, jib cranes, etc.’’ ‘‘However,’’ the CAG points out, ‘‘it was observed that during 1997-98, the Company executed jobbing orders valued at Rs 1.19 lakh only.’’

‘‘Thus,’’ concludes the CAG, ‘‘even 12 years after the takeover of the unit, the Government as well as the management have failed to formulate any revival package.’’

On paper

Set up in 1918, the Indian Paper and Pulp Company used to produce paper from bamboo and hardwood. Because of the difficulties in obtaining adequate quantities of these raw materials, it switched to jute sticks. Its profitability declined, its production fell. Government of India stepped in — these were days of the Emergency, and the Government in Delhi was as committed to the interests of labour as the Government in Calcutta. It transferred the management from Andrew Yule to the Hindustan Paper Corporation. Incidentally, there is quite a bit of irony there — Andrew Yule too was nationalised, it too became sick, and ended with the BIFR; Hindustan Paper was a PSU, it too became sick, and ended with the BIFR. But to continue the story, the CAG records, ‘‘Since then there was an overall deterioration in the operation of the unit followed by labour trouble. Production of paper decreased from 13,080 tonnes in 1975 to 3,000 tonnes in 1979. The unit was closed down in November 1979 and the creditors were left unpaid...’’

Heeding the plea of creditors, the High Court ordered that the Company be wound up. That order was stayed. The Government of West Bengal stepped in, and declared the Company to be a ‘‘relief undertaking’’. The Government was committed to protecting jobs, the Communist Government declared. It gave a solemn assurance to the Court that it would provide the required working capital, the managerial expertise — that itself should have made the Court see Red — and technical personnel.

The Company was given a new name. Its production increased for a spell. And then fell precipitously. In 1998/99, it had fallen to just 302 tonnes. As against the paid up capital of Rs 50 lakh, the accumulated losses of the Company on 31 March 1998 had risen to Rs 49.73 crore, and its net worth had plummeted to a negative Rs 124.66 crore.

What of the assurances to the Court? ‘‘Out of the Government’s investment of Rs 68.37 crore up to 31 March 1999,’’ the CAG notes, ‘‘Rs 63.53 crore (93 per cent) was in the form of loans. The unit did not get the required assistance from the Government Departments in the form of assured orders with advance payments through which it could have increased its capacity utilisation and minimised its loss.’’

The CAG’s conclusion is unambiguous: ‘‘Thus, it would be evident that the Government’s inadequate financial assistance and unsystematic supporting measures for the revival of the unit, had drawn the unit towards extinction.’’ Pride was swallowed. In April 1995, an agreement was signed with the Canadian Industrial Consortium for promoting a Joint Venture. It was an ambitious plan: requiring an investment of Rs 1,184 crore. ‘‘However,’’ the CAG says as he concludes his account in September 1999, ‘‘the project was still in the process of implementation.’’

PART I