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PSUS:
TEMPLES OF DOOM
Loss
Spinner From The Raj
If BCI's products still sell it is because the government prefers to
source its uniforms from the PSU.
BRITISH
INDIA CORPORATION
Nationalised: 1981; HQ: Kanpur; Product: Woollen textiles; Public investment:
Rs 374 cr; Wage bill in 1998-99: Rs 18.29 cr; Net worth: -Rs 329 cr
By
Sumit Mitra
The
headquarters of British India Corporation (BIC) at Sutherland House in
Kanpur has the aura of the colonial past-a single-piece mahogany table
in the board room, Belgian chandeliers and portraits of former British
managing directors on the wall. However, the current state of BIC is bad
enough to disrupt their eternal peace. Its two woollen mills in Kanpur
and Punjab, known for the Lal Imli and Dhariwal brands, now work at 15
per cent of their capacity. It would have been so much better if they
hadn't worked at all because in 1998-99 BIC ran up expenses totalling
Rs 35.17 crore to book an income of only Rs 8.37 crore. This does not
include an annual interest bill of Rs 21.59 crore on loans taken from
the State Bank of India (SBI). In May 1997, after the company lost an
appeal against a BIFR winding-up order in the appellate tribunal, SBI
stopped the operation of all BIC accounts. The company is without any
working capital since.
Chairman
and Managing Director D.K. Mahalanobis (related to the late P.C. Mahalanobis,
Jawaharlal Nehru's chief ideologue for a dirigiste economy) says the company
can still turn the corner if the Government injects a fresh dose of cash.
"We need a cash loan of Rs 50 crore-a kitty of Rs 10 crore to retire
surplus staff and working capital of Rs 40 crore," he says.
That's the
typical defensive endgame of managers of failed PSUs. BIC has lost dominance
in every field where it had a reasonable presence-blankets, lohi (shawls)
and government supply of regulation woollen uniforms. The coarse-spun
Lal Imli products could not cope with changes in consumer taste and competition
from private sector rivals like Raymond's or OCM. If BIC still has a toehold
in the government supply market, it is because of a controversial price
preference given by the Union government to all Central PSUs.
BIC's subsidiaries,
Cawnpore Textiles Ltd and Elgin Mills Company Ltd, are lying closed for
a year. Their elegant offices and workshops, built by the British in the
19th century, are crumbling due to neglect, the courtyards being under
the occupation of flag-wielding demonstrators with little work but full
pay. The holding company alone has 4,334 employees (in 1999), most of
whom are above 40 and quite dispirited-the better ones having quit already
with handsome severance packages. BIC's spinning and weaving mills are
fairly modern, having been imported in the first flush of the 1981 nationalisation.
But machines alone do not a successful business make. It still needs capital,
men and a vision. BIC has none of it. There isn't a single MBA on its
staff. The brass' current chief agenda is to persuade the Union Textile
Ministry into a new financial commitment. Their trump card: No private
investor will buy a sick company with a net worth of Rs 328.84 crore in
the negative.
The argument
is a yarn jointly spun by self-serving managers anxious to protect their
status and workers who have got used to an idle monthly pay of Rs 4,000
on an average. They could not make the company earn a rupee in profit
even when its line of credit with the bank was open. It was a blunder
to nationalise an ailing business that had lost its moorings after its
British founders left. A new inflow of taxpayer's money will complete
the deathwish.
On The Wrong Foot
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