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PSUS:
TEMPLES OF DOOM
BHARAT
GOLD MINES LTD
Golden
noose
Set
up to stabilise prices in India, the company has produced more red ink
than gold. With India importing almost all its requirement of the metal,
it's a PSU ready for retirement.
By
Stephen David
 |
DRILL'S
BILL: For every Rs 1,000 worth of gold, the company spends
Rs 1,500 on wages |
Swarna
Bhavan, an imposing colonial edifice at Kolar Gold Fields, 120 km north-east
of Bangalore, once housed John Taylor and Sons, the British owners of
one of India's oldest goldmines. Today, Kolar Gold Fields, the most famous
and largest goldmine in Asia, now under Bharat Gold Mines Ltd (BGML),
may earn its name in history for being the first Indian PSU to be wound
up.
That is
if the Karnataka High Court agrees to vacate the stay that it had given
until next month on the closure of a Voluntary Separation Scheme (VSS)
offer. Once the stay is removed, the Centre plans to hasten the winding
up of BGML. The Union Labour Ministry is also expected to give its green
signal to BGML's application for permission to close down the establishment
under Section 25 (O) of the Industrial Disputes Act, 1947.
There has
been no productive activity for the past several years
at any corner of BGML's large sprawl of 12,000 acres, but its 3,873 workers
have been receiving their salary all the same, costing the exchequer Rs
2.24 crore every month. The workers mark attendance, and spend a few hours
hanging out at the idle plants and the rusted cages. The famed township
of gold wears an eerie look now.
BGML's is
not a sudden death-the cancer had set in several years ago when its high
production cost (Rs 14,000 for 10 grams against Rs 4,000 or so in the
open market), combined with a liberal gold import policy, took a heavy
toll on BGML. The mining activities at the deeper levels in Kolar goldmines
became uneconomic as early as the 1980s due to depletion in the high grade
ore reserves. In 1987, a decision was taken by the Union cabinet to phase
out mining operations at such depths. Mining was confined since then to
the shallow areas. But the company was still unable to clean up its balance
sheet because of its high wage bill (Rs 23.90 crore in 1998-99), representing
over a third of its cost before depreciation and interest, and the load
of its mounting debt. The interest charged to its profit and loss account
in 1998-99 equals the operating income for that year. Officers in Swarna
Bhavan are literally burning the midnight oil while Nagpur-based Mineral
Exploration Corporation Ltd Chairman S.D. Prasad, holding additional charge
as managing director of BGML, flies in and out of Nagpur to see how fast
the curtains can be brought down on the gold plant that has failed to
glitter.
BGML was
incorporated in March 1972 as a public-sector company to own and manage
the goldmines with effect form April 1, 1972. Its mines were ageing even
then, but an unreasonable recruitment binge under obvious political pressure
got its bottom line eroded beyond repair. Its net worth became negative
since 1988-89. The company was referred to the Board of Industrial and
Financial Reconstruction (BIFR) in early 1992 and was declared sick on
August 28, 1992. In July 1993 the BIFR was appointed as the operating
agency to prepare a scheme for revival/rehabilitation of the company.
The agency had submitted proposals in March 1994, October 1996 and July
1997.
The July
1997 proposal envisaged a fresh infusion of about Rs 200 crore which the
Centre rejected. The Centre wanted to find a suitable co-promoter to rehabilitate
the company through the joint venture route but a high-power committee
chaired by the additional secretary, Department of Mines, stated that
no joint venture partner was suitable on their terms. The Centre thereafter
decided not to provide any funds for revival and mining operations except
for safety considerations and conveyed its "no objection" to
the BIFR to wind up the company.
The irony
is that the long wait for nine years since BGML being declared sick has
cost over Rs 400 crore. The delay was caused by the combined efforts of
BGML's officers and workers, and the Centre's lack of political will to
take the unpleasant decision of closure of a psu without a future. Divided
among as many as 18 unions, the workers were obviously ill-advised by
their leaders in spurning VSS offers. It made the closure all the more
difficult.
Earlier
the workers hoped for wage revisions, which would have augmented the VSS
packet. But no wage increase has happened in BGML in the past decade,
and the present VSS, computed on the basis of the unchanged wages, is
decidedly the last offer of succour before the curtain is drawn on the
mines. Since 1992, the employee strength has been brought down from 8,821
to 3,873. However, the workers with an average age of 45 do not have much
hope of finding a job.
"We
are trying to ensure that the employees understand the ground realities
and that we have to move with the times," says Prasad, whose team
is working closely with the Karnataka Government whose concurrence is
required for ensuring the mines are shut down without much hassle. For
example, the huge Rs 70-crore bill the state electricity board has slapped
on BGML has to be sorted out. The goldmines had an understanding with
the then maharaja of Mysore to tap power from the Shivasamudram hydel
plant exclusively and the tariff was as low as 0.8 paise per unit (today,
Rs 4.32) and the SEB has also been charging fuel escalation costs to pad
up its power bills.
While these
liabilities are likely to be settled, partly through negotiations and
partly out of post-closure sale proceeds of the company's fixed assets,
the Centre will still have to explain why it allowed the cash bleeding
to continue for so many years. The Indian gold market of 730 tonnes per
annum is almost entirely imported, the share of domestic mining is a measly
two tonnes. Even in the past, the domestic goldmines in India never had
the potential for market intervention. With such a vast gap between India's
gold demand and its domestic production potential, there is hardly any
role that the state could play in influencing the local price. Nationalisation
was, therefore, a costly job-creation (or job-saving) exercise cloaked
in the garb of price stabilisation.
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