States show the way as PSU recast speeds up

this is one lesson that the centre can learn from states. operation clean-up of sick public sector enterprises has started showing visible signs of change even while the centre finds itself on a sticky wicket to get its house in order. in the last three years, karnataka, andhra and even orissa and nagaland have offloaded over 50,000 staff, privatised non-core activities and exited businesses where the government has no business staying in. this is part of the medium-term fiscal reforms programme that the government has envisaged to correct state finances. in fact, these states have effected major overhaul in terms of privatisation, closure and restructuring of ailing psus. as an incentive, the finance ministry has decided to set aside around rs 500 crore for states to undertake their voluntary retirement exercise in the event of closure and restructuring of these enterprises. this money will go to states via the additional market borrowings facility of rs 1,500 crore that the government has decided on. the condition of this facility is that the end use would be reforms-linked. there is an approved market borrowing limit of rs 10,000 crore for states which has been fixed by the ministry of finance and planning commission. the additional access to funds is over and above this borrowing ceiling and would be decided only on a case-by-case basis. sources said the additional access to funds would be cleared by the reserve bank, which is the debt manager, and the ministry of finance. sources said the apex bank would go in for these borrowings in february. while some states enjoy access to multilateral funding, the finance ministry is also looking at opening a window to facilitate reforms in a small way. the key component of expenditure in psu reforms is separation package along with wage arrears, gratuity and other benefits. andhra pradesh is looking at separating 20,000 employees via vrs and its total fund requirement is over rs 100 crore. orissa has off-loaded around 7,000 employees with a vrs expenditure of rs 50 crore which is being funded by the uk's department for international development. the state further plans to lay off 5,000 employees and asset sale of three psus under its reforms programme. even nagaland has made a headstart by kicking off restructuring in 10 enterprises and has actually closed down one called nagaland sugar mills company. while each state is following its own procedures, the broad outline of the programme is reduction of government holding in non-core enterprises to 26 per cent, utilising selloff proceeds for retiring public debt and servicing other ailing psus in a 70:30 ratio and implementation of vrs for surplus staff and those belonging to units which are closed down. for instance, in andhra, privatisation is in various stages at nizam sugars, six co-operative spinning mills, four co-operative sugar factories. downsizing exercise is on in ap state irrigation development corporation and the ap state textiles development corporation and ap small scale industries development corporation are closed. in fact, the irrigation department has handed over 75 per cent of its schemes to water user associations.

States show the way as PSU recast speeds up

THIS IS one lesson that the Centre can learn from states. Operation clean-up of sick public sector enterprises has started showing visible signs of change even while the Centre finds itself on a sticky wicket to get its house in order.

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