People's Democracy

(Weekly Organ of the Communist Party of India (Marxist)


No. 36

September 14 , 2008




M K Pandhe

THE Left and Democratic Front (LDF) government in Kerala has remarkable achievements in revamping the state owned public sector undertakings. It is worth noting to understand this, so that a clear cut alternative to the policies of globalisation is highlighted by the experience.

E Kareem, Kerala minister for Industries and working commtitee member of CITU had explained the efforts made at his government’s initiative in Kerala in the meeting of the CITU general council held in Puri in the first week of August.

There are 111 state level public enterprises of which 41 are under the ministry of Industry. During the UDF regime, led by the Congress, the state government during 2001-06 period appointed an Enterprises Reforms Committee (ERC) to develop the scheme to disband the public sector units.

E Kareem pointed out “The ERC report recommended for closure of many PSUs and earmarked the units which should be privatised. Following the recommendations of the ERC the government issued orders either to disinvest or to close down the units. 21 units were ordered to be wound up and to sell the assets to private takers. Massive VRS programme was implemented which was financed by the Asian Development Bank.”

However due to the strong opposition by the united trade union movement and Left parties, the programme could not be carried out. The CITU played an important role in opposing the retrograde policies of the UDF government towards the state owned public sector undertakings.


During 2006 assembly elections the UDF government was defeated and LDF got majority in the assembly which created a favourable background for change in the basic policy towards public sector undertakings. The newly elected LDF government appointed E Kareem, a well known CITU leader as the minister for Industries. The department prepared a scheme to revamp all the state owned public sector undertakings and prepared a comprehensive scheme with the following aspects.

Professionalising the management of the Board, improving the productivity, diversification of products and upgrading of technology, budgetary support and streamlining of financial operation, strengthening the marketing network, synergising of PSUs, both central and state, co-operation with state and central government departments, strict monitoring of the performance at the Board and government level, proper communication with workers and trade unions and increased remuneration and better service conditions for workers.

The decision of the LDF government not to privatise or disinvest any of the state owned undertaking or close them down has created enthusiasm among the trade unions and workers of all affiliations and they offered full co-operation to the efforts of the Kerala government to revamp all the public sector units.

The LDF government characterised the public sector units into four categories - profit making, loss making but commercially viable, loss making and commercially unviable with present operation and closed down ones prior to formation of LDF government and beyond revival.


During 2005-06 there were only 12 profit making units out of which nine were manufacturing units and three were operating in welfare and infrastructure sectors. Their profits were only 4.16 per cent of their turnover. To increase profitability the LDF government had undertaken their expansion, modernisation and adopted improved management methods. This resulted in sizable increase in the turnover of these units making them more profitable. Government could take steps to improve the conditions of workers. These measures have resulted in more involvement of workers in improving the performance.

In case of loss making undertakings which were potentially viable, the Kerala government studied all the units in detail and found out the real cause of their sickness. The report of the ministry of Industry has noted, “For those state level public enterprises which could be revived with governmental support and by refining operations, `Immediate Revival Packages’ were prepared and were implemented without delay. For those state level public enterprises where fundamental changes are to be brought in the core areas of operations, steps were taken to prepare long term revival packages. It was decided that till these packages are prepared and executed they must be supported and short term packages must be implemented to keep the operations profitable.”

In this case also the LDF government gave special emphasis to involve trade unions and workers who co-operated well in making sick units profitable. Even INTUC and other unions who opposed the Left Front government supported the proposal of the government which facilitated the process of making sick units viable.

As a result of these measures, in 2005-06 only 12 units were profit making in Kerala but in 2007-08 the number of profit making undertaking rose to 27. E Kareem expressed his hope that the rest of the units would also be made viable with the help of the state government and trade unions.


The Kerala government identified ten units which were commercially unviable with the present way of operation due to outdated technology and shortage of working capital to run the undertaking efficiently. The government prepared a detailed study of these units on case to case basis, since the causes of their sickness were varying from unit to unit. Help from technical experts was taken by the government in case of each unit and suggestion for their revival was obtained from them. Some financial assistance was provided by the government to make them viable. Some units required restructuring and the government took necessary steps to help that process. In case of some units, the cost of revival was very high but the government decided to do it in a phased manner so that ultimately they are out of the red.

There are seven units under textile sector, which are posing some acute problems of revival due to present marketing conditions. The obsolete equipment cannot make them profitable and hence huge investments would be required to introduce modern technology. However, despite difficulties the government of Kerala has decided to provide required funds so that they can overcome their losses and start making profits. Years of neglect have landed these units in precarious conditions. But the LDF government’s commitment to help them becoming viable has received great appreciation from the employees as well as general public.

In Kerala, 17 units have been closed down and 15 of them are closed down since long, while majority of the workers have left the work through VRS route. Though their revival is extremely difficult task, the government of Kerala has decided to reopen them in a phased manner so that they can be commercially viable. Some units under liquidation were taken over by the government with a view to make them viable through state intervention. Some sick units were merged with profit making units to run them commercially.

Some closed units have reached a stage beyond repair. The proposal of the Kerala government states, “Although some steps could be taken for making use of assets of some companies there are lot of state level public enterprises which are under various stages of liquidation. Government is considering to constitute a high power committee to go into the details of each company and prepare a plan for using the land and other assets of such state level public enterprises for industrial purpose”.


The ministry of Industry convened a meeting of trade unions working in state level public enterprises in June 2008 at Ernakulam in which leaders of CITU, INTUC, AITUC and STU participated. The proposals of the Kerala government to revive all the sick public sector undertakings in the state was considered at length. The trade unions in the meeting gave valuable suggestions many of which were accepted by the government. The positive outcome of the meeting was that irrespective of different affiliations and political views all the trade unions supported the government of Kerala’s proposal for revival of the sick public sector undertakings. As a result of this dialogue there was no labour unrest in these undertakings and the process of revival became smooth.

Some state units have developed joint venture with central government undertakings which enabled them to improve their performance with the help of central undertakings TELK had a joint venture with NTPC. Steel Complex Ltd had a joint venture with Steel Authority of India. The CITU centre gave considerable help to prevail upon SAIL to have the joint venture. A joint venture with Indian Railways was signed by Autocast Ltd and Steel Fabrication unit is to start a railway bogie manufacturing unit. KELTEC at Thiruvananthapuram had been taken over by “Brahmos Aerospace” under ministry of Defence to start missile manufacturing unit in Kerala. This has a potential to develop many ancillary units in the state.

Kerala Electrical and Allied Industries Ltd is trying to have business co-operation with central public sector unit BHEL while Kerala State Electronics Development Corporation is attempting to develop collaboration with Bharat Electronics, a central PSU at Bangalore.

The Kerala government has decided to have links with only public sector undertakings. This policy is also welcomed by all the major trade unions in the state.


Planned development of state public undertakings had led to improvement in all round performance of state undertakings. The government is planning to make all the state public undertakings to make viable and enhance their profitability in a time bound period.

The LDF government has targeted improved performance in the next three year period. The expected rise in profit during 2008-09 would be eight per cent, during 2009-10 it would be raised to 10 per cent and further would rise to 12 per cent in the year 2010-11.

The growth of performance during the next three years has been stated in the following table.


Rs In Crores

S. No.







Value of Production












Thus the improved performance of state public sector undertakings will be in position to finance further development of public sector in the state. The public sector will be able to raise resources for the state government’s programme of further improvement in the standard of living of the people and generate more employment in the state.

The policy of the state has immensely helped in improvement of industrial relations in the state owned public sector undertakings.