People's Democracy

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


No. 11

March  13, 2011


Resurgence of Kerala PSUs:

The Political Lesson

Elamaram Kareem


TECHNICALLY speaking, the LDF government in Kerala is left with only two more months whereas practically the government has come to an end from the declaration of election to the Assembly except for routine matters. The electorate of Kerala will be casting their confidence for the formation of a government on 13 April 2011. At the fag end of this government, I think it is necessary to do two things. Firstly, to critically analyse the performance of the government from a pro-people angle and secondly, to put forward an agenda for further actions.




When the LDF government assumed office in May 2006, the industrial sector of the state was in doldrums; public sector was collapsing, private investments were diminishing, workers in the traditional sector were thrown out on to the streets and the small and medium sector was thoroughly shrinking. The conventional stigma that the state was not investor friendly was underscored and whatever industry was operating in the state also was getting ready for migrating to neighbouring states. This was neither accidental nor an immediate phenomenon. It was the result of the neo liberal policies pursued by the immediately preceding UDF government from 2001 onwards. Of course, the economic policies of the union government also contributed to develop this state of affairs.


The LDF government that came to power after a landslide victory in 2006 was well aware of the task ahead but we had taken it up as part of our struggles against imperialistic globalisation and was sure that with the help of common people we would be able to confront the situation. Our immediate task was to set the house in order that was totally in a mess with corruption, extravaganza, nepotism, and malpractices. We could start implementing the development projects only after a considerable time due to this. So we had to work extremely fast, and very often take unprecedented decisions. After almost five years of running the government, we are very sure that the promises we had given to the people of Kerala had been successfully honoured.


Although there are commendable performances in industrial sector as a whole I will confine my note to the performances of State Level Public Enterprises in Kerala during the last five years. When the LDF government came to power, the state of the affairs of the PSUs was pathetic. Demoralised workers, low productivity, liquidity crisis, mismanagement, corruption and nepotism were the main characteristics of these companies. The UDF government was implementing the policy of “Close down, Privatise and grant VRS to the workers”. In order to implement this policy at the official level, an Enterprises Reforms Committee (ERC) was constituted and the Report, which throughout has taken an anti-PSU stand, was accepted by the UDF government without any modification. The ERC Report emphatically stated that the PSUs had become a huge liability on the state exchequer and such undertakings should be immediately closed down or privatised. On the basis of the ERC Report, Government Orders were issued for closure/disinvestments of 25 companies. Hundreds of workers were given voluntary retirement. Profit making companies had become fertile areas of corruption. There were strong moves to sell out the properties of the PSUs. Against the anti-PSU stand of the UDF government, there was strong public opinion and employees of these companies, irrespective of their political affiliation, rallied behind the 'Save PSUs agitation'. The strong protests by the workers and the Left parties had prevented the UDF government from selling out the public properties. However, many companies became dormant due to massive VRS and deliberate management inefficiency.




In 2005-06, i.e., in the last year of the UDF rule, only 12 out of 44 companies were making profits. These units together made a loss of Rs 69.64 crore. From 2006-07 onwards the situation started changing. In 2006-07 there was a considerable leap both in the case of turnover and profit. The total turnover was Rs 1763.74 crore against Rs 1540.40 crore in the previous year and the total profit was Rs 91.18 crore. The number of profit making companies increased to 24. In 2007-08, the number of profit making units was increased to 27 and the total profit was Rs 80.30 crore. The turnover was increased to Rs 1811.50 crore. In 2008-09, in spite of global economic recession and corresponding shrink in demand, the companies presented extremely impressive results. By this year the number of companies under the Industries Department was reduced to 41 and out of the 41 companies, 28 companies became profitable. Total turnover was Rs. 2105.01 crore and total profit was Rs. 169.45 crore. There was an increase of 16 per cent in the turnover and 111 per cent increase in profit compared to previous year. In 2009-10, the number of units has further reduced to 37 as some small units were merged together. Out of the 37 companies, 32 companies became profitable. The total turnover was Rs 2190.73 crore and the total profit was Rs 239.75 crore.

With a strong political will and concerted efforts, this government could bring substantial changes in the performance of the units. The loss of Rs  69.64 crore in 2005-06 was converted into a profit of Rs 239.75 crore in 2010-11. All the companies except five were made profitable. In 2011-12 the state will have the record of 'no loss-making PSU'. This achievement is mainly due to the pro-PSUapproach, conceptual clarity about the role of PSUs, result oriented action plan with definite milestones, meticulous supervision, and professionalisation of management. Growth and development of PSUs are taken as the essential part of the political struggle against neo-liberal capitalism and the imperialist globalisation.

Special mention is necessary about the role of Trade Unions and OfficersAssociations in achieving these results. For the last five years there was no notable labour unrest in this sector and the employees were fully cooperating with the management. The government could solve many of their long pending demands and salary revisions were implemented in almost all the companies and in those units where salary revisions were not legally permitted, remunerations were hiked either by paying interim relief or incentives. During the last five years, Rs 340.57 crore was remitted to the exchequer as Commercial Taxes, Excise Duty and Electricity charges. Around 9000 new appointments were made in this sector during the last five years.




I am not going into the details of strategies adopted for the resurgence of the public sector units in Kerala. When the revival of PSUs was planned in 2006, it was sure that the task was not going to be an easy one. All the important fields like management, financial, technical, marketing, human resource, administrative etc., demanded a new approach. It was important to develop a result oriented action plan and to execute it in a time bound manner. In order to prepare such an action plan, lot of deliberations were held with experts in the relevant fields. Dialogues were initiated with various government departments, PSUs under other administrative departments, banks, similar units under central government, media etc. Trade Union leaders were specially invited and interactions with them were held for identifying the crucial problems in this sector and for gathering inputs for solving them. On the basis of these deliberations an action plan for the growth and development of PSUs was prepared. Road map with specific milestones was developed and clear targets were fixed for the implementing agencies. Systems were established for meticulous monitoring and follow up actions.


From 2007-08 onwards, appointments of CEOs in the PSUs were made by a Selection Board through open advertisement and interview. Search committees were also constituted to identify experts of various sectors. In majority of companies, persons selected through the above processes are appointed as CEOs.  For the capacity building of second line management, recurring training programmes were organised. The companies were making huge monetary defaults to the banks and in 2006-07, the amount defaulted by the companies was Rs 359.66 crore. With government intervention, this amount was settled under One Time Settlement Scheme for Rs 89.39 crore with the budgetary support. This has enhanced the financial capacity of the companies. For the last five years, performance review of the PSUs is made every month without fail. The monthly performance review is done by the minister for a whole day with the support of secretaries and senior officials of the department. This has developed a sense of accountability in the management and that has resulted in the performance of the units. It was a matter of serious concern that there were huge arrears of auditing of accounts in the PSUs. This has resulted in faulty financial planning, and developed room for corruption. In some cases the internal auditors were colluding with the management to hide certain wrong practices.  These issues were solved by preparing a panel of auditors and the companies were instructed to appoint the auditors from this panel only. A time limit also was fixed for the auditors. By 2009-10, almost all the operating companies have completed their internal audit.




It was a unique attempt to go for strategic tie-ups with central PSUs and central government agencies and to form joint venture between the state and the central PSUs. So far, four such companies have been formed. This has helped the state PSUs to have an exposure to better management in marketing, finance and HR sectors. These Joint Ventures are functioning successfully.  


During 2010-11, expansion / modernisation programmes in the companies to the tune of Rs 275 crore are being implemented. Most striking point was that eight new units of PSUs were commissioned in this year attracting capital investment of Rs 170 crore. They were declared in the month of February 2010 in the budget of 2010-11 and all these units are operational by March 2011. This is probably for the first time in the history of Kerala that so many new Public Sector Undertaking units have been announced and commissioned within such a short period. It was astonishing that the public sector could outperform the private sector in project implementation. For implementing the above projects, the surplus funds of the PSUs were utilised. Capital investment in the public sector was happening after a lapse of almost three decades!


The LDF regime will be marked as the golden era of the PSUs in the state. The achievements in this sector were highlighted in a national conference in 2009 and in an international conference in 2010. The remarkable performances were acclaimed by academics and practitioners alike and it was suggested that the Kerala model should set as an example before the advocates of neo liberalism who argue for the closing down of all public sector units.


Of course, lot of things are left to be done. For the revamping and strengthening of the PSUs, the present activities are to be continued. These units are to be converted into exemplary productive zones and thereby making them as effective tools to counter the neo liberal capitalist agenda. Instead of making them as the replica of private sector undertakings where the utmost importance is to maximising the profits, public sector units with social obligations and commitments are to be developed. In the transitional period from capitalism to socialism, the public sector has to play a very important role and should be able to expedite the struggle for socialism. That is the historical importance of the revival of Kerala PSUs and I am sure that the LDF government that is going to be formed after the assembly election will carry forward this struggle.