Loss-making PSEs

That there’s not a single profit-making public sector enterprise (PSE) in Meghalaya is no surprise. A PSE must be run along the model of a corporate organisation which means that it must yield enough profit to make it sustainable. A corporation is run by a board of directors elected by shareholders. In the case of PSEs since the Government is the main shareholder, it nominates its own people. Some of these nominees are politicians, others are bureaucrats. While some bureaucrats with a degree in business management can read the balance sheets and audited accounts analytically, politicians mostly don’t care. Yet most of these corporations are chaired by politicians. In fact, the PSEs in Meghalaya have all gone into the red because politicians treat them like employment agencies where they can appoint their camp followers. They don’t care whether the corporation swims or sinks. They are happy to draw their pay and perks even when the Corporation is incurring losses. They know the State Government will pump in more money to keep the ship afloat.
One such loss-making Corporation is the Mawmluh Cements Corporation Ltd (MCCL) which is also the first cement producing company in Meghalaya. MCCL had been doing well when its Board consisted of those who cared to ensure its profitability. This PSE has no business to sink into a debt burden of Rs 234.79 crore against a paid-up capital of Rs 197.51 crore. Despite major capital investments in the MCCL, the CAG report says the Company could achieve only 22 per cent capacity utilisation against the projected capacity utilisation of 60 to 75 per cent which was mainly on account of excessive machine stoppages, idling of machineries/equipment and absence of skilled staff. What’s ironic is that all the private cement producing companies are faring well, making profits and expanding their businesses. Considering that Meghalaya has the key raw material for producing cement which is limestone in abundance and it also has coal to run the cement producing furnaces there is no reason for the MCCL to be losing money. Bad corporate governance is the only reason and that goes for all the other PSEs too.
The CAG report also points to the fact that 97 per cent of the losses incurred by working PSEs during 2019-20 was on account of the four PSEs in the Power sector and the MCCL. Accumulation of huge losses by these SPSEs had eroded public wealth, which is a cause of concern. The State Government needs to review the working of these SPSEs to either improve their profitability or close their operations, the CAG had categorically stated. The Government is already looking at disinvesting the MCCL but on what terms is the question.

Get real time updates directly on your device, subscribe now.

Comments are closed.