By Patricia Mukhim
The above is not a love triangle. On the contrary Party 1 is in league with Party 2 against Party 3- the MLA of Sohra who obviously is not the reason for the downfall of the MCCL. We are well aware that any business run by the government is doomed to failure because companies follow a strict business model and the prime aim of any business is to make profits so that the company is sustained and salaries etc to employees are paid from the profits. Governments on the contrary are unable to do business because every public sector undertaking is reduced to an employment agency where politicians push in their camp followers as employees irrespective of whether they have the calibre or the qualifications for the job. The MeECL is a good example. Over the years it has added so much flab that it has developed a fatty liver – a huge debt burden which is strangulating the Corporation.
But Meghalaya is not the only state where the electricity corporations are running on losses. The central government has taken a grim view of this and in October 2020 it proposed the Electricity (Amendment) Bill 2020, which could help re-energize the country’s power sector and attract foreign investment. The central government found that the pandemic had worsened the situation for an already beleaguered industry which has been battling operational and financial inefficiencies. Meghalaya’s debt burden on account of the poor management of MeECL has only increased over the years. As of April 2023, the outstanding debts (principal and interest) is to the tune of Rs 1200 crore. For several years even the accounts were not audited timely. Hence no financial discipline was adopted in the Corporation.
Looking at the MeECL financial reports over the years we see that major constraints hindering the financial viability of the Corporation are (i) its weak industrial base and large share of domestic consumer below poverty line; (ii) high tariff paying industry consumers have decreased over the years; and (iii) it has geographical disadvantage for grid electricity penetration, leading to high loss. Therefore, the financial position of the Meghalaya Power Distribution Company Ltd (MePDCL) should be practically analyzed and action taken. Meghalaya is basically an agricultural state with about 80% of its total population depending entirely on agriculture for their livelihoods and being an ecologically fragile state it cannot support polluting industries. This low level of industrialization and the relatively poor infrastructure base in the state hinders the economic development of Meghalaya. Without industries the main tariff collected is from domestic users – a huge majority of whom pay subsidised electricity bills. At this rate how can MeECL and MePDCL become viable PSUs?
Beyond a point, states cannot continue to borrow and throw good money after bad money. The Central Government which underwrites these loans knows that it cannot allow unregulated borrowings where repayment schedules are unmet. Hence the proposal for reforms in the power sector which could well be the solution to revive the sector. The bill proposing privatization of electricity distribution is currently with state governments for approval. If passed, it will open the doors to this sector for private domestic players as well as international entities seeking to explore its potential.
It is with a view to privatize power distribution in India that the central government circulated the Electricity (Amendment) Bill 2020. The Bill proposes to strengthen the power distribution aspect by allowing participation of private and international players. While all the three segments of the power sector – generation, transmission, and distribution – are essential, distribution companies (discoms) are perceived to be the critical link in this value chain. Currently, this segment is dominated by state discoms, with little to no private participation, hence the continued losses. The Central Government had stated that it would soon unveil the a scheme to cut transmission and distribution losses and to incentivize states to involve the private sector in improving the efficiency of their discoms. As expected, this would have a political cost hence many states governments including the Government of Meghalaya are yet to approve the Bill.
India will need to look at examples of most developed countries that have privatized their electricity distribution businesses to enhance efficiency. Several have established regulators for the sector to protect the interests of consumers and act as legal and enforcement bodies to ensure a balance between private-sector participation and government control. This is the only model that India could follow to revive its sick power sector.
Now let me come to the crux of the matter – the Mawmluh-Cherra Cements Ltd (MCCL) established in 1966 for manufacturing Portland cement. It is a joint sector company with the government as the major shareholder and a few private shareholders. Over the years mismanagement saw the private shareholders pulling out since the company was running at a loss. In 2021 the state Cabinet had cleared the proposal to initiate the process of a joint venture partnership in the MCCL due to the financial constraints that the State is facing and because of which it is unable to invest Rs 190 crore to revive the PSU. MCCL has been making continued losses since 2007-08. As of 2018-19, the cumulative losses stood at about Rs 234 crore and as of September 30, 2020, MCCL owed Rs 60.75 crore in overdue liabilities to government departments, suppliers and contractors and its employees. It is estimated that the liabilities of the MCCL have accumulated to Rs. 65.93 crore which includes Rs. 27.09 crore due to government departments, Rs. 14 crore to suppliers and contractors and Rs. 24.84 crore as liabilities to employees.
It is evident therefore that none of the PSUs (some of which have already been closed) are run on business models that are intended to deliver profits. They are more like government departments and further political appointees rule the roost. The management has no control over such employees. Besides, the MCCL would now have to compete with private companies producing cement at huge profits in the state. MCCL is no longer the only cement producer in Meghalaya which it was in the 1960s. Poor management of human resources and finances both have been the downfall of all companies. MCCL is no stranger to this. Since there are no takers for a joint venture with the government, the only alternative is for the government to run the MCCL which would mean the government pouring in money every year into a failed project merely because employees have to be paid! Is there any sense in saving a few employees of a failed project while the state is burdened by more debts from private borrowings?
What’s interesting is the Hynniewtrep National Liberation Council (HNLC) jumping into the MCCL issue at this juncture. Considering that the HNLC has substantial funds invested over the years why does it not take over the MCCL and run it efficiently, employing the best management practices? Or is the MCCL issue just a decoy for the outfit to walk out of the peace talks? Since the HNLC represents all of us the “Hynniewtrep” people, we would like to know what are the salient features of the peace deal being discussed with the interlocutor – AK Mishra since we are all stakeholders in this. What is the HNLC going to liberate us from? How can the HNLC discuss a deal with the Centre which will have an impact on all of us, but without us knowing what’s in the peace deal? But above all, how can an outfit discuss peace on one hand and issue death threats to an MLA on the other? What can the MLA do to revive a dead company?
From what one can gather, the HNLC is unhappy that their cadres are not getting a general amnesty after all that they had done in the past decades. Well one leader – Julius Dorphang was given general amnesty but he landed up in jail for raping a minor girl. What does that say about the antecedents of the HNLC? Are we sure all the cadres will not get back to their old ways and that extortion has ended? These questions need clarity. The Hynniewtrep people too must engage with this issue because it is “our” issue and not just a binary between the central government and the HNLC.