Wednesday, July 12, 2006


The New Economist points to a good article by Andy Mukherjee of Bloomberg "Why India must sell only troubled state assets".

In the year ended March 2005, 73 unprofitable companies controlled by the federal government incurred total losses of about $2 billion, of which two-thirds was accounted for by just 10 companies, including two from the fertilizer industry and two from coal, one telephone-equipment manufacturer, one drugmaker and one railway operator.

He points out that

The Common Minimum Program of May 2004, the agenda agreed on by the government and its allies, states that, ``generally, profit-making companies will not be privatized.''


``Chronically loss-making companies will either be sold off or closed after all workers have got their legitimate dues and compensation,'' says the Common Minimum Program, giving the government latitude that it has just not used effectively.


The trick lies in separating distressed companies from surplus labor, with generous compensation and retraining benefits for the latter. This strategy would serve the twin goals of increasing the value of distressed assets and reducing the opposition of labor to outright sales.

The eastern Indian state of West Bengal, ruled by Marxists, has implemented just such a strategy, even roping in the U.K. Department for International Development to foot the cost of worker payouts.

More good stuff. Whats the world coming to, when a Bloomberg correspondent writes like a political analyst?

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