rediff.com

NewsApp (Free)

Read news as it happens
Download NewsApp

Available on  

Rediff News  All News 
Rediff.com  » Business » How gigantic sums of public money are being lost

How gigantic sums of public money are being lost

February 21, 2011 14:01 IST
BSNL shall be bankrupt by the end of 2011, Indian Railways is bleeding; Air India has run up a total debt of Rs 40,000 crore.

T V R Shenoy on the figures that tell the government's story.

A rookie gambler asks an old hand, 'What is the quickest way to leave Las Vegas with a million bucks?'

And the voice of experience responds, 'Arrive with two million!

Here is the UPA version. How do you achieve a cash reserve of Rs 4,000 crore? Start with Rs 30,000 crore!

Vast sums are making the headlines because this is the Season of Scams. But it is also the Season of the Budget, so spare a thought for the no less gigantic sums that are being lost legally and with none of the pesky publicity that makes the prime minister so querulous.

To keep Dr Manmohan Singh happy let us focus on three areas where policy is -- or was -- set by no less pesky coalition partners, namely communications, civil aviation, and railways. Coming down to specifics, I am referring to BSNL, Air India, and Indian Railways.

When the UPA took over in 2004, BSNL (the 'Bharat Sanchar Nigam Limited') was highly profitable. At one point it was sitting on a cash reserve of Rs 30,000 crore.

That mountain has shrunk to Rs 4,000 crore. Worse, BSNL is haemorrhaging Rs 400 crore every month. At this rate BSNL shall be bankrupt by the end of 2011.

Government servants can speak their mind when on the cusp of retiring, when there is no fear of forfeiting a coveted promotion. In 2010 Kuldeep Goyal, the outgoing chairman-cum-managing director of BSNL, was asked whether bringing in a successor from the private sector might reduce government interference; the blunt answer was 'No'.

The fruits of government interference are clear for all to see. In 2009-2010 BSNL revenues fell by 10.4 per cent over the previous year. Wage revisions cost Rs 2,900 crore but BSNL also had to pay the spectrum fee for 3G and broadband wireless.

BSNL -- together with its sister concern MTNL -- shelled out over Rs 29,598 crore by way of spectrum fees, of which about Rs 18,500 crore came from BSNL coffers. Why did it spend so much?

BSNL employees insist their organisation was not given the option to bid for chosen circles as private firms were. Instead, BSNL was given spectrum for every circle -- barring Delhi and Mumbai, which are MTNL territories -- and ordered to match the bids.

No organisation can be run on these lines without running the risk of going bust. But declaring bankruptcy is simply not an option. Not only are there the 300,000 BSNL employees to consider but also the reported 83.6 million subscribers that use BSNL services.

One way to cover losses would be an IPO, and at one time it was suggested that 10 per cent be hived off to investors. This was shot down on the grounds that there should be no IPO until BSNL's financial status improved. This, given competition from the private sector and the unending government interference, is unlikely. Thus the Government of India shall again call upon the taxpayer for a subsidy.

This story -- complete with overstuffed employee lists, the call to meet 'social obligations', the refusal even to hint at privatisation, all leading to inevitable subsidies at taxpayer expense -- is repeated at Air India.

The national airline was already wheezing when the Manmohan Singh government took over; it is now in the Intensive Care Unit.

The figures tell the story. In 2009-2010 Air India lost Rs 5,551 crore. The airline has run up a total debt of Rs 40,000 crore, and it needs to pay up Rs 1,800 crore annually just by way of interest on previous debts.

In February 2010 the Manmohan Singh ministry gave Air India Rs 800 crore by way of assistance. That was not enough, and in December a further infusion of Rs 1,200 crore was given the green signal. Everyone knows that more money will be given in 2010-2011.

This is even more ridiculous than in the BSNL case. The telecom giant is genuinely offering some little service to society by linking unprofitable or less profitable areas of India. Please remember that BSNL is specifically forbidden to operate in Mumbai and Delhi, the two biggest cash cows.

Air India on the other hand exists to serve the elite of India, and over 95 per cent of India will never use its services. Why should current and future taxpayers be saddled with the burden of subsidising Air India? Readers may remember that this has been a pet peeve of mine since July 2009.

Air India's contagion is spreading across the public sector. The airline has an annual fuel bill of about Rs 4,000 crore. Everyone agrees that it would make more sense to buy ATF from the private sector because it offers higher discounts, but would this be acceptable to the government-run oil companies?

Actually, those oil companies might prefer to cut their losses since Air India owes them a cumulative Rs 2,300 crore -- just as it owes Rs 600 crore to the Airports Authority of India. But whether Air India, the Airports Authority, or the oil companies, as government undertakings it is ultimately the public's loss.

At least Air India is not guilty of fudging its accounts. That is precisely what Indian Railways did in the years of Lalu Prasad Yadav's reign. The current railway minister presented a White Paper that showed how accounting changes were made to inflate profits -- and reputations.

If standard accounting norms had been followed, according to Mamata Banerjee, the supposed cumulative investible surplus for five years would have fallen from Rs 66,804 crore to Rs 20,269 crore.

Translation: Not enough to invest in infrastructure! (Even assuming that we finally possess the correct figures, which is not a given.)

It would be nice to report that the current railway minister has a plan to turn things around. If so, it would be nice to hear it soon because Indian Railways is bleeding.

In the first half of the last fiscal year, April-October 2010, freight loading targets fell by roughly 10 million tonnes, meaning that revenue fell short of the projected amount by about Rs 1,192 crore. However, operating expenses rose by roughly Rs 2,400 crore in the same period. Passenger trains, of course, already famously don't make profits.

Will this be reflected in the rail budget? No. Mamata Banerjee is a politician before she is an administrator, and assembly elections are due in West Bengal within months.

The answer lies in the prime minister's current favourite word, 'subsidy'.

It did worry me a little, watching his press conference, that our economist administrator seemingly confused 'subsidies' -- expenditure approved by Parliament -- with 'revenue losses'. One can only hope that Dr Manmohan Singh does not similarly confuse 'prime minister's responsibility' with 'compulsions of coalition'.

ALSO READ:
Don't tax common man to bail out Air India
Why is the UPA so unprepared for economic crisis?

T V R Shenoy