This Govt Company Lost Rs 17.5 Crore Per Employee, Before Being Shutdown - Vivek Kaul's Diary
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This Govt Company Lost Rs 17.5 Crore Per Employee, Before Being Shutdown

Jul 31, 2018

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The government lives off the taxpayer. And by this I don't just mean the few individuals who pay income tax in this country, but all other kinds of indirect taxes which are paid by almost the entire population.

Since the government lives off the taxpayer, by the very definition, so do government employees who work for loss-making public sector companies. In an ideal world, this would have meant that any government would have gone around spending money wisely and not wasted it.

But the world that we inhabit isn't ideal, in any sense. So where does that leave us taxpayers? At the mercy of the government and its decisions and what it decides to do with our money.

Over the years I have often written about public sector enterprises, which should not be existing in this day and age but have been kept alive nonetheless. An example I love to cite here is that of the Hindustan Photo Films Manufacturing Company Ltd.

Photo films went out of fashion a while back, but the company continued to exist for a long time, and made losses, which you and I, dear reader, basically paid for from our pockets.

In 2016-2017, the company incurred a loss of Rs 2,917 crore. It employed 167 individuals. This basically means that the company incurred a loss of around Rs 17.5 crore per employee during the course of the year.

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This lack of performance in 2016-2017 was not abnormal and is something that the company went through over the years. In 2015-2016, the company made losses of Rs 2,528 crore. It had employed 217 individuals at that point of time. This meant losses of Rs 11.6 crore per employee.

In 2014-2015, the company made losses of Rs 2,164 crore and employed 348 individuals. This meant losses of Rs 6.21 crore per employee.

All this, of course, was being financed, by us taxpayers. Take a look at Table 1, which lists out the losses of the company over the years.

Table 1:

Hindustan Photo Films Losses (in Rs crore)
2016-2017 2,917
2015-2016 2,528
2014-2015 2,164
2013-2014 1,820
2012-2013 1,561
2011-2012 1,352
2010-2011 1,157
2009-2010 1,003
2008-2009 876
2007-2008 789
2006-2007 653
2005-2006 561
2004-2005 496
Source: Public Sector Enterprises Surveys.

What does Table 1 tell us? Between 2004-2005 and 2016-2017, the company made losses of Rs 17,877 crore, while it continued to operate.

Over the years, more and more debt was taken on to keep the company going. As of March 31, 2017, the total debt of the company amounted to around Rs 13,990 crore. A bulk of this debt, Rs 13,752 crore, was short-term in nature.

Given that the company barely had any revenues, the company had degenerated into a Ponzi scheme over the years, with more debt having to be taken on so that the company could pay off the debt it had taken on previously (given that most of it was short term in nature), as well as pay interest on it.

In 2015-2016, the total debt of the company had stood at Rs 11,954 crore. The question is why did banks continue to finance, what was essentially a company which was both bankrupt and without any business model. The answer lies in the fact that any bank while lending to a public sector enterprise assumes it is lending to the government. And governments don't default, at least that is what the assumption is.

The good news is that the company has finally been shut down. A report in The Times of India points out that April 25, 2018, was the last day for the 167 employees who remained and who had not taken on voluntary retirement schemes offered in the past. On that day, they punched their attendance for one last time.

The company had been declared a sick unit in 2004, but it took nearly a decade and a half, for it to be finally shutdown. Meanwhile, the company manged to accumulate huge losses, most of it was financed through taking on more debt. Taking the past trend into account, it can safely be said that by March 31, 2018, these losses would have easily crossed Rs 21,000 crore.

This debt as on March 31, 2017 amounted to Rs 13,752 crore. Going by the past trend, by March 31, 2018, it would have crossed Rs 15,000 crore and will have to be serviced by the central government.

And as I said at the beginning, governments live off taxpayers. It's essentially you and I who will be paying for this as well. The sad part is that many such companies continue to exist. Hopefully, something will be done about them, soon enough.

Regards,
Vivek Kaul
Vivek Kaul
Editor, Vivek Kaul's Diary

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Vivek Kaul is the Editor of the Diary. He is the author of the Easy Money trilogy. The books were bestsellers on Amazon. His latest book is India's Big Government - The Intrusive State and How It is Hurting Us.

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7 Responses to "This Govt Company Lost Rs 17.5 Crore Per Employee, Before Being Shutdown"

Anti

Aug 2, 2018

At least this government had the balls to close the enterprise rather then the UPA regime who did not do any thing since 2004 since the company was declared sick.

Whatever said and done I will vote for this government in 2019 for taking a lot of "unpopular" steps which so called Dyed in Wool socialist government like UPA would never had the guts to take.

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chandrakant gandhi

Aug 1, 2018

in my view all these companies were establish at that time to push industrial revolution and create employment, but pity is that with changing time, technological development govt does not think , even if they think there are lot of political pressure to continue and also labour problem .. even when company like kodak has to shut down we do not think and continue and public pays for it .there are many companies which can be shutdown and save money and it is not that govt will loose money as property price of those company have increased many fold .but who will bail cat, govt only talks for votes and they are more worried about loosing those votes than public money. this is India where politician think first of themselves than people or country.GOD SAVE INDIA OF SUCH WASTE FULL EXPENDITURE AND PEOPLE WHO RULE - I SAY ANY PARTY.

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Anish

Jul 31, 2018

Dear Sir,
Firstly I am a very big fan of yours having read numerous articles in various newspapers and reading Easy Money Trilogy's.
However in recent times I am increasingly getting the notion that you are against the current BJP government and supporting Cong and other parties.
Case in point is this article-earlier you had written that Would current government show guts and willpower (not the exact same words) to close the loss making company. Now when the government has managed to do it, not even a single word of praise for current bjp govt.. not even an iota .. Ironical isn't it ?
specially when u have written more than 50 articles on demonization, black money .. This is not cool

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Gautam M

Jul 31, 2018

While statistics reveal the amount that was plundered due to keeping alive the company on ventilator, it would have helped if Mr Kaul would have dwelled into the reasons why it took 14 years to shutdown a company after declaring it as sick. Was it purely for political reasons (to not appear as against working class as many at that time would have been rendered jobless)? Or are the reasons different. That would have helped analyze the pros and cons of the final decision. If it was only employees then I feel giving them a golden separation (no voluntary) would probably have costed government far less. Also these employees would still have some working years left with them to look out for some other form of work without worrying too much of how to feed their family due to the golden handshake amount.

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J Thomas

Jul 31, 2018

It's a fond hope that the government will pay the banks for the losses of Hindusthan Photo Films. They will not. The banks will suffer huge losses. But they will carry the account as "Dues in, considered good" for a long time.

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Vikram Bhatt

Jul 31, 2018

This means credit of taking right decision of shutting down the company should go to Government of the day.
Hopefully opposition is not coming on street crying that Government is anti people and killing jobs

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Manmohan Khetan

Jul 31, 2018

9008466009

Is there any solution to come out of this mire ?
Lets start thinking on solutions mode as we i.e. taxpayers loose money helplessly

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