Govt may soon bite the bullet on privatising MPM

Panel in favour of privatising operations, leasing out property

Now the time has come for the Siddaramaiah government to take hard decisions regarding the modalities to be worked out for privatising the loss-making the Mysore Paper Mills (MPM) in Bhadravati, the government owned public sector company.

A high-powered committee headed by the chief secretary has completed its task of preparing recommendations to be submitted to the government pertaining to the features in the tenders to be called for taking over the company. 

The committee met twice to finalise the recommendations. The same may go before the cabinet in the next two weeks. In tune with the earlier decision of the government to privatise the operations of the company, the committee too is in favour of leasing out the property for 30 years to a private investor.

However, the ownership of the company will remain with the government.
Three major concerns to be addressed are - the structure to be followed to protect the interests of the employees; to settle liabilities of the company before leasing it out and whether the forest land which has been leased to the company should also go to the lessee, secretariat sources said.

If all goes well for the plan to privatise the 78-year-old company, within a month’s time tenders could be invited, to follow transparency in handing over the company. In a year’s time, the leasing process could be completed, the sources said.

Integrated sugar mill
The MPM, which is into paper manufacturing with an integrated sugar mill, has captive forestry of about 20,000 hectares, which supplies raw material pulp. The lease period of the forest land given to the company expires in 2020. Officers privy to the developments are not sure whether the forest department would transfer its land to private hands.

The government’s efforts to privatise the enterprise were derailed in 2007. A section of the employees, in 2008, had signed an agreement for privatisation, but later backtracked. There are about 1,300 regular employees and 1,100 on contract. There are 500 employees on contract for the plantation work. Nearly 75 per cent of the permanent employees are above the age of 52 years.

Not in a position

A minimum of Rs 1,400 crore would be required to revive the company. The government is not in a position to invest such huge amount. Hence, it took a decision to lease out MPM long ago.

Challenges

 The structure to be followed to protect the interests of the employees
in the company
 To settle liabilities of the company before leasing it out to a private firm
 Decide whether the forest land which has been leased to the company should also go to the lessee

Fact file

 With operations being privatised, ownership will continue to remain with the government
 Lease period of forest land given to the company is set to expire in 2020

Some truths about MPM

     Accumulated loss as in March 2015 - Rs 535 cr
     Outstanding dues - Rs 620 cr
     Daily loss is about Rs 25 lakh
     The loss escalated from 2009 onwards
     Electricity bill dues - Rs 92 cr
     Revival requires - Rs 1,400 cr
     MPM assets at market rate - Rs 850 cr
     Extent of MPM land-holding -850 acres
     Forest land leased to MPM - about 20,000 ha
     Total subsidy MPM gets from govt - Rs 150 cr/yr
     Salary bill a month - Rs 7.5 cr
     Total employees -1,300 regular, 1,100 on contract, 500 on contract for plantation
     (Source: Officials of MPM)