Modi seeks to revive India's 'zombie factories', not abandon them

Sun Oct 12, 2014 6:09pm EDT
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By Andrew MacAskill and Manoj Kumar

KANPUR India (Reuters) - At British India Corporation's textile factory in northern India, four men sit in a control room watching computerized gauges eight hours a day. When they are done, another group takes over, and then another, for 24 hours a day – much as they might at any major industrial plant.

The problem is, nothing is produced there.

The strange tale of British India Corporation is an example of how political patronage and India's strict labor laws keep publicly owned companies going long after they are insolvent.

Now Prime Minister Narendra Modi, who campaigned in this year's general election on a promise of "minimum government, maximum governance", is preparing to invest more taxpayer money in ailing state-owned factories in a bid to turn them around.

While the government has announced the closure of six publicly owned companies, Minister for Heavy Industries and Public Enterprises Anand Geete said last month that about two-thirds of 64 loss-making firms can be revived with more money.

The government has set up a committee to examine ways sick public companies can be resuscitated, including using cash reserves from profit-earning state firms to provide lifelines to the loss-making ones, according to officials in New Delhi.

The committee will report its findings in two months.

The moves have disappointed those who want Modi to force through economic reforms, however painful. He might reply that past success in reviving "zombie" enterprises as chief minister of Gujarat state gives him the right to try on a national level.   Continued...

India's Prime Minister Narendra Modi speaks during his meeting with U.S. President Barack Obama in the Oval Office of the White House in Washington September 30, 2014.       REUTERS/Larry Downing