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.
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.
| 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.
from vivek kaul's dary
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