Government Funded Mafia, or a brief history of SIDCO

SIDCO, or Kerala Small Industries Development Corporation, was set up around 40 years ago to make life hell and completely quash entreprenuerial spirit in Kerala. Their website however says the following:

"This Corporation is rendering assistance to SSI's in the State, like providing Infrastructure facilities, distribution of essential raw materials, marketing of the SSI products,undertaking Civil and Electrical works etc. Moreover Kerala SIDCO is supplying Bitumen to Local Bodies as Nodal Agency and Paraffin Wax to small scale industries."

They also have text scrolling through the top of the screen saying "We serve small scale Industry on a Large Scale". Someone must be really proud of that line.

Even if this were true, this doesn't seem like much to accomplish over 40 years. Their performance figures give a slightly clearer picture. Comparing the two years given, you can clearly see the performance getting even worse. For example, out of the 135 idling units, they have rehabilitated all of 6 units in the first year, and none out of the 160 units the next year. On closer inspection you will find that even the 6 units "revived" in the first year, were given a total of only Rs. 2.2 lakhs, and that too from state government funds, and not from SIDCOs own funds. This my friends, is just the beginning of the dark and devious story of a modern day Lochness Monster.

My father, oh no actually my grandfather "purchased" land from SIDCO in the mid '60s. They had just been given a lot of funds from the Central Government, part of some misdirected scheme to help Small Scale Industries (SSIs). We were allotted the land and sheds back then, under a "Hire-Purchase Scheme" where we paid the rent every month, and a portion of the rent paid would be adjusted against the final value of the land as assessed by the time the paper work got done, and SIDCO got the title deeds for the property from the government which they would then transfer to us.

We started paying rent from 1965 or something, and whenever we enquired, the paper work was still getting done, and we continued without the title deeds to our factory. We were lucky, being a fairly well to do family, and we could raise some funds from other sources to run the business. The vast majority of the other "owners'" of the sheds in our Industrial Estate were genuine really small scale entrepreneurs. No bank would finance them without collateral (there's definitely a series of postings coming on banking to explain that and a lot more). Whats more, no bank would accept an allotment certificate from SIDCO as a realizable security. The banks were way smarter than the entrepreneurs in that case. Many people had to pledge their houses to get bank loans, which was of course the worst way to encourage an entrepreneur. SIDCO has ruined the lives of people who's business went down. They wait or travel all day from office to office, visiting bureaucrats, politicians, lawyers and anybody else who might perhaps be able to do something, anything at all.

In 1994, SIDCO came out with a final offer for "outright sale" of the factory and sheds. They fixed a new (considerably high) value for the sheds and said they would consider 75% of the rent paid as part of the purchase price. We took the offer up immediately, and somehow raised the funds to pay the balance amount. Out of the 46 odd units in the Estate, only 3 managed to raise enough money or initiative to "buy" the land and factories. With that SIDCO gave as allotment certificate allowing us to pledge the property to any financial institution, and gave us more assurances that the title deed would be given soon.

At this point, one may question, quite rightly, whether these SIDCO guys were part of some masochistic cult or just plain inefficient. The answer is neither. See, once the Central Government gave funds to SIDCO to "promote" industry, SIDCO just sat on their asses and didn't really do anything. They built a few hap hazard industrial estates and parks. However, anyone who was aware of SIDCOs practices would stay away from their Estates, and in fact, from Kerala itself. So SIDCO has like lots of employees, tons of them, and what do they do? Well pretty much nothing, if tea and lunch breaks don't get credits. Who pays them to do nothing? Well, SIDCO does, from the rent it charges. Once entrepreneurs get their title deeds, they'll stop paying rent, and SIDCO will go defunct. So, the employees union is actually objecting to giving the title deeds to the rightful owners.

Unfortunately, SIDCO employees unions were very strong and we are still waiting for the deeds. The Hindu on April 28th, 2005 reported the Chief Minister's statement that SIDCO estates property is going to be sold. They also report the CPI Leader Mr. E. K. Ismail's defense of the decision in his press conference on June 1st, 2005.

He said there were 621 small industrial units functioning from 17 industrial estates of SIDCO. The State Government did not have to spend any funds to start these industrial estates since were built way back in the 1950s entirely with Central Government grant, he said.

SIDCO too had made no investments in these industrial estates, though it had collected more than Rs. 5.27 crores from the entrepreneurs since 1975. The Government could have allotted the land and buildings in these estates to the entrepreneurs under the rules governing the subject, but that too did not happen all these years despite several requests from the entrepreneurs. They could not even borrow funds from the banks since they do not have the title deeds on the properties.

The people who run units in these estates could not be called big industrialists. Though the units are all small ones, they employ thousands of workers. The Government, through its decision to issue title deeds on the properties to the entrepreneurs, had done only what it should have done years ago.

Its more than a year now, and nothing seems to have happened. If all this above, didn't really give them the Mafia feel, they came out with a new regulation that to transfer the property, (which is rightfully ours, which they should have given us years ago, which they haven't spent one paisa on maintaining) the seller has to pay SIDCO 25% of the value they have assessed for the plot. If this isn't extortion....

The government should pay for this!

Winding up the company I knew would be a big process. I knew a lot of complications would arise and that everything had to be well thought out before the execution. But I must be some sort of psychic if I could predict for instance that the electricity board would case for extra power consumed in 1995 would surface now.

What more can you expect from these guys? And I'm not sure how many of you are familiar with the receipts you get from the KSEB. If you don't treat it with the utmost respect and care that it deserves, it will most likely just tear in your hand. And to hope that we would have receipts from ten years ago. Looking through the files, as obvious, the receipts from the preceding and the subsequent month, of the month in question had miraculously survived. Useless junk always seems to do that, unless it senses that it might be needed at a future date, when it will disappear.

To start with, they first assess us for extra power used during a time of power cut in 1995-1996. I can't believe that future generations will not know of something as ludicrous as a power cut, where they actually give a quota of how much power an industry can consume. I guess I was lucky enough to not have to deal with the far more frustrating License Raj or the MRTP act. Anyway, returning to the topic of discussion, they issue us a notice in February, 2000 for extra power that we had used between January and August of 1995. If they had informed us of the extra consumption earlier, like after the first month for instance, we would rather have closed down production than pay the exorbitant rates and penal rates charged. We thought we could fight it based on the law of limitation, that you can't claim money if you haven't claimed it for three years, but apparently, those rules aren't applicable to the Electricity Board.

Anyway, we give a petition in the high court which presumably took six years to go through the case and finally directs us to negotiate with the Electricity Board. If that was the decision going to be made, I would have taken all of ten minutes to arrive at it. Now the board says we pay this with a "concessional" rate of interest of 12% as against their "normal" rate of 24%. Hadn't the Supreme Court come out with a ruling saying that those interest rates amounted to extortion?

Luckily, the solution is much simpler than the problem. In two words, competition and technology. Competition will force the State Electricity Boards (SEBs) to either become more competitive or shut shop. Personally, I feel they should just shut shop, and use license fees collected from private operators to distribute power to economically unviable areas, where private corporations might hesitate to go. Technology will free up hundreds on man hours, and possibly reduce the labour force by a sizeable percentage.

How did BSNL the state owned telecom giant transform itself. Around 15 years ago, there were no STD and ISD booths, and people had to wait in hour long queues in telegraph offices to make a long distance call, or dial a “Trunk” call. To those of you who had managed to blank out memories of trunk calls, sorry for bringing it up. Anyway, even after the introduction of direct dialing services, lines were always down or congested, and the people in the telecom department were amongst the rudest of the government staff. But look at them now, they offer state of the art services, the cheapest deals, and definitely acceptable customer care. They have retained their position as the leading service provider in the country, though “evil multinational corporations” have entered the market. And what about the common man, did he lose out on the deal? I think not, considering that to make a long distance call, one had to wait till ten at night and try a hundred times and finally pay 8 bucks a minute. Contrast that to now with India One, one buck a minute to anywhere at any time of the day.

Searching on the net, I cant find any evidence of massive DoT employees strikes or anything when it was corporatised. I wonder why the government hasn’t implemented a similar thing for the electricity boards. The electricity act of 2003 was supposed to change all this, but nothing seems to have happened yet. This is possibly due to more interest groups pushing the telecom reform, or stronger unions in the SEBs.

One last note on the KSEB union: The pay of the KSEB employees, like all government employees, are fixed by pay commissions and what not. However, one fine day, the employees start giving higher salaries to themselves. By the time the government caught on, or decided to act, several crores of rupees had already been disbursed over several months. A commission headed by a high court judge was set up to “review” the matter. On receiving several death threats from the union, the judge politely decided to leave. The matter got buried in some paperwork and not one employee has even been retrenched.