Date:21/11/2007 URL: http://www.thehindu.com/2007/11/21/stories/2007112154390400.htm

Karnataka - Bangalore

Official-private firm nexus proves costly for MPM

Special Correspondent

Interest waived for the firm, says panel
Revival plan for the factory yet to be approved

BANGALORE: The Public Enterprises Committee of the State Legislature has said the nexus between the officials of the Government-owned Mysore Paper Mills (MPM) and an entrepreneur of the private firm, poor marketing strategy and use of old machinery had made the company financially unviable.

The panel, headed by BJP MLA Araga Jnanendra, on Tuesday submitted a report on the factory to Legislative Assembly Speaker Krishna and recommended action against top company officials involved in alleged financial irregularities. An important recommendation was the revival and restructuring of the unit rather than privatising it.

The factory had transacted business worth crores of rupees with Ambika Enterprises, a private firm owned by a former employee of MPM, without calling tenders. Action had not been taken against Ambika Enterprises which had not paid Rs. 8.66 crore dues to MPM, the report said. MPM was established in 1936 by the erstwhile Mysore ruler Krishnaraja Wadiyar. It was nationalised in 1977. Till March 2006, the company incurred a net loss of Rs. 53.70 crore. The paper mill, located on 881 acres of land in Bhadravati in Shimoga district, had been engaged in the manufacture and marketing of newsprint, writing, printing and packing paper of different varieties and sugar at its plant with 3,500 workers.

Revival plan

Although a consultant had been appointed to suggest measures for modernisation of the plant, a decision had not been taken so far. For modernisation of the company, the panel suggested raising of a loan of Rs. 100 crore with the government guarantee; government assistance of Rs. 34 crore in 2007-08; and a new plan to rejuvenate the factory’s sugar plant.

The factory could be revived in 18 months. The modernisation of the machinery would ensure that MPM responded to the demands of the market, the report said.

Although the committee in 1998 recommended the paper mills to strengthen its marketing strategy, the factory officials ignored it.

It was unfortunate that the mill had now decided to recover dues from Ambika Enterprises in the form of one time settlement by waiving interest, Mr. Jnanendra said.