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HNL is now KPPL: Kerala Govt Scripts Revival Story of Central PSU

When the Centre decided to sell HNL to private parties on a massive disinvestment drive, the Kerala government stepped in to take over the paper products manufacturer.
KKPL inauguration - Credit Deshabhimani

KKPL inauguration - Image Credit Deshabhimani

Kochi: Vellore in the Kottayam district of Kerala witnessed a historic moment on Thursday as Kerala Chief Minister Pinarayi Vijayan inaugurated Kerala Paper Products Limited (KPPL). The new company registered as a Public Sector Undertaking (PSU) under the state government came to be in place of the erstwhile central PSU Hindustan Newsprint Limited (HNL).

When the central government decided to sell HNL to private parties on a massive disinvestment drive, the Kerala government, led by the Left Democratic Front, stepped in to take over the paper products manufacturer.

Inaugurating the Vellore unit of KPPL, Kerala CM Pinarayi Vijayan called the revival of HNL an exemplar of the alternate development model that Kerala upholds. The state government aims to develop KPPL as the largest paper products manufacturer in the country. The first phase of development worth Rs 34.30 crore has been completed ahead of schedule. Rs 44.94 crore has been allotted for the second phase, which is expected to be completed by August 2022, bringing KPPL to its full swing production. The target is to complete the four-phase development and transform the company into a turnover of Rs 3,200 crore. The PSU, which has 252 employees at present, will give jobs to 3,000 people in the future, Vijayan added.

Presiding over the function P Rajeeve, Kerala Minister for Industries, who took a lead role in the revival process, said the state government had to do the near-impossible task of launching HNL as KPPL within a short time frame after taking over the central PSU. “It was the determination of the first LDF government that made the extraordinary revival mission possible. The chief minister insisted that it was part of a larger policy decision, and it should be executed well. That goal has been achieved with the launching of KPPL,” he said.

The minister also stressed the need to ensure professional management of KPPL. The government aims to go beyond merely protecting public assets from privatisation. KPPL is envisaged as a competitive and profitable public sector entity. The company would take a U-turn from the path of mismanagement that destroyed HNL, he said. While ensuring standard employee benefits, the financial status and productivity of the organisation cannot be compromised. Former HNL workers would be given priority to corresponding positions; management will have the freedom to take necessary creative steps to keep production costs up to global standards and the government will only intervene in policy matters, Rajeeve said.

KPPL can claim to be a unique model of revival only if it is transformed into a competitive and profitable PSU, he added. The minister further said that Kerala Rubber Limited and Kinfra's industrial park would be opened shortly adjacent to the KPPL Vellore unit.

On the occasion, former Kerala chief minister and senior Congress leader Oommen Chandy also lauded the Left government's efforts to retain HNL in the public sector. The take-over blocked the Centre’s attempt to use public assets under HNL for real estate business. Kerala has stakes in the assets under HNL. The central PSU was established utilising free facilities provided by the state government. If the institution is to be abandoned by the Center, it should be handed over to the Kerala government. This is a proud moment for Kerala, said Chandy who also hails from the Kottayam district.

The relaunch of the paper manufacturing company has reaffirmed hope among employees of the former HNL, said T B Mohan, Working President, Kerala Newsprint Employees Union. Many of them have been employed on contract under KPPL, and many more expect to be part of the company in the near future. As the company’s operations expand to a full swing, more jobs are expected. The newly formed KPPL has been envisioned to emerge as a competitive-profitable player capable to meet market requirements. If the company becomes self-sustainable with professional management, it would benefit the employees as well. Managerial failure was the major reason behind the debacle of HNL, said Mohan, who has served 37 years as an employee of the central PSU, while speaking to Newsclick.

Timeline of the Take-Over

The Centre had listed HNL for disinvestment long back. On October 24, 2016, Kerala Chief Minister Pinarayi Vijayan requested the Government of India to delink the company from its holding company- Hindustan Paper Corporation Limited (HPCL). He also urged the government to make it an independent enterprise under the Department of Heavy Industries, but the proposal was not given ascent.

Even in March 2018, the company had invited expressions of interest for the proposed strategic disinvestment of 100% shareholdings of HNL. Following that, Kerala Newsprint Employees' Union approached the Kerala High Court in 2018. During the case period, the Industries Department’s undersecretary of the state had stated that the decision to hand over the land was illegal. The state also made it clear that if the Centre was giving the company off to private players, the state had the right to step back from the contract on land, which was mentioned in the agreement.

Following the series of events, the Kerala government had offered to buy the company's stakes for Rs 25 crore. Hindustan Paper Corporation Limited (HPCL), the parent company of HNL, accepted the bid as well. On November 25, 2019, the National Company Law Tribunal (NCLT), in its final order, directed the Centre to hand over the entire stakes of HNL in HPCL to the Kerala government.

During this time, HNL had as many as 364 regular employees and about 400 contract workers. Along with this, about 4,000 people depended indirectly on the unit.

HNL was incorporated as a wholly-owned subsidiary of the HPCL in 1983. HPCL, which was established on May 29, 1970—to develop indigenous capacity in the production of paper and newsprint to reduce dependence on imports—launched the Kerala Newsprint Project (KNP) in 1976. Later on, HNL took over KNP—with effect from October 1, 1983.

At the time of the company's establishment, the then Government of Kerala had acquired 650 acres of land for the company. As the company helps the state develop and generate employment, the state has been providing subsidised raw materials—pulp from the eucalyptus, bamboo reed, water and power.

By retaining the company in the public sector, the Kerala government has yet again upheld an alternate model of industrial development while resisting privatisation.

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