Project Case Study
Public enterprise reform and social safety net in Madhya Pradesh
Providing technical assistance to Madhya Pradesh's public enterprise reform programme
Madhya Pradesh is both one of India’s biggest and its poorest states. It has historically been highly dependent on aid, which was estimated to be worth 50% of its GDP in 2005.
Its economic growth until 2003 was one of the lowest in the country, and while it has improved significantly in the last decade, it was imperative the state develop the capacity and undertake the public enterprise reforms to achieve this.
In 2000, we were appointed by the Asian Development Bank, and subsequently by the UK’s Department for International Development, to assist the Government of Madhya Pradesh in taking forward its public enterprise reform programme, focusing in particular on the implementation of the ADB’s loan tranche conditionalities.
The tasks that we undertook included advising on both the development and implementation of Voluntary Retirement Scheme procedures, with approximately 20,000 workers being retrenched, disbursing approximately US $150m, implementing the closure of 5 state owned enterprises, which realised savings of approximately US $10m per annum, and setting-up of the Technical Secretariat to implement privatisations and closures.
Additionally, we advised on restructuring the state’s Finance Corporation and State Road Transport Corporation, conducted a valuation of assets of various public enterprises, and developed procedures for implementing closures and undertaking asset sales. We also developed a privatisation public awareness plan, and undertook a study of the co-operative and SME sector in Madhya Pradesh.
The project was very successful, with the ADB rating it as one of their best managed, and Madhya Pradesh has over the last ten years become one of India’s fastest growing state economies, nearing 9% annual GDP growth in 2005 and helping to reduce the number of people living in poverty.