In the previous post, some background and general issues of state forest corporations were discussed; now to specifics, based on personal experience.
Struggles of a forest industries corporation
My very first regular posting was to just such a forest corporation’s field unit in a small town in the Western Ghats of Karnataka. Its core operation was an old sawmill inherited from the erstwhile Forest Engineering wing of British days. The saw mill’s heart was a legacy horizontal steam engine with a huge vertical metal flywheel, which imparted rotary motion to rods running overhead to which were attached individual machines with belts. The pride of the sawmill was its main breakdown sawing machine, the logs being fed by a rolling trolley onto the endlessly looping band saw. The saw band was quite broad and thick, with the result that it produced as much sawdust and waste as cut wood. The problem was compounded by the difficulty in procuring proper saw blades, and the frequent malfunctioning of the saw blade sharpening device, all imported but ageing contraptions. The original role of the unit was to produce railway sleepers, but since the railways had switched to concrete or steel sleepers, the sawmill had to produce cut wood for other general uses. Because of saw blade problems, the surfaces of the cuts were often bowed or rutted, making for much wastage. The standing joke was that the mill’s first priority was to produce enough waste wood for the boiler, with the production of sawn wood being a secondary consideration! Another huge handicap was that the sawmill was saddled with a large work force of some 300 persons (originating in a plan for weaning away a community from a way of life that was damaging to the forest), which was some ten to twenty times the work force of a commercial mill with a comparable output (which rarely went above 10 cubic meters a day). The seasoning kilns also were fairly inefficient. There had also been a sudden spate of recruitment at the supervisor level at the inception stage of the corporation. At that time, much was made of the promise of modernization, technology improvement, infusion of finance from banks, and expansion of products and markets, and so on.
If these problems were not enough, the corporation had taken up a whole variety of other ‘projects’, such as medicinal and aromatic plants, pineapple and fodder grass, and others which I have forgotten. None of these had really worked out well, and dealing with these scattered field installations was wasteful of time and money. The mill was able to meet some of its overheads only because the forest department had an arrangement of giving butt-end pieces of large logs of teak and other valuable hardwoods at a concessional price. Bespoke contracts were given for supply of timber to other government agencies like the road transport corporation (for building truck bodies) or the schools directorate (for school furniture).
A particularly brilliant and entrepreneurial officer was posted to head the corporation, around the time that I was ready for my first posting, and he more or less hijacked me into the said field unit. Under this officer’s guidance, the corporation gradually wound down the unprofitable side ventures, and tried to find alternative work with the support of the forest department: for example, taking on the logging and extraction activities of the neighbouring forest divisions. During the time I was with this corporation, a number of fuelwood depots were also set up in the eastern dry tracts of the state, to provide domestic fuelwood and bamboos at controlled rates in lieu of the entry of farmers into the forest under the prior “pre-paid license” system. Years later, when the corporation went into almost terminal difficulties in meeting the salaries of the employees, it was even awarded a portion of the net sale proceeds of the logged timber, as a further financial support from the government. These measures were resisted by local cooperative forest labour societies, which were already getting preferential allotment of logging works (as a part of the government’s strategy of giving legal work to the local people who had been dependent on removal of timber and other produce directly from the rich forests of the Western Ghats, at the cost of forest fires, damage to young pole crop, soil erosion, wildlife poaching, and so on).
My own contribution, if I remember rightly, was to introduce a couple of modern electricity-powered sawing machines, push for a switch from steam to electricity (this was in the 1970s!), and take measures to reduce the production of sawing waste (which not only fed the boiler, but was also taken home by the workers for their domestic fuel requirements).
Such measures kept the corporation going for many decades, but the saw mill field units gradually sank and were closed down in due course of time. Many years after that first posting to the field unit, I also had occasion to work as managing director at the helm of this forest industries corporation, thus giving a broad view of the whole range of operations over the entire history of the company. Attempts to revive the old saw mill units did not gain traction. The only successful wood processing unit left was the one at the state capital, mainly because of the brisk demand for its products such as made-to-order doors and windows, and furniture, in the burgeoning construction industry. The unit had a very good reputation for producing quality products from wood that was seasoned and treated on its own premises, further bolstered by the confidence in the quality and genuineness of the wood used. As timber supply from the forest department tapered off with the ban on green fellings, the unit switched successfully to timber bought in the open market: imported logs to a great extent, and some innovative sources like rubberwood from the rubber plantations, acacia wood from the mature trees planted here and there, and so on. For the rest of it, recourse was had mainly to the logging activities on behalf of the forest department to cover the salaries of permanent staff, and total staff strength was gradually brought down as retirements took place in the normal course.
So this hands-on experience in the forest industries corporation brought home to me the typical deficiencies and handicaps of our government undertakings. In this case, they included old legacy plant and machinery, bloated legacy load of employees, deficiency of market demand, lack of focus, diversion of attention into unprofitable projects, and so on.
Problems of forest plantation projects
While this corporation had only a limited scope for rescuing itself from its weaknesses, I had a better experience of the other forest corporation I came to head later in my service career. This was a forest ‘development’ corporation that had been set up around a kernel of the extensive forest department plantations of pulpwood (eucalyptus, acacias, casuarina, etc.) and rubber (raised for the rehabilitation of Tamilian workers repatriated from Sri Lanka). Now that I think back upon it, there was also a chunk of cocoa plantation, raised under god knows what scheme. A special project had been pushed through to raise tamarind in blocks, combined with small timber and manila fiber-producing agave (which is a scrub species used for soil conservation and natural fencing in dry lands). A foray had also been made into tea in some degraded land in Coorg (Kodagu) district, and I think there was also a tiny bit of coffee somewhere. There was also a separate corporation for cashew development in my state (and this one tempted some of our senior officers to engineer the setting up of a factory to produce feni, the liquor based on the pulp of the cashew fruit).
I think the underlying rationale was that our mixed miscellaneous forests were not contributing their mite (or might, as the Indian expression would have it) to the economic strength of the country, and the route to increasing their physical and economic productivity would be to replace the poor mixed growth with intensively cultured, superior, commercial forest- and tree-based crops such as teak, pulpwood, rubber, and so on. This was the approach settled upon by the post-independence National Commission on Agriculture in its interim report on man-made forestry (NCA,1972), and also urged by mainstream economists - including the great Samuelson (1974), who questioned the physical sustained yield model of traditional forestry as being financially inefficient and wasteful. Somewhere along the way, the corporation had also been saddled with the staff and remaining crops of a ‘joint sector’ plantation company set up in collaboration with a prominent rayon manufacturing company. This joint sector corporation had run into rocky waters by the attack mounted by our environmental warriors, and the private partner had been forced to relinquish its portion, although it was ultimately compensated by the government for its share of the investment.
It is apparent that many, if not most, of these ventures had been drawn up as ‘bankable’ projects, and put through the appraisal procedures of commercial banks and funding agencies in their initial stages. On paper, then, these were all financially attractive projects that should have solved the problem of the low-investment low-productivity trap that was diagnosed as the fundamental problem of the forest sector in India. In reality, most of these projects failed to live up to their promise, and in many instances could not keep up the interest and principal repayments. In other words, they became ‘non-performing assets’ in banking jargon.
Each project may have had its own problems, much as Tolstoy’s unhappy families were each unhappy in their own way, but some factors can be seen commonly. The simplest factor was that the projections in the project proposals may have been too optimistic; they commonly assumed the best performance reported (or imagined!) in the best of conditions, as applicable over the whole geographical extent and time span of the proposed project. As against this, the actual sites obviously exhibited a range of productivity classes, very few of them conforming to the best in the models. Needless to say, a host of other factors may have conspired to depress the actual performance: deterioration in planting stock quality, slippage in timeliness of operations, inadequate inputs, vulnerability to failure of rains, biotic disturbances from pests and diseases, animals, and even from human sources, and so on. The plans and projections, extrapolated from the best and most optimistic models, were rarely achieved in the actual yields, which were distributed over a wide range in much lower productivity bands.
The answer is to fool-proof the growing assets against such hazards, by such measures as providing artificial irrigation to eliminate the effects of drought, and so on. But such interventions are costly, and are not usually provided in forestry projects, which are extensive in area and left to the mercy of nature. Indeed the plantation of forest species (pulpwoods or small timber) often mimics the natural forest, where seeds fall in their thousands but only a fraction of them grow to maturity. Thus a commercial crop may start with planting at a few thousand plants per hectare, but these are thinned by design over the subsequent lifetime, until the final stand may have only a few hundred stems per hectare. The growth pattern in a horticulture or agriculture crop is quite different, as the initial spacing corresponds to the final spacing, and each plant is nurtured individually and contributes to the final yield. This of course has to be the case with coffee or rubber plantations, even when grown by a forest corporation!
Management lapses and sheer failures could also contribute. A common bane of public sector companies is that the top management (especially the politicians and the politically ambitious civil servants at the top) may tend to use them to garner influence and prestige, that is by lavish spending for publicity, functions, foreign trips, entertainment, prestige buildings, unnecessary or unproductive purchases and investments, unplanned side ventures, and so on (not to mention provision of personal facilities like extra vehicles for personal use, domestic servants, or even outright corruption, which of course we do not talk about in polite company).
Private plantation schemes turning into a scam
Incidentally, it was not only the government forest ventures that were performing below expectations: some of the commercial tree plantation ventures floated in the 1990s may also have come a cropper owing to this quirk of forest tree stands. Many of these were floated as investment schemes, prospective investors being offered a guaranteed return of one cubic meter per tree in something like 15 to 20 years (Balooni, 2000). They seem to have engaged some foresters as advisors, adding to their credibility.The investor was also promised a share in the title to the land. Obviously this looked like a really good deal, and many individuals were tempted to put some of their savings into these companies.
I recall that some of us younger foresters did have some discussions on these schemes at the time, especially as the growth and production promised seemed to call into question the forest department’s own productivity record. If these private outfits could achieve such sterling results, why couldn’t the forest departments do the same? However, the more we examined it, the less credible did their claims appear. The productivity of our tree species is laid out in what are called Yield tables, produced by our central forest research institutes. If you look at the tables for teak, for example, average crops may yield a few cubic meters stem timber from a whole hectare of plantation, rather than one tree. However, as we were not asked for our technical advice, most of us kept our own counsel, as we could not question the credibility of these public prospectuses without attracting libel suits. The most we could do was to just refrain from putting our own money into such schemes, without overtly attacking them, and leave people to draw their own inferences from our actions.
In due course, most of these projects landed in problems as the production failed to match the promises (https://en.wikipedia.org/wiki/Anubhav_Plantations). The Securities Board of India, the watchdog body to ensure a safe investment market, clamped down on these schemes (https://www.sebi.gov.in/sebi_data/attachdocs/1300276223382.pdf). Some of the project proponents were even prosecuted, and had to spend some time in jails (https://www.watchoutinvestors.com/Press_Rel-T/cis/0001.pdf).
My own hunch is that some of them in the initial offerings may have been well-meaning but mis-informed. Perhaps they looked at the yield tables, which show the volume expected per hectare (differentiated between the main stem timber and smallwood, which cannot be valued at timber prices), and mistook these figures as the volume expected per tree. This of course would amount to a gross blunder, and it is indeed difficult to accept such a lack of attention on their part. Perhaps the project proponents were genuinely convinced that they could achieve these extraordinary yields by applying fertilizer, irrigation, and genetics. In summary, they exhibited the unreasonable optimism of project proponents seen everywhere, but in an extreme form.
Rescuing a forest plantation corporation
When I took charge as MD of the forest development corporation, it seemed to have entered an irretrievable end stage, with defaults in repayment of its huge debts (taken in previous years for the fanciful tamarind and timber plantation projects). The prices for its rubber products (mainly liquid latex) seemed to be falling. The previous bosses had developed the narrative that only a massive financial infusion could save the corporation, which government was not very willing to consider, as a large chunk of capital had already been given in the form of plantations and land. There was also some fanciful (again!) suggestion of diversifying into some modern, dynamic activities (like eco-tourism, which was a hot topic after the success of a jungle tourism corporation). In fact the previous bosses had ventured into a joint sector operation to construct just such a jungle lodges-type resort in the heart of a national park, but this had run into problems with the courts and had had to be abandoned (again, the private party was happily compensated for its losses after litigation and arbitration).
One of the curious facts of the real world is that one is often thrown into situations which have no relation to one’s previous experience or training. This is of course common in the state sector, but is not unknown in the private sector either, as the biographies and memoires of private sector CEOs demonstrates. A new CEO brought in from outside has to gain an understanding of the situation and the people, and initiate appropriate action, within a reasonable time – maybe a couple of months or less. There is an approach to the new leader’s role termed “the first 90 days” that serves well in this context (see below). A little secret: it is easier to follow on behind a poor past management, as the unresolved issues themselves suggest the appropriate remedies and responses – at least for the first 90 days! The public servant can usually get away with this much of agenda in the short span of his charge (usually a couple of years, to a maximum of three years).
A few remarks about the 90-day principle: this is a nod to the book The First Ninety Days by Michael D. Watkins (2003), which expands on the idea that a new CEO has to get on top of his or her new charge within a reasonable period, say 90 days, or else lose the plot. (It also has a sibling, The First Ninety Days in Government, by Daly, Watkins and Reavis, that adds a few plausible examples of government officials in similar challenged situations). Of course, I had no knowledge of this book or the principle, let alone the methodology, during my CEO days; it was all done by common sense and listening, mainly to staff and employees and customers. My home-spun approach was to make a list of outstanding issues over the initial weeks of discussions with the staff, clients and workers, and outline the steps needed to resolve each of them over the ensuing months (and in some cases, years). Some items were quite obvious, especially those involving the reversal of unwise decisions in the past (such as contracting costly management consultants!). Some involved collecting field information and developing better practices and protocols. Some were concerned with identifying cost savings and time-wasters, and gradually rationalizing activities. Some were to do with sorting out basic staff problems, such as promotions, seniority issues, confirmations, old arrears of payments, pay revisions and so on. A more long-term intervention involved our rationalizing our land holdings, getting rid of the unproductive acres (we gave up some 40,000 hectares out of 80,000), and working more intensively on the better land parcels that were located in contiguous chunks. Such rationalizing measures not only reduce costs, but also make protection and management more efficient and convenient. Of course, the traditional executive may baulk at such self-denying measures, because they may think that their market influence or importance is proportional to the size of buildings or land holdings.
Often one will find the existing officials and employees themselves coming up with their diagnoses and suggestions, not to talk of the company’s customers and clients. On the whole, these may be the best sources for the new CEO’s ideas, because they will probably have the highest stake in the long-term health of the concern. One has to be wary of ambitious colleagues and superiors, however (especially the high government functionaries and political bosses), who may well want to extract the maximum personal benefit with little regard for long-term sustainability.
The one most significant initiative I took was to talk to the lending banks and get them to agree to a rescheduling of repayments. The one idea they gave was that even if the principal could not be paid as per schedule, it was important to keep up interest payments, and especially to project a resolve to keep the loan servicing alive. The mistake the previous management had made (in my understanding) was to rebuff the lenders and basically tell them to take a hike. Good personal interactions are really important in dealing with such matters.
The secret, as far as I have been able to understand, is that one should treat a corporation as if it was one’s household. My simple suggestion to my financial manager (who turned out to be quite the wizard) was to set aside little sums from each incoming payment in as simple a form as bank fixed deposits. From my experience with my own personal budget planning, I sensed that the best way to build up reserves is to remove cash from circulation. I am glad to say that my financial manager caught the point, and gradually built up the reserves, and was able to start servicing the outstanding loans, and finally succeed in liquidating them some years after I left (with a helpful adjustment of terms and rates by the banks, if I remember correctly).
This apparently became a habit in this corporation, for I got the impression that they had built up quite a sizeable corpus over the years, all without taking on new loans or getting any great financial support from the government. My principle was that there should be enough money in the reserves to sustain the staff salaries for a decent period if markets crashed, or even to liquidate the company and pay off all the terminal benefits, if such a situation should come to pass at any time (the covid pandemic, for instance!). One of the advantages of corporate accounting I found is that it is difficult for an outsider (such as a curious minister!) to ferret out such reserves, as they are buried in annexures and subsidiary account sheets. It’s also important to keep showing only a very small profit, if at all, or a small loss on occasion, in the annual accounts, so that people don’t get tempted to make monetary demands on the corporation. So few of our public persons have a genuine concern for the long-term health of our institutions; most are on the look-out for some immediate gains. To simplify things, it is best for a public sector company to just keep the money in fixed deposits; anything else (like land or stocks) will get the manager into trouble with audit.
Colleagues have often criticized such measures as against the corporate culture or gentlemanly style expected. Some of them feel a sense of responsibility for the larger economy, and think that public corporations should keep spending a lot of money to create jobs and keep the ‘animal spirits’ alive in the economy. I think that is a mistaken notion. To be frank, the average small corporation is not going to make such a great positive impact if it takes on huge loans and spends liberally, or conversely a material negative impact on the larger economy if it cuts down on expenditure. It will make a better contribution by ensuring the long-term sustainability of its operations, and by achieving a reasonable return on investments made in the past. Government has various other instruments of its own with which to activate demand or, conversely, to quell inflation, which we need not worry about in our small sphere of activity.
Similarly, some managers think they can control the market price of their products by withholding supplies when the market falls. This again is a fantasy, especially when you are left holding large stocks of a perishable commodity like rubber latex. I understood early on that the smart thing to do was to sell early in a falling market; hoarding product would not really influence the price, as we were one among many hundreds of sellers. Some of the earlier CEOs had tried to ‘play’ the market, withholding stocks in a falling market, which usually does not end well (in distress sales at a throwaway price, in fact).
In this context, I must say that even a rudimentary familiarity with the basic principles of economics or management is really helpful. For instance, two principles from economics made my decision making process vastly simpler. One is the principle of ‘sunk cost’, which encourages you to look at each option afresh, without getting over-awed by past investments (why throw good money after bad). This principle, in fact, is essential to justify closing a poorly performing project that is draining funds with little prospect of reasonable returns, since audit authorities would raise objections to throwing away the past investments. The other was the understanding of competitive markets: that a single firm has little power to dictate market demand and price, something which some of my predecessors seem not to have accepted. A third important principle could be the power of compound interest, whereby even a small rate of growth or accretion mounts up over time to appreciable levels (applicable to my strategy of accumulation of reserves, obviously, and in reverse, to the importance of paying off the interest accruals as soon as possible). Many more such principles and approaches can be thought of, by relating basic management and economics principles to real life situations.
Often one observes senior management or the principal agents in high levels of government frantically casting about for new things to do, fresh avenues to explore. Often this sort of hyper-activity ends in hare-brained and wasteful schemes. Self-styled experts and consultants are all the time circling around trying to sell the latest snake ointment. My suggestion is to first focus on improving the core activities of the company, those which are actually bringing in the revenue, rather than solely going after expenditure schemes. One has to be especially careful about large expansion or investment schemes, a better option being a type of ‘organic’ growth based on prior experience and tailored experimentation. An analogy I can offer is a large airplane, or an ocean liner: one makes any course changes slowly and carefully, and definitely not on the basis of ‘creative destruction’ or ‘chaos theory’ models that management gurus and economic advisors seem to love nowadays. Unfortunately, this is a rather boring style of managing the corporation; ambitious senior personnel love large spending projects that can make them look dynamic and provide the funds for entertaining influential people and building an exciting career.
A golden rule: Keeping long-term employee interests in focus
There is always some controversy about who the principals are in the case of a public corporation. Whose interests should be given priority by management? Under the neo-liberal dispensation, it is argued that hired managers owe their first loyalty to the owners, the shareholders. This often leads to short-term priorities in the private sector that may run the company down to increase returns to current shareholders. In the case of a government company, the people as a whole are supposed to be the stockholders. How do we interpret the interests of the people at large? The managers are on their own in this, and many are tempted to just serve the selfish, short-term interests of the political boss of the day. My own experience has been that the simplest way of arriving at a good long-term strategy is to make the stability and security of the employees the first priority. On the whole, it is these people who will have the greatest commitment to the long-run viability and sustainability of the concern. Most other stakeholders will tend to see it as a milch cow to be exploited for selfish, short-term interests.
Resistance to closing a failed concern
I have also faced the opposite problem, that of closing down a terminally ill corporation. Closure of ailing concerns is always a difficult decision, and nobody likes to take the responsibility for such a negative and buzz-killing option. There are always people with bright, and impractical, ideas, like setting up new units in a more hopeful sector like tourism or information technology. Unfortunately the old and tradition-bound staff can seldom be easily transformed into bright and dynamic youngsters. If the company is not closed down, these old-timers will end up getting neither their salaries (because the company has run out of paying activities), nor such terminal benefits as they may be entitled to on closure, such as gratuity and pension. Sometimes it is better for all concerned to be done with such ‘sunset’ concerns. But it is usually traumatic to the controlling officials concerned to take such decisions, and the problems are allowed to fester on. Sudden policy changes or ‘acts of God’ (like the corona virus or war) may also make a corporation unviable. In my state, for example, the government has issued orders banning the planting of eucalypts anywhere (even in private lands). Unless some alternatives are developed, this is going to make the future of my erstwhile corporation uncertain. My recommendation is that a good corpus of reserve funds should be maintained to meet any such eventualities, so that employees made redundant can be pensioned off at any time.
Some examples from the larger corporate world
Before wrapping up, I would like to refer to some examples from industry at large. The first is the account of the revival of the behemoth IBM, by its CEO Louis V. Gerstner, Jr. He has titled his book Who Says Elephants Can’t Dance?, suggesting that it is not just government companies that suffer from a sense of diffidence, but that even a large private corporation may be seen as too slow and bureaucratized to survive in the fast-changing market. Gerstner also describes the initial learning curve of a person who comes to lead a company from outside, without any serious experience of the particular sector or industry. His account is surely of great interest to people like our senior civil servants, who have to suddenly take charge of large, usually ailing, public corporations at a moment’s notice. Another impressive account is that by V. Krishnamurthy (At the Helm: A Memoir), which is of even greater interest and relevance to us, as it is about his experiences in a number of large government corporations, like BHEL (Bharat Heavy Electricals Ltd) and SAIL (Steel Authority of India Ltd). A third is Jitender Bhargava’s account of the gradual deterioration of India’s prestigious air carrier (The Descent of Air India), which documents the mistakes that are made in public corporations when short-term and selfish interests of political and bureaucratic bosses at the higher levels are allowed to dictate actions. This is not an indictment of public companies per se, as private airlines have also been tanking, not just because of adverse market conditions, but also because of faulty management strategies and misplaced priorities.
A larger world-wide study of the differences between the more successful and longer lasting corporations, and their less successful peers, is contained in the landmark book Built to Last by Collins and Porras (see their 10th Anniversary edition, 2004). They studied pairs of companies in similar sectors, like Ford and GM, IBM and Burroughs, Sony and Kenwood, General Electric and Westinghouse, Hewlett-Packard and Texas Instruments, and so on. The first named in each pair showed extraordinary growth over a long period, taking off especially between 1960 and 1990, as measured by cumulative stock returns in comparison with their peer in the samples as well as with the general market. Now one may think that the highly successful companies were blessed with some special advantages, or inspired visionary leadership, or ruthless market machinations or financial wizardry. Not so, say Collins and Porras: they go on to debunk some popular myths (12 in number) about extra-successful corporations. For a sample: the success story does not necessarily start with some “great idea” that occurred to a genius, say in his morning bath; many of the great companies cast about for a good product, and went through initial failures, before going on to greater success (Sony started with a rice cooker!). It doesn’t necessarily depend on “great and charismatic visionary leaders” so much as on institution-builders (this should be comforting for our civil service plodders landed with big companies!). The best companies have not focused only on maximizing shareholder wealth or profits; they are “equally guided by a core ideology – core values and a sense of purpose beyond just making money”. The visionary company does not believe in change as a fetish: it “almost religiously preserves its core ideology”, the core values “form a rock-solid foundation” that “do not drift with the trends and fashions of the day” (again, comforting to our chief executives in fairly old and dowdy industry segments). Successful companies follow an experiment-and-confirm process of evolution, rather than sophisticated and complex ex-ante strategic planning. The best companies don’t necessarily bring in management expertise from outside: they don’t necessarily believe in disruptive leadership. And so on; all appearing very reassuring to the average administrator or bureaucrat who may be overawed by the potential for flashiness in the corporate world and his or her own limitations in this regard. In other words, our government functionary can plod his or her way to success, and does not have to assume that one has to be a charismatic high-flyer like the magnates of the private sector.
Summary learnings, and a caveat
Finally, let me record a caveat and a disclaimer of sorts. Some of my colleagues may well think that my views are prejudiced by my early experiences, and that it is still possible to set up such ventures with due care about using better planting stock, better cultural practices, and tighter management. To overcome the deficiencies of government, the proposal is frequently made of entrusting management control to private entrepreneurs (e.g. a Public-Private Partnership model). I may be pardoned for being more than skeptical. We have already seen how such ventures run into problems of financing, management control, and opposition from environmentalists (for a good discussion, see Bhushan and Saxena, CSE, 2016; Agarwal and Saxena, 2017). The private partner usually wants to push the entire risk onto the government, while retaining management control and first call on incomes. This obviously introduces ‘moral hazard’ in many forms (the less the risk, the more adventurous or neglectful one can be). My state government has in the past paid out substantial sums to reimburse private partners when such joint ventures fell through (see above). One of the specific problems for forest corporations is that government forests cannot be placed as collateral for taking out loans, because the courts are clear that private entities should not be allowed entry. Of course parliament may enact suitable enabling legislation, as is its prerogative, but even these are liable to run aground on legal principles.
One of the difficulties in making a balanced judgment on dynamism versus maintaining the status quo in public sector undertakings, is that those who initiate large (and costly!) ventures are rarely around at the reckoning. Those with influence and the knack of enrolling the support of political bosses get in when these programs or projects are in the formative stages, when funds are flowing and everybody is upbeat. The plodders and politically less savvy are landed with the responsibility of rescue and rehabilitation usually when the first heady years of investment and innovation are over, and sober reality starts to sink in. The innovators and trail-blazers can always turn round and blame the followers and plodders for not implementing things properly, i.e. not throwing good money after a bad investment. It is almost impossible to throw doubts on the future viability of a new project, even though its deficiencies may be obvious (the emperor’s new clothes syndrome), for the critic will be branded a cynic, a kill-joy, a ‘permanent pessimist’. These things have an inexorable logic of their own, like the inevitability of a Greek tragedy.
This article of mine is meant to be of some help to the average public official who is thrown into the midst of these contentious problems, and who has to keep things running and the home fires burning ‘in spite of the gods’. If newer and better ways of dealing with commercial forestry in the public sector are developed, perhaps my suggestions and insights may well be ignored.
Balooni, Kulbhushan (2000). Teak investment programmes: an Indian perspective. Unasylva 201, Vol.51, pp.22-28.
Bhargava, Jitender (2013). The Descent of Air India. Bloomsbury Publishing India, New Delhi.
Bhushan, Chandra and Ajay Kumar Saxena (2016). Fumbling with Forests: Why We Should Not Handover Forests to the Private Sector. Centre for Science and Environment (CSE), New Delhi
Collins, Jim and Jerry I. Porras (2004). Built To Last: Successful Habits of Visionary Companies. 10th Anniversary Edition. Random House Business Books, London (2005).
Daly, Peter H. and Michael Watkins, with Cate Reavis (2006). The First Ninety Days in Government: Critical Success Strategies for New Public Managers at All Levels. Harvard Business School Press, Boston.
Dhar, S.K., J.R.Gupta and Madhu Sarin (No date). Participatory Forest Management in the Shivalik Hills: Experience of the Haryana Forest Department. Sustainable Forest Management Working Paper No.5. Ford Foundation, New Delhi.
Gerstner, Louis V., Jr. (2002). Who Says Elephants Can’t Dance? Inside IBM’s Historic Turnaround. HarperCollinsPublishers, London.
GoI (1990). Review of the Working of the State Forest Development Corporations in India. Draft Report by The High Level Study Team. Government of India, Ministry of Environment and Forests, New Delhi (April 1990).
Krishnamurthy, V. (2014). At the Helm: A Memoir. Collins Business, HarperCollinsPublishers, Noida, India.
NCA (1972). Interim Report of the National commission on Agriculture on Production Forestry – Man-Made Forests. Government of India, Ministry of Agriculture, New Delhi. (August 1972).
Poffenberger, M (1990). Joint Forest Management for Forest Lands: Experiences from South Asia. Ford Foundation, New Delhi.
Samuelson, P.A. (1974). Economics of forestry in an evolving society. Journal of Public Enquiry, 14(4): pp.466-492.
Saxena, N.C. (1997). The Saga of Participatory Forest Management in India. Center for International Forestry Research (CIFOR), Bogor, Indonesia.
Watkins, Michael D. (2003). The First Ninety Days: Critical Success Strategies for New Leaders at All Levels. Harvard Business School Press, Boston.