July 11, 2005

Communists happy to sell off Calcutta’s faded glory

By Surojit Gupta

CALCUTTA, India (Reuters) - Once known as the Jewel of the
East, the Great Eastern Hotel in Calcutta, former capital of
colonial India, has seen better days.

Used by the British to billet their troops during a mutiny
by Indian soldiers in 1857 and again in the 1960s to house the
Queen's entourage, the Gothic-style hotel's average occupancy
is now just 20 percent and its owner, the communist-led
government of West Bengal state, has put it up for sale.

Although they criticize a federal privatisation drive by
New Delhi, the communists are selling off their own loss-making
firms in West Bengal, where they have ruled for nearly 20

At the federal level they oppose any efforts to sell stakes
in profitable state-run firms, even though India's
cash-strapped ruling coalition needs $6 billion to fund
projects for the poor, and selling chunks of a few choice
assets could help fund that.

But at state level, five years after first announcing plans
to sell the Great Eastern, the far-left hope finally to do a
deal by the end of the year. They have hired a consultant, and
several hotel chains have inspected the property.


The communists in New Delhi, whose support is vital to the
coalition, are set against selling off healthy state firms.

The federal government is selling 10 percent of power plant
equipment maker Bharat Heavy Electricals Ltd. to the public.
The communists say this is creeping privatisation and plan to
boycott meetings of a government liaison panel in protest.

In contrast, analysts say the need to develop West Bengal
has led the communists down a path of economic reforms there.

"The communists in West Bengal are pragmatic while the
communists who are pure ideologues are free to be as
irresponsible as they wish," said P.K. Basu, managing director
of private economic research house Robust Economic Analysis.

The state's industry minister, Nirupam Sen, said West
Bengal was merely taking steps to restructure its loss-making
companies. "We are facing fiscal constraints, so we identified
areas where we can save. We decided to close down chronically
loss-making firms," said Sen, sitting in front of a
black-and-white photo of Soviet leader Vladimir Ilyich Lenin.

Some savings will not be immediate.

The Great Eastern's 444 staff still need to be paid,
costing the cash-strapped state government 3.7 million rupees
($85,000) a month.

The hotel -- which promises on its tariff card that "we
serve more with endearing warmth of our heart than with
shot-hot hi and hellows (sic)" -- ran up 23 million rupees in
losses in 2003. The figure has since risen to 30-40 million


West Bengal started a pilot project for restructuring 16
state firms with help from Britain's Department for
International Development. It has already closed two
loss-makers and is on the verge of shutting an electronics firm
and its five subsidiaries after handing out handsome severance

"We had taken into confidence all the trade unions while
undertaking this restructuring," Sen said. "We have done it
through dialogue and debates."

Four years ago, the government tried to transfer management
of the Great Eastern to French hotel giant Accor, but failed
because of stiff opposition from the powerful unions.

West Bengal has struggled to find a buyer for the
164-year-old hotel as it slips into decay. Once-gleaming marble
floors are stained and a musty smell greets visitors, while
furniture and upholstery in many of the 213 rooms are frayed.

"There are various reasons for this state of the hotel. We
don't have funds for renovation to compete with modern 5-star
hotels," Great Eastern chief executive Jagannath Bag said.

Sen says communists only support reform where it is needed.

"There is no need to fear the communists. We only want that
there should not be any privatisation of profit-making
state-run firms," he said.

For the hotel's staff, privatisation is still taboo.

"We want our jobs," said salt-and-pepper-haired waiter
Mohammad Ibrahim, who has put in 40 years of service. "I am
worried about the future of my colleagues."

"The hotel can be renovated and can return to its glorious
days. It should stay with the government." ($1=43.50 rupees)