CHAPTER 22
MINISTRY OF SMALL SCALE INDUSTRIES AND AGRO AND RURAL INDUSTRIES

The National Small Industries Corporation Limited

22.1.1    Infructuous expenditure on setting up of offices abroad

The National Small Industries Corporation Limited (Company) participated in the INDEXPO-94 in South Africa and sold machines and equipment worth Rs.22.50 lakh. Based on this response, the Company submitted (September 1994) a proposal to its Board of Directors (Board) for opening a representative office in Johannesburg where it expected business of Rs.8 to 10 crore in the first year. After approval of the Board, an office was opened (December 1995) in Johannesburg. Similarly, the Company opened another office at Dubai in September 1996 where it estimated business of Rs.10 crore in the first year.

However, the Company failed to achieve the estimated targets. It earned revenue of Rs.3.21 lakh from business of Rs.1.00 crore since inception till March 2002. Against this it had incurred an expenditure of Rs.2.38 crore on operation of both the offices.

Despite the fact that the Dubai office generated business worth only Rs.17 lakh with a revenue of Rs.0.50 lakh and the Johannesburg office generated no business during initial two years, Management failed to review their performance. The Board was apprised of the performance of the foreign offices only in February 1999 when it was decided to depute a team of senior officers of Ministry and the Company for assessing the viability of these offices. The action plan suggested by the team, which visited these offices in June 2000, had also not yielded any positive result. In their meeting held on 16 April 2002 the Board directed Management to prepare an Action Plan for next three years for these offices and advised that potential possibilities of opening offices in other states of South Africa instead of Johannesburg be explored. However, Management had not placed Action Plan before the Board so far.

Thus, the Company failed to assess the feasibility of running operation in these foreign locations as its core competence was not applicable for South Africa where imports consisted mainly of foodstuff and garments and the uncompetitive offers of Indian goods in Dubai. Consequently, the Company incurred an infructuous expenditure of Rs.2.35 crore on setting up of the offices abroad which have earned revenue of Rs.3.21 lakh from business worth only Rs.1 crore.

Management had not controverted (June 2002) the facts and figures of the para. Ministry stated (October 2002) that though the offices in Dubai and Johannesburg did not appear to justify their existence in terms of revenue earned, they had been able to satisfactorily fulfill the promotional role for the Indian small scale industry sector, for which they were set up. Ministry, however, did not furnish any details of the business generated due to the effort of the offices.