MILLIONS of pounds of British taxpayers’ money is being used to finance early retirement and redundancy packages for public sector workers in India.

More than 3,000 employees facing dismissal from loss-making state-owned companies in West Bengal will benefit from a £27m severance fund set up by the Department for International Development (DfID).

Hundreds of workers have already received up to £6,000 — 20 times the average Indian salary — as well as medical and accident insurance.

Although money for retraining is being made available through British aid, critics claim the immediate effect of the scheme is to increase unemployment in one of Asia’s poorest regions.

“People on the street in England will wonder what on earth DfID is doing funding redundancy packages in a country many thousands of miles away,” said John McGhie of Christian Aid. “The link between laying off workers and poverty alleviation is not immediately apparent.”

The controversial scheme has been negotiated with DfID by the communist-led state government of West Bengal.

The nationalisation in the 1970s and 1980s of scores of loss-making companies — ranging from handloom factories to hotels — has landed the authorities in Calcutta, the state capital, with crippling debts that are diverting resources away from education and welfare projects.

The authorities have now decided to close down or restructure and privatise up to 28 of these enterprises, which ran up losses of £23m in 2001, the latest year for which figures are available. The moves will affect up to 10,000 workers in West Bengal.

“The burden (these companies) have placed on the state is huge, and as a result we have had to reduce our (welfare) spending,” said Nirupam Sen, the state’s industry minister.

“We decided to restructure our loss-making enterprises. If they’re not viable, we’ll close them. Those that can be made viable with extra funds will be offered as joint ventures.

“One of the major issues was how to compensate the workers who will lose their jobs. The compensation is being provided by DfID.”

DfID has agreed to pay £26.7m over three years towards the programme. The West Bengal government will contribute about £3m to the redundancy scheme.

A similar initiative is thought to be operating in two other Indian states: Orissa and Andhra Pradesh.

One of Calcutta’s state-owned companies that has already been taken into private hands is the Great Eastern hotel. Opened in 1840, it was known under the British Raj as the Jewel of the East.

It was sold last November to an Indian hotel chain for £6.5m. After the West Bengal government had cleared debts of £2.5m, it made a net profit of £4m on the sale.

Despite initially resisting the privatisation, more than 400 hotel workers were laid off and shared just under £2m of the DfID severance money.

The average redundancy package was £5,000-£6,000 per employee. The average Indian salary is about £300.

Sen insisted that profits from the Great Eastern sale would be ploughed back into further restructuring of public sector companies and towards retraining programmes for workers.

However, Andrew Mitchell, the shadow international development secretary, questioned DfID’s role in the sale.

“This is hardly the way the British taxpayer would normally expect DfID to be making disbursements,” he said. “It’s not clear why our money should be used to underwrite a programme which the West Bengal state could carry out at a profit without our help.”

DfID denied that the department was subsidising a profitable deal for West Bengal’s government or underwriting redundancies. “We back West Bengal’s efforts to reform its loss-making public sector businesses — including the sell-off of the Great Eastern hotel,” said a spokesman.

“Whilst it is propping up failing businesses, funding is diverted from improving hospitals, getting more children into schools and reducing the number of people living in crippling poverty.”

DfID’s total aid budget for India in 2005-6 is £255m.

Explore UK News

• Crime News

• Education News

• Health News

• Science News

• Scotland News

Times Recommends

• Donor organ allowed child’s own heart to heal
• Michael Jackson: Not the final chapter
• Brüno toned down for 15 rating