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 privatization drive by New Delhi, the communists are selling off their own loss-making firms in West Bengal, where they have ruled for 20 years.

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 US$6 billion (HK$46.8 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, oppose selling healthy state firms.

The federal government is selling 10 percent of power plant equipment maker Bharat Heavy Electricals to the public. The communists say this is creeping privatization 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 PK Basu, managing director of private economic research house Robust Economic Analysis.

The state's industry minister, Nirupam Sen, said West Bengal is 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 (HK$661,000) 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 rupees.

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 packages.

``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 five-star hotels,'' said Great Eastern chief executive Jagannath Bag.

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 privatization of profit-making state-run firms,'' he said.

For the hotel's staff, privatization 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. The government should keep it.''