The Hindu Business Line : Unshackling the public sector

FOR THE BUREAUCRACY and the political leadership, loosening the strings that bind the public sector units, to give them autonomy in degrees, is like gradual abdication. This is why one sees the granting of freedom in small doses, as in recent announcements about greater financial autonomy, approved by the Cabinet Committee on Economic Affairs. The so-called ratnas are clearly seen as family jewellery and handing them over to mere Chairmen and Managing Directors and Boards seems somehow out of tune with nature. The fact that one of the discretionary powers liberalised is to do with foreign travel, mentioned alongside decisions relating to mergers and acquisitions involving hundreds of crores of rupees, demonstrates a mindset that is still in the 1970s.

The irony is that ministers and bureaucrats still behave as if autonomy is a matter of their choice. The day the economy was opened up and the PSU lost its monopoly character, autonomy became a non-issue, though many in Delhi seem reluctant to acknowledge this. They still seem to think that autonomy for PSUs to function and survive in a market is something for them to grant in their munificence. Increasingly, there will be far weightier issues that top managers must tackle on merits, without help from the administrative ministries, such as product mix, pricing, location of units, export markets, dealing with unions, competitive marketing strategies, developing and retaining high calibre talent to ensure continuity in quality of management, innovation, and so on. In all of these, generalist secretaries or MPs cannot be expected to contribute much. Decisions in these areas are fraught with long-term implications for the value of the firm and its ability to survive in an open, worldwide marketplace, thus demanding an understanding and industry-specific experience of a high order. This can be delivered only by professional managers. Therefore, financial autonomy as a separate concept has no meaning. PSUs can never expect to run effectively unless all such decisions are left to the best judgement of experts and top managers. To treat a PSU board as subordinate to the ministry is to ring the death knell of competitive public sector.

Put in other words, since SAIL, for instance, has to compete today not only with Tata Steel but steel-makers worldwide, the relevant question is whether SAIL's managers are equipped to take decisions quickly and effectively on the same sort of issues that its private sector counterparts would face. If a public sector organisation fails this test, it is doomed from the start. Managerial autonomy is thus an imperative — barring issues which any company would take to its shareholders, in this case the government. Fairness and equity too demand this approach because in most cases, the government is only one, albeit a major, shareholder. Unless the government, as a promoter, submits itself to the disciplines of the market place, it would be no different from the promoter family members using company resources for personal benefit.

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