Don’t neglect public sector enterprises

M Chandra Shekar | Updated on April 05, 2021

The performance of many of the public sector units can be improved if the government puts its mind to it. The track record of the private sector hasn’t been healthy

Privatising public sector enterprises is being debated widely in public and social media. Employees of public sector units, students and leaders of various political parties have been protesting in Vizag over the past few dys to save Vizag Steel from privatisation.

The assets of not only Vizag Steel but also other public sector enterprises belong the people of this country. Such public assets have been privatised in past, leading to the closure of many an enterprise.

Hyderabad, for instance, was known for PSUs like IDPL, HCL, Alwyn and HMT, among others. Today, most of them have been shut due for various reasons. Why are such entities closed? What are the reasons for the failure of these organisations? Is it due to the inability of the managers or the failure of human capital? Or is severe financial crunch, excessive interference of bureaucracy/politicians, , increasing competition, or lack of modern technology the reason?

Private airlines such as Jet Airways and Kingfisher Airlines collapsed due to a pile up of a large amount of debt. This resulted in an increase in the non-performing assets (NPAs) of public sector banks, which in turn led to the merger of several PSBs. Many private companies in the telecom sector are still struggling with debt.

In the financial sector, YES Bank, a private sector bank, collapsed and State Bank of India had to rescue it. Public sector banks face huge NPAs mainly due to private sector entrepreneurs wilfully defaulting on loans. The public sector oil and gas companies are also pushing for privatisation today, as governments fail to cover subsidy losses. Is privatisation a panacea for the problems facing public sector units? If one goes by current status of Nokia and Kodak, the world’s most prestigious private sector companies at one time, the privatisation route doesn’t inspire confidence.

Public sector companies distribute profits as annual dividend to the government. Many of the companies have also been resorting to share buybacks as part of the disinvestment mechanism. They also contribute to social causes during crucial times. Is it appropriate to privatise companies like LIC and BPCL?

If the government is serious, the performance of public sector entities can be improved. To cite an example, former Railway Minister Lalu Prasad Yadav played a crucial role in improving the efficiency of the Railways when it was incurring huge losses. Rajneesh Kumar, former chairman of State Bank of India, used his rich experience and smoothened the merger of five associate banks . Subsequently, his bank also protected YES Bank depositors from losses and gained their trust.

Exploiting workers

A number of private sector companies belonging to the IT, banking, manufacturing and services sectors are exploiting their human resources on many fronts. Such enterprises treat their human resources as a cost rather than as assets. They are now extracting work from employees by extending working hours from nine to 12 hours daily. So employees working in private enterprises are generally stressed and face job uncertainty.

Public sector organisations have contributed to job security, social security and to nation development in the most tricky times. Public sector enterprises are struggling because governments over the years haven’t made timely policy decisions in addressing the shortcomings of such enterprises.

The International Monetary Fund estimates that India’s GDP for 2021 will be 11 per cent. It is better to find the reasons for the respective enterprises’ failures, employ skilled human resources, and introduce modern technologies.

Public and private sector organisations are like two eyes of the Indian economy. Travelling on one eye will only give short-term benefits. So the government should continue to focus on public sector organisations and regulate private entities. Else, there can be a risk of income inequality.

The writer is Assistant Professor, Institute of Public Enterprise, Hyderabad

Published on April 05, 2021

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