With the Cabinet committee on economic affairs giving its approval last week for the strategic sale of loss-making Bharat Pumps and Compressors Limited, strategic sale of government equity in PSUs as a concept will finally stage a comeback after 12 long years. This is a welcome change in thinking on the part of the Centre when it comes to the concept of disinvesting government equity in PSUs. While there is general consensus on the notion that the Government has no business to be running companies, particularly when it is unable to run them as commercial organisations, there is much less clarity on whether the Government should continue to stay invested in businesses it already owns, or if it should exit. Even in cases where there has been general agreement on the need to divest the Government’s holding, there has been a marked reluctance to actually let go of control of such PSUs, and the attendant opportunities for the exercise of power and patronage that these PSUs provide. As a result, many public sector enterprises that currently exist serve no specific social obligations beyond keeping a few people employed, and in reality, under-employed, while imposing a heavy burden on the exchequer.
Disinvestment has for long been seen as merely a tool to raise revenue for the fisc rather than as a means to restructure ailing public sector companies. Successive governments at the Centre have been content with selling small parts of equity in well-run public sector enterprises to raise funds in the name of disinvestment. The strategy ideally should have been to exit from troubled undertakings in general, and strategically irrelevant investments in particular. The key is effecting a cultural change in such entities by ushering in a change in management by inducting the private sector. In cases where the Government wishes to retain a minority or majority holding for strategic or other reasons, it should ensure that the managements of such businesses are adequately empowered to run them on professional lines. The Centre’s valuable resources are better spent on creating public and social capital through education, health, sanitation and building public infrastructure rather than in helping to keep alive loss-making PSUs.
It is time politicians and trade unions stopped treating privatisation as anathema. Rather, trade unions should focus on getting the best deal for workers affected by strategic sales. Many privatisation transactions carried out between 1999 and 2004 have emerged as success stories — the ITDC hotels and CMC (now merged into TCS) are some outstanding examples of turnaround in performance and fortunes. Many more enterprises can be turned around likewise and the Fourteenth Finance Commission has provided some recommendations on how the Government could proceed. The Centre should also take note of errors in judgment and failure to carry through proper due diligence that hurt the strategic sales process over a decade ago, and prevent their recurrence.