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    September 2016

What ails PSUs in India?


At a time when the Narendra Modi Government is projecting India as a manufacturing hub and its ambitious Make in India initiative is attracting overseas investors, the Niti Aayog’s recent submission of a list of 74 sick and loss-making CPSEs to the PMO for their closing down and strategic sales has come as a rude shock for the public sector enterprises. It is quite surprising that the crucial Government organ is mulling such a hostile step towards the public sector.

To make their voices reach the highest authority of the Government, a group of CMDs belonging to various Navratna, Maharatna, Miniratna and loss-making PSUs recently met Bureaucracy Today over lunch and revealed, albeit anonymously, what is ailing the public sector undertakings in India.
Our Cover Story in this edition is an attempt to show officials in the PMO, the Niti Aayog and the Department of Investment and Public Asset Management the other side of the story, detailed by the CMDs, on what is affecting the performance of PSUs. 
Before taking the step of shutting down the non-profitable PSUs, the Government should take into consideration the enormous amount of resources and energy which had gone into their building. The assets of the State-owned companies are far more valuable than what the accounts sheet actually shows.
No one would dispute the fact that public sector enterprises have extremely complicated problems. However, it is not impossible, though a challenging task, to put the house in order. It is very easy to bid adieu to all the worries by closing shop or going in for privatisation.
There is not an iota of doubt that stringent measures are required to find solutions for companies not making profit. But privatisation is not the right solution. Decisions like going in for strategic technological and financial tie-ups and reforming the mode of their functioning with the needs of the time can play a major role in sustaining the competitiveness of the State-run firms in an era of globalisation. 
Many public sector enterprises are admittedly inefficient due to the multiplicity of reasons like the lack of their accountability, political interference in their day-to-day functioning and their wrong pricing policy and cost escalations. Most of these pitfalls can be corrected by adopting suitable methods instead of resorting to privatisation. If the PSUs are allowed to grow in an independent way, the managing heads of these enterprises could respond positively according to the changed market requirements.
The strategy for reforming the losing PSUs should be evolved on a case-by-case basis. The Government can ask its experts to evaluate what is wrong with each of such PSUs and find tailor-made solutions for all of them. The Government should not get carried away by the propaganda that only multinationals and private companies have a future in the current economic regime in the world and that the public sector firms have no justification to continue. 


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