India to sell off its State owned Firms—PSUs-Public Sector Units?

Since independence in 1947 India was a socialist planned economy for about five decades. The  economic  liberalisation of the  early  1990s,  brought  about  some kind of  qualitative change in the  Indian  development  scenario. The  state owned  firms were in every  sphere  like hotels, tea, textiles, coal, etc numbering  some   244  at the  central government  level  and may be 1000  state  government, owned PSUs in  the 29 states. It  is  said  that  nearly   20  per cent of the  budget  support  goes  to  fund  the  PSUs. By March 2016, it is estimated that some 30 per cent of the PSUs made losses. This included the BSNL too.

Air India is a big black hole. It  seems  despite  many  prayers and  management  manoeuvring, it is a  lost case, beyond  redemption.

It is estimated that 1.2 million Indians work in its PSUs. And the assets they own may be around $ 500 billion. The  return on capital  is  very  abysmal  and  to put in  figures  it may be   less that  8  per cent.

Some  80  per  cent of  the total profit made  by the  PSUs come from coal, petroleum  products,  oil and  power generation . It is not to argue that they are all efficient   performers as most have   regulatory protection. It is better to  compare the output  per man  shift with  other   countries  to  know  exactly  where  India  stands in term of  production  efficiency.

State owned banks account for   some 70 per cent of the   banking system in terms of assets. These banks are notoriously known for NPA—nonperforming assets.

India  to learn from  Singapore  with  regard  to  heading its  firms  with  well  qualified  professionals. Here  it  is one of  over  governance  wedded  to conservative,  cautious and  risk  averse  management  culture. The  head of many  PSUs  are square  pegs in  round  holes as  far  as  expertise and  educational competence  is  concerned. PSUs are synonymous to financial distress. Sell offs are the only way out for the PSUs. There  are  a  few  PSUs  which are  fully  non  functional  for   years in India like Hindustan  Photo Films and Hindustan Cables.

Any prudent government must move from discussions to disinvestment on war footing.

Dr  KM Geogre;

Leave a Reply