Don’t overlook public sector companies

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The privatization of public sector companies is widely discussed in public and social media. Employees of public sector units, students and leaders of various political parties have demonstrated in Vizag in recent years to save Vizag Steel from privatization.

The assets of not only Vizag Steel, but also other public sector companies belong to the people of this country. These public assets have been privatized in the past, leading to the closure of many businesses.

Hyderabad, for example, was known for its PSUs like IDPL, HCL, Alwyn, and HMT, among others. Today, most of them have been closed for various reasons. Why are such entities closed? What are the reasons for the failure of these organizations? Is it due to the incapacity of managers or to the failure of human capital? Or is it a severe financial crisis, excessive bureaucracy / politician interference, increasing competition, or a lack of modern technology?

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

In the financial sector, YES Bank, a private sector bank, collapsed and the State Bank of India had to save it. Public sector banks face huge NPAs, mainly due to voluntary default by private sector contractors. Public sector oil and gas companies are also pushing for privatization today as governments fail to cover subsidy losses. Is privatization a panacea for the problems facing public sector units? Based on the current status of Nokia and Kodak, the most prestigious private sector companies in the world at one point in time, the path to privatization does not inspire confidence.

Public sector companies distribute the profits as an annual dividend to the government. Many companies have also resorted to share buybacks as part of the divestment mechanism. They also contribute to social causes at crucial times. Is it appropriate to privatize companies like LIC and BPCL?

If the government is serious, the performance of public sector entities can be improved. To cite one example, former Minister of Railways Lalu Prasad Yadav played a crucial role in improving the efficiency of the railways as they suffered huge losses. Rajneesh Kumar, former chairman of the State Bank of India, used his wealth of experience and facilitated the merger of five associated banks. Subsequently, his bank also protected YES Bank’s depositors from loss and gained their trust.

Exploit workers

A number of private sector companies in the IT, banking, manufacturing and service industries are exploiting their human resources on many fronts. These companies treat their human resources as a cost rather than as an asset. They are now extracting work from employees by extending working hours from 9 to 12 hours per day. Thus, employees working in private companies are usually stressed and face the uncertainty of employment.

Public sector organizations have contributed to job security, social security and nation building in times of hardship. Public sector companies struggle because governments, over the years, have failed to make timely policy decisions to address the shortcomings of these companies.

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

Public and private sector organizations are like the two eyes of the Indian economy. Traveling with one eye will only provide short-term benefits. The government should therefore continue to focus on public sector organizations and regulate private entities. Otherwise, there may be a risk of income inequality.

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

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