The finance minister wants to sell sick PSUs to private companies. The question is who will buy a loss making company that even the government wants to get rid of?
Finance Minister Arun Jaitley on Wednesday said that the government could consider selling off some of the public sector units (PSUs) that were making losses. Jaitley feels that these sick units would be better off in private hands. His statement came at the World Economic Forum conference held in Delhi.
He said that the economy was in a pit and the recovery was the first priority, which is what the government has been doing. “India had fallen off the radar, now people have started looking at us,” he said.
When asked about the strategy to mobilise resources from foreign and domestic investors, the FM said that disinvestment of state-run units will continue, but the feeling is that there are some PSUs, which are lossmaking and are on the verge of closing, could do well in private hands. At present, these loss-making PSUs are getting support from the government but taxpayers cannot continue to support these PSUs, he added.
The big question regarding privatising loss-making PSUs is that why would a private company buy a sick unit when it would have to deal with labyrinthine regulatory and tax issues, in addition to the efforts needed to revive these loss-making companies.
Jaitley’s statement is also contradictory to the government’s initiative to use surplus cash of Maharatnas and Navratnas lying idle in banks to revive ailing PSUs. In September, the union government had formed a committee to study the proposal. The Committee headed by NTPC chairman Arup Roy was expected to submit its report in two months.
According to Heavy Industries and Public Enterprises Minister Anant Geete, there are 70 sick PSUs and 43 out of this can be revived by infusing surplus cash from profit making PSUs. He had said, “All the Maharatnas and Navratnas combined have a (cash) surplus of around Rs2 lakh crore which is lying idle in banks. We have given them a proposal to form a joint venture company which has equal equity share of all these cash rich companies.”
As of 31 March 2013, there were 277 central public sector enterprises (CPSEs) having aggregate investment of Rs8.51 lakh crore and turnover of Rs19.46 lakh crore. The total turnover of CPSEs has grown by about 6% and net profit has recorded a growth rate of about 17% from 2011-12 to 2012-13. These CPSEs contributed Rs1.63 lakh crore to central exchequer by way of excise duty, customs duty, corporate tax and dividend during FY2012-13.The foreign exchange earnings through export of goods and services has shown a growth of 8% in the same period. About 14 lakh people are employed in CPSEs.
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In the case of public sector undertakings including public sector banks government should own up responsibility for their inefficient functioning and incurring losses. Making organisations sick by following bad policy and throwing them to the laps of greedy private sector will have long term impact on the credibility of government as an institution.
Post-independence India has a history of building and nurturing several public sector organisations including Railways, State Bank of India, Ordnance Factories and Research Organisations including ISRO. Mentioned this to emphasise that despite constraints, PSUs have survived and to tell the obvious that certain manufacturing and social sectors which will be avoided by private sector, have to be supported by government irrespective of their ‘commercial profitability’.
Government should cause a survey to assess the health and mortality rates of private sector organisations with focus on their consumption (yes, consumption) of public funds and nation’s resources. Time is opportune for central government to consider setting up umbrella organisations in sectors where government would like to retain majority stakes to oversee their functioning and give necessary and timely policy guidance and support to ensure their healthy existence.
M G Warrier, Mumbai