Role of CPSEs in achieving PM’s Vision
2022
Dr. Mrinal Chatterjee
Professor and Regional Director,
Indian Institute of Mass Communication
(IIMC), Dhenkanal
mrinalchatterjeeiimc@gmail.com
What is PM’s Vision 2022PM Narendra Modi has
outlined his vision for India in 2022, when India will celebrate 75th
year of her independence in his speeches delivered at several places. Here are
some major points: ·
“An India free from poverty, dirt, corruption,
terrorism, casteism, and communalism”.
In short, the PM envisages an egalitarian and just society based on the tenets of true democracy. With modernity, he seeks a moral underpinning and wants the people take more responsibility instead of depending on the Government..
Is there anything special about PM’s vision 2022?
However, I am not going to discuss politics here.
Socially, Modi wants people to assume more responsibility and to have a defined alignment with national interest.
On the economic front, his vision envisages a paradigm shift for the Central Public Sector Enterprises (CPSE).
But before I dwell on that a quick look at the history and genesis of CPSE and the role they have been playing.
The rural growth story, which has recently caught an attention of private sector could not have been possible without the number of basic infrastructure services offered by public sector in this area. LIC, one of the largest PSUs, was probably the only large investor in the Indian equity market when rest of the large investors preferred to stay away during the market turmoil of 2008.
The Road ahead of CPSE
In short, the PM envisages an egalitarian and just society based on the tenets of true democracy. With modernity, he seeks a moral underpinning and wants the people take more responsibility instead of depending on the Government..
Is there anything special about PM’s vision 2022?
However, I am not going to discuss politics here.
Socially, Modi wants people to assume more responsibility and to have a defined alignment with national interest.
On the economic front, his vision envisages a paradigm shift for the Central Public Sector Enterprises (CPSE).
But before I dwell on that a quick look at the history and genesis of CPSE and the role they have been playing.
The rural growth story, which has recently caught an attention of private sector could not have been possible without the number of basic infrastructure services offered by public sector in this area. LIC, one of the largest PSUs, was probably the only large investor in the Indian equity market when rest of the large investors preferred to stay away during the market turmoil of 2008.
The Road ahead of CPSE
·
“A new India where the poor do not want anything by way of
charity, but seek opportunity to chart out their own course … Indians today are
not waiting for governmental sops. They only want opportunities to be created
for them, so that they can work for their livelihood and prosperity.”
The
Father of the Nation Mahatma Gandhi had a vision for the country. So did
Jawaharlal Nehru. So did all other Prime Ministers. Question is: is there
anything special about the present PM’s dream? Is it any way different?
Politically,
yes. Remember his speech in which he said, tantra se lok nahin, lok se tantra chalein (democracy will be driven by people, not the other
way round). There is a hint of change there from the existing political
structure.
History of CPSE (Central Public
Sector Enterprise)
At the time of independence in 1947, India had just five central public
sector enterprises with an investment of mere Rs 29 crore. By 2016 India had
320 central public enterprises with investment of around Rs 12 lakh crore. As
many as 165 CPSEs earned a net profit of about Rs 1.5 lakh crore and 78 CPSEs,
a net loss of Rs 29,000 crore.
Role of CPSE down the years
Public Sector Enterprises formed the backbone of industrial development
of the country in Independent India. Of course, its role has been
changing with the changing time. Initially its role was to help create the much
needed industrial base and infrastructure apart from bringing about price
stabilization and socio-economic development. They were also engine of growth
in true sense of the term. PSEs contributed greatly to job creation by adopting
labour-intensive techniques in the early part of independence, nationalization
of sick textile units and setting up ancillary industries around major units
subsequently.
With the economic liberalization in 1991, its role changed to take on
competition including global. This included reduction in jobs as a result of
modernization and to improve efficiency. SAIL for example, which employed over
two lakh workers to produce less than 10 million tonnes of steel in the past,
employs just 80,000 workers today and produces much more. But even today it has
surplus employees. It has seven times more employees than Tata steel for per
tonne of steel production. This is one of the major reasons for some of the
public enterprises not being able to function competitively. Some other
companies like Life Insurance of India, which enjoyed monopoly status after
nationalization in the 1950s, took on competition well after Insurance sector
was opened up to private players in the late 1990s.
Role played by CPSE in Nation
Building
Public Sector Enterprises played a key role all along in nation
building. In the early years of independence, Public sector got into areas of
basic and heavy industries where private sector would not venture into as they
did not have the financial muscle or wherewithal. In fact 1948 industrial
policy encouraged private sector more. But when private sector was not forthcoming
in adequate number and in areas where investments are needed, the government
modified the industrial policy in 1956 to give more prominence to public sector
in the industrial development of the country. This ensured that there was
balanced growth. Public sector also helped in removing regional imbalances,
development of infrastructure, townships and remote areas. Subsequently
Government was forced to nationalized some sick unites particularly in textiles
industry to protect the interest of worker. It even had to start manufacturing
bread to bring about price stabilization in an era of shortages. Food
Corporation of India was set up to improve storage facilities and create buffer
stock due to which India is surplus in food production.
Being the largest commercial
enterprises in the country, PSUs provide a huge leverage to the government
(their controlling shareholder) to intervene in the economy directly or
indirectly to achieve the desired socio-economic objectives. At times, these
objectives may be misplaced but at others especially in times of do-or-die
situation such as in 2008, PSUs played a key role in steering the national
economy in the right direction.
However, times have changed. Some of the purposes for which CPSEs have
been established have been achieved and in some cases the purposes cease to
exist. In these cases, it is time for government to exit the concerned areas,
particularly in services sector.
For example, in case of Hotel industry, Public sector came into being
when private sector was not forthcoming in an era of controls. Today it should
exit totally has private sector does better in this sector. So also Air
India as private airlines have shown the way how airlines can be run
efficiently. Consider the case of FCI (Food Corporation of India). It was
useful in steering India towards self-sufficiency in food grains at a very critical
time. But the organization has now outlived its utility and it is time it was
dismantled as was done in Mexico and perhaps continue only in eastern India
where procurement is still a problem as green revolution has not spread far and
wide there.
How can the CPSE align its role with Vision 2022
Indian Public Sector enterprises have evolved over the
decades and undergone significant changes amidst the competitive landscape of
business environment to contribute immensely to the success story of India.
However, perhaps it is time for some CPSEs to shut shop and
for some CPSEs to shed fat and be globally competitive. Public
sector Enterprises should exit areas where it is not competitive and drain on
resources and public exchequer. It is time for re-evaluation of the
role of CPSEs. They should not be a drain on tax payer’s money.
However
there is a caveat.
I believe there are some core and basic areas,
which should never be left completely open for the market forces (for example in railways and telecom where
privatization has not worked in many countries) for several reasons including governance
responsibility, social responsibility, security and strategic importance.
We must
not forget that there is a fundamental difference between Private Sector and Public
Sector. The basic objective is profit
maximization in case on of any private sector enterprise while it is not the
case for PSU. Till now, India has not resolved all its traditional issues like
lack of modern technology in strategic sectors, under exploitation of local
resources, a thin and lopsided industrial base, skewed income distribution,
regional disparities and high unemployment rate for which the PSUs were
actually set up. So, one cannot rule out the continuing existence of the public
sector to meet these objectives.
Another important point: Indian economy could lose
its vitality without public sector enterprises considering the country's
existing socio-economic structure.
But there is
an urgent requirement to address inefficiencies and limitations pertaining to
the sector. Mere privatisation of all public sector units could not be the only
solution to it. Rather, there is a need to have a fresh look on the role of
public sector enterprises in Indian economy and need to realign the policies
accordingly.
***
Excerpt of my deliberation at the seminar "PM's Dream India 2022-
Role of CPSEs" at Angul organised by Nalco Officer's Association on 29.10.17
