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Public assets or perpetual burdens?

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Written By murali772 - 20 November, 2013

Media Reports Economy Public Sector regulation India outsourcing, privatisation

Babus and public sector executives may have to surrender phones and broadband connections from private operators such as Airtel and Vodafone and shift to the networks of state-owned MTNL and BSNL as part of the government's plan to improve the finances of the two PSUs.

The proposal envisages shifting the entire telephone expenses paid by the central government — mobile phone, landline, broadband and enterprise bills — to the state-run telcos and give exclusive rights to them. A similar model is followed for ailing Air India, which continues to bleed despite government officers, PSU executives and those working for autonomous bodies funded by the Centre flying the national carrier. "They may be making losses, but MTNL and BSNL are public assets. We are working on this proposal as part of measures to support their revival," said a government official, defending the plan.

MTNL, which operates in Delhi and Mumbai, has been accumulating losses since 2008-09. In 2012-13, the company registered a loss of over Rs 5,300 crore on annual revenue of a little under Rs 3,500 crore. The losses for BSNL, as per unaudited results, were close to Rs 8,200 crore in 2012-13, compared to around Rs 8,850 crore in 2011-12. BSNL has been in the red since 2009-10.

For the full report in the ToI, click here

I would say not only MTNL, BSNL, and Air-India should be wound up, but even infrastructure sectors like
a) public bus transport services (stage carriage services, using which differentiation the public sector monopoly has been perpetuated - check here for details),
b) power distribution (where Delhi has evolved a model over the past 9 years - check here for details),
c) water supply (where again Delhi is working on new models - check here for details),

where there is a near monopoly situation currently, should also be opened up to the private sector, and, resulting out of it, if the public sector players can't cope up with the competition, they should also be phased out/ wound up. The public sector players have shown themselves incapable of building capacity, particularly in monopoly situations, leading to these key sectors languishing and becoming stumbling blocks in the growth paths of the rest of the economy too.

The government's role should largely be confined to being the facilitator, and regulator (and controller, where essential). When they become players in addition, their regulatory role gets badly compromised, as we have been seeing repeatedly, and the game gets totally distorted, leading thereof to its ill effects on the economy.

Simultaneously, even the governments need to reduce their size - check this. I fully support NaMo's slogan "less government; more governance" in this regard.

Muralidhar Rao

COMMENTS

an impossible task

murali772 - 5 May, 2015 - 12:42

In an attempt to bounce back as a profit making entity, state-owned BSNL plans to monetise its assets like land, towers, factories and educational centres as it gets approved by Department of Telecommunications. The company estimates to garner around Rs 5,000 crore annually from monetising its assets. - - - - Srivastava further added that the company’s top line is around Rs 28,000 crore but our staff expenses are around Rs 15,000 crore. “That is cause of concern for us,” he said. For private operators their staff expenses are 5 per cent where as in our case it is around 55 per cent of our revenue, Srivastava added. - - - - - Telecom Minister Prasad had asked BSNL to improve quality of services, especially in border and extremist-affected areas, in a bid to become market leader and win back people’s confidence.
 
He said that the government is committed to revive BSNL and a number of initiatives are in the pipeline to bring the PSU back to the position of market leader. BSNL’s profits started declining from Rs 10,183 crore in 2004-05 before recording a loss in 2009-10.
 
For the full text of the report in the New Indian Express, click here.
 
Can the gap between 5% and 55%, on staff expenses, ever hope to be bridged? Plainly an impossible task. Very clearly, PSU's largely exist only for the sake of perpetuating the vested interests of the mafia confederation comprising the unionists, some babu's, and neta's of the Dayanidhi Maran, A Raja kind.
 
The question that arises is what is Ravi Shankar Prasad's interest in sustaining this juggernaut? Is it his case that the private players will not serve in the border and extremist-affected areas? These are all plain Socialist shibboleths, and it's time their bluff is called. Given the right incentive, the Indian entrepreneur will go anywhere, and do a far better job than a government set up can be expected to do.
 
Enough is enough - let's just dump these behemoths, once and for all. 
 

Ordnance factories - chinks in our armour

murali772 - 19 May, 2015 - 14:11

I happened to watch "Buck Stops Here" programme (Chinks in India's Armour - click here to view it) on NDTV past week-end, where Lt Gen Malik (former chief of Army Staff) made a shocking revelation that our ordnance factories still manufacture World War-1 vintage compasses and binoculars, which is what our jawans have to depend on when faced with far better equipped Pakistani soldiers on our borders. And, one of the other panelists (a retired IAS officer) pointed out that there was no way out other than to privatise all of the ordnance factories, including the likes of BEML.

I can't agree more with him. We cannot continue to expose our valiant jawans this way any longer.

Public sector to the fore again?

murali772 - 8 July, 2015 - 11:29

The National Mineral Development Ltd (NMDC) will set up a three-million tonne per annum steel plant in Karnataka, union Steel and Mines Minister Narendra Singh Tomar said on Tuesday.

The greenfield plant, in the state's mineral-rich northern region, will be a joint venture with the state government at a cost of Rs.18,000 crore, he told reporters here.

Though the Hyderabad-based NMDC's main activity is mining iron ore and selling the raw material to steel plants, it is foraying into rolling out the hot metal to meet the 300 million tonne production target the government seeks to achieve over the next decade.

"The government is setting up four steel plants in Chhattisgarh, Jharkhand, Karnataka and Odisha through state-run SAIL, RINL and NMDC by forming special purpose vehicle (SPV) for each of them with the respective states where the raw material is available in abundance," Tomar said after chairing a parliamentary consultative committee meeting of his ministry.

- - - NMDC will be the second state-run enterprise to have a steel plant in Karnataka after SAIL, which operates a steel mill at Bhadravati in Shivamogga district.

For the full text of the report in the New Indian Express, click here.

On the one hand, the government has been talking of disinvestment, the idea, one had thought of as eventually leading upto privatisation. On the other, there's this talk now of investing anew, and in green-field plants. Also, one had thought that SAIL, RINL etc are not exactly exemplary performers, compared to Jindal, TISCO, etc. Besides, there are the likes of POSCO, whom the farmers of Gadag are now rolling out the red carpet for (check here).

So, is this indicative of a policy shift towards public sector once again commanding the heights of the economy?

unaffordable gaffe

murali772 - 16 August, 2015 - 13:35

Over 2 lakh photographs and thumb impressions on documents of registered property owners, 15,993 registration deeds of firms and societies and over 4,000 certificates, including marriage certificates, are missing from the records of 43 sub-registrar offices here.

The department of stamps and registration department admitted to this lapse during a departmental meeting chaired by the deputy inspector general for stamps and registration on August 11, 2014. In the proceedings of the meeting, of which TOI has a copy, the department has admitted that all these documents are missing or untraceable.

That these are all e-documents is mystifying as even the back-up mechanism, a routine feature for any electronic documentation, has failed. Sources in the department attribute the failure of this back-up to disinterested department officials and vendors tasked with updating and maintaining the e-records.

- - - Earlier last year, based on these grievances, the department set up a fact-finding commission to investigate the issue. Its interim report highlighted the missing records and untraceable documents. The committee held the two vendors - government-owned Electronics Corporation of India Ltd (ECIL) based in Hyderabad and CMS Computers Ltd (founded as Computer Maintenance and Services Company) with a registered office in Mumbai-responsible for the gaffe.

- - - ECIL and CMS have both moved away from the department contract after a decade of servicing the company when the contract expired. HCL Infosystems has replaced them.

For the full text of the report in the ToI, click here.

The mistake committed, by department of stamps and registration department, in the first place, was engaging the two government-owned vendors. The enormous price to be paid for the mistake should be evident to all concerned. To their credit it must be stated that they did not persist with the government-owned vendors, realising their incapacity to undertake the task, even if a bit late in the day, and switched to the professional HCL Infosystems. But, the problem is that as long as such government set-ups continue in operation, there will be compulsions on them to grab orders, and on government departments to patronise them. Therein lies the danger, and the need for winding them up, once and for all.

The Election Commission likewise needs to review its tie-up with NIC (check here), and BBMP with sundry quarter-baked amateurs posing as professionals (check here)

high time PSUs' roles are reviewed

murali772 - 16 April, 2015 - 14:02

Two recent reports showing how our PSU's are letting the country down badly, in the key area of defense-preparedness:
 
a) The New Indian Express report - excerpts reproduced below (for the full text, click here)
 
The objectives of the Defence Production Policy (2011) were to achieve substantive self-reliance in design, development and production of weapon systems, to create conditions conducive for private industry to take an active role in this endeavour, to enhance potential of small and medium enterprises in indigenization, and to broaden defence research and development. An increase in home-made content for production of defence equipment by the Defence Public Sector Units (PSUs) and Ordnance Factory Boards (OFBs) was another goal.
 
But even three years later, a review of this policy at the review committee meeting, held a few months ago, has exposed the dismal performance of defence PSUs.
 
b) The ToI report - excerpts reproduced below (for the full text, click here)
 
A major stumbling block to wrapping up the entire Rafale deal, which included domestic production of 108 jets by Hindustan Aeronautics Limited (HAL) using transferred technology, was an inability to guarantee the cost and quality of locally produced aircraft. 
 
This vote of no confidence in HAL points once again to the perils of excessive dependence on the public sector in the defence industry. Government would do well to promote more private investments in defence on the lines of the deal made between L&T and Areva in the nuclear sector, to give a boost to its Make in India strategy. A good place to start would be an agreement to co-produce more Rafale fighters in India, in collaboration not with HAL but with a suitable Indian private sector entity.
 
The best way to promote Make in India is to encourage greater cooperation between private sector companies in India and France. 
 
The answer clearly lies in what has been highlighted by me in bold print above. And, the story is the same everywhere. It's high time the PSU's roles are limited to where their presence is essential.
 

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