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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

ironies and myths

murali772 - 25 November, 2013 - 18:09

Prime Minister Manmohan Singh on Thursday said greater functional autonomy and independence from bureaucratic control will help public sector enterprises become more competitive. Speaking at the BRICS (Brazil, Russia, India, China and South Africa) Competition Conference here, the Prime Minister said that state owned units have enjoyed captive markets and have been, over the years, shielded from competition. “Going forward, our governments will have to increasingly adopt competition-neutral policies. Competitive neutrality requires that the government not use its legislative and fiscal powers to give undue advantage to its own businesses over the private sector,” he said during the conference themed ‘Competition enforcement in BRICS countries: Issues and Challenges. Emphasising on greater functional autonomy, he reportedly said that such companies should become increasingly competitive and not shy away from competition from other players. He conceded, “unfortunately, government ownership inevitably brings with it a bureaucratic style of decision-making and the end result is that the enterprise cannot compete in a market populated by equals.”

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

This is the statement by the Prime Minister of the very same government, the spokesman of which talked about imposing BSNl/ MTNL on babu's, in addition to Air-India, in just the past week. Can there be a bigger irony?

Apparently, there can be bigger ironies, since even as the above article talked of "greater functional autonomy" for PSU's, the following excerpts from an article in ToI (for the full report, click here), shows how the ministers in-charge are playing favorites, undemining the whole idea of autonomy:

Heavy industries minister Praful Patel and oil minister M Veerappa Moily have sought a year's extension beyond retirement for chief executives of two of India's largest enterprises under their wings — power equipment-maker Bhel and explorer ONGC, respectively. - - -The recommendations come at a time when the top management in Bhel and the public sector oil industry is going through succession process—from CEO to directors. The importance of the two companies can be judged from the fact that they account for procurement of material, services and equipment worth over Rs 55,000 crore a year. The Prime Minister's Office (PMO) has so far been steadfast in opposing the idea of granting extension beyond superannuation, both through UPA-1 and UPA-2. But the pressure from two powerful ministers in the Cabinet may sway the PMO's resolve and create precedence. If that happens, it would open floodgates for similar requests from other ministries and set off lobbying by chiefs of all PSUs.

Very clearly, autonomy for PSU's is a myth - they just can't be insulated from government interference. And consequently, the need for the government to disinvest from them.

unsustainable burdens

murali772 - 23 December, 2013 - 12:03

Consider the magnitude of decay. Just in one segment—heavy industry—17 of the 32 Central public sector units have wiped out their net worth. The horror story of PSUs of course is in flashback, dated for the financial year 2011-12—the government is yet waiting for 2012-13 financials. In a country where every second subscribers are logging on to mobile networks, in a country where connectivity is yet an opportunity, MTNL and BSNL have between them notched losses of `26,580 crore in the last three years. These are no ordinary public sector units. MTNL is on the Navaratna list and BSNL is on the Miniratna list. And they are by no means the only “ratnas” on the list of lossmaking units. There is Shipping Corporation of India, the undeclared “ratna” called Air India which accounted for 27 per cent of PSU losses for the year 2011-12 and many other members of the 70 ratnas listed by the department of public enterprises.

The issue is not just about losses. Losses are not unknown or unusual in India’s public sector, given the socialist mythology of not-for-profit or not-only-for-profit mantra that they chant. The question is: Is the government true to the  covenant of nurturing PSUs? Take drug-maker IDPL. It was declared sick in August 1992 and sent to BIFR (Board for Industrial and Financial Reconstruction). In 2013, it transpires that IDPL has received no package yet—not in the Xth plan, not in the XIth plan nor in the XIIth plan. And IDPL is not the only sick unit trapped in this black hole between life and death.

For the full text of the column by Mr Sankar Ayyar, in the New Indian Express, click here. The party that incorporates privatisation/ closure ( where there are no takers) of these perpetual burdens in its manifesto for the coming Parliamentary elections, surely gets my vote.

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.
 

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. 
 

best bet for Air-India

murali772 - 21 November, 2013 - 13:47

http://praja.in/hi/blog/murali772/2013/11/20/grab-opportunity-offload-air-india

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