Don’t neglect public sector enterprises


The privatization of public sector companies is widely discussed on public and social media. Public sector unit workers, students and leaders of various political parties have protested in Vizag in recent years to save Vizag Steel from privatization.

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

Hyderabad was known, for example, for power supplies such as IDPL, HCL, Alwyn and HMT. Today most of them have been closed for various reasons. Why are such units closed? What are the reasons for these organizations to fail? Is it the incompetence of the managers or 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 like Jet Airways and Kingfisher Airlines collapsed due to high levels of debt. This led to an increase in non-performing assets (NPAs) of public sector banks, which in turn led to the merger of several PSBs. Many private companies in the telecommunications sector are still grappling with debt.

In the financial sector, YES Bank, a private bank, collapsed and the State Bank of India had to bail it out. Public sector banks face huge NPAs mainly because private sector entrepreneurs deliberately default on payments. Public sector oil and gas companies are also pushing for privatization today as governments cannot cover the subsidy losses. Is privatization a panacea for the problems that public sector entities face? Given the current status of Nokia and Kodak, the world’s most prestigious private sector companies, the privatization path does not create confidence.

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

If the government is serious, the performance of public sector institutions can be improved. To take an example, former rail minister Lalu Prasad Yadav played a vital role in improving the railways’ efficiency when they caused huge losses. Rajneesh Kumar, former chairman of the State Bank of India, took advantage of his rich experience and smoothed the merger of five associated banks. Subsequently, his bank also protected the depositors of YES Bank from losses and won their trust.

Exploiting workers

A number of private sector companies in the IT, banking, manufacturing and services sectors use their human resources on many fronts. Such companies treat their human resources as a cost rather than an asset. They are now removing work from employees by increasing working hours from nine to 12 hours a day. Employees who work in private companies are generally stressed and faced with insecurities in the workplace.

Public sector organizations have contributed to job security, social security, and the development of the nation during the most difficult times. Public sector companies have problems because governments have failed to make timely policy decisions over the years to address the shortcomings of such companies.

The International Monetary Fund estimates that India’s GDP will be 11 percent in 2021. It is better to find the reasons for the failure of the respective companies, employing skilled workers and adopting modern technologies.

Public and private sector organizations are like two eyes of the Indian economy. Traveling in one eye only brings short-term benefits. Therefore, the government should continue to focus on public sector organizations and regulate private entities. Otherwise there is a risk of income inequality.

The author is an assistant professor at the Institute of Public Enterprise in Hyderabad