Slimming a leviathan

PRIVATISATION IN INDIA: (Series No. 6 on Concepts and Applications in Management): G. Ganesh; Prof. Ishwar Dayal - General Editor; Mittal Publications, H-13, Bali Nagar, New Delhi- 110015. Rs. 650.

IF ANYBODY had imagined that the disillusionment with the performance of the public sector in India during the last few decades would by now have paved the way for privatisation of the state-owned units, the scene at the Bharat Aluminium Company (BALCO) where the unions are putting a stiff resistance to the Government's decision to sell it to Sterlite should make it clear that the induction of the private sector is not going to be smooth.

The rationale for the entry of the public sector in a big way into Indian industry was that it would ensure a fair deal to labour as well as a fair price to the public at large. The assumption on which this hope was based was that there would be a qualitative change in the attitude of trade unions towards the government which was making its entry as owners and managers from what it had been to the private captains of industry. If this did not happen, it could be attributed to a few factors which began manifesting themselves later. The attitude of the trade unions only stiffened when they assumed that the government in a democracy which had gone on record under Nehru's inspiration that it was committed to inducting a ``socialistic pattern of society'' could be dictated to submit to their demand. When the public sector managers who were responsible for sustaining an increase in production and were in no position to submit to every demand including increase in wages, there was disharmony and strife in a number of public sector units.

What made the scene worse in the public sector was that the managers did not have the same freedom as their counterparts in private sector for agreeing to wage increases and recovering the outgo by effecting economy elsewhere. Trade union leaders - and they included veteran communists - also discovered that it was much easier to negotiate with private sector than public sector managers who had to depend upon their ministries for approval of every decision they had to take.

A scenario like this in which a number of public sector units in India seem to have reached the end of the road, therefore, has provided an occasion for Mr. Ganesh, a senior officer of the Indian Administrative Service, to take a look at whether there could be a return to privatisation. The huge burden thrown upon the government by its having to lend and indefinitely sustain budgetary support to public sector units which were perpetually in the red, did not seem to leave it with any choice except to disown the units. He drives home this point with a spray of statistics and draws attention to how the contribution by the central public sector exchequer to the central public sector enterprise in the Eighth Plan period amounting to Rs. 1,42,321 crores was twice the contribution made during the Seventh Plan. The measures which he has examined for achieving a turnaround of the public sector units include the restructuring of the capital base involving huge amounts into equity and disinvestments of government shareholding to public shareholders and access to capital market. ``This involves changing from a psychosis of distribution of patronage to one of aggressive marketing and selling which will embrace a whole canvas of steps such as quality control, product diversification, locating new customers and new user after-sales, packaging and brand image,'' writes the author.

The question is whether these and other recommendations could be implemented for producing the desired ushering in of a healthy public sector. The government did realise that the top bureaucracy from which the CEOs of the public sector units were chosen lacked the managerial expertise and took the decision to recruit executives from some of the private sector units to run some of the public sector units. It is worth examining whether the infusion of talent from the private sector did really make a difference to the performance of the PSUs. Mr. Ganesh devotes considerable space to a study of the creeping sickness of public sector units and the efforts made by the Bureau of Industrial and Financial Restructuring (BIFR) and the Disinvestment Commission which must have discovered that the malaise to which the public sector units had sunk into would take quite a long time to disappear. The government should have known that it was only deceiving itself when its disinvestment measures provided for the taking over of the shares by the financial institutions in the public sector. While there have, no doubt, been examples of a quite few public sector enterprises like the Oil and Natural Gas Corporation which have done well and are recording profits year after year, it is due to their field of activity being in a realm where it was virtually impossible to run into losses.

The author has indeed made an exhaustive study of the public sector and the ills it is suffering from. The question, however, is whether apart from the stiff opposition from the labour unions and the leftist opposition to privatisation, do we now have a private sector in India which could be ushered in for an efficient takeover? Apart from the huge resources the private sector would have to mobilise - a conservative estimate would put it at not less than Rs. 60,000 crores even if only 50 per cent of the PSUs is to be taken over - does the private sector have the kind of leadership which could prove equal to the job?

However, much the captains of the private sector might resent the suggestion, the distressing reality seems to be that it has done quite well for itself during the era of the public sector which has been obliged to rope in its services for quite a number of jobs which had to be done. It was certainly an option much softer than that of having to assume responsibility in disinvested public sector units. Even if there could be a smooth transfer of control from the public sector to the private sector, could there be an assurance that the community will get a better deal? The right to hike - or ``rationalise'' - prices and the disappearance of any accountability to Parliament are the realities which a community much larger than the trade unions will have to face. The public sector may be a slumbering leviathan but it is going to take a long time before it can be slimmed. Mr. Ganesh has done a competent analysis of the issues involved in privatisation.

CVG

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