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Making PSUs leaner

Kuldip Nayar

A PARLIAMENTARY committee took me to headquarters of several public sector undertakings (PSUs) in Mumbai, Bangalore and Hyderabad. It was an outstanding performance which they projected on the screen with the help of computers. The PSUs do us proud. What impressed me the most was not the whopping profits, but the entrepreneurship -- the spirit to excel and the determination to be on a par with international standards, which some have already achieved.

Indeed, they are the `new temples', as Jawaharlal Nehru hailed them whenever he pushed the button to start a new factory, or an irrigation project. He reminded us of the commanding heights they would achieve one day. Unfortunately, many have failed to co me up to those expectations because they are trapped in bureaucratic delays and political patronage.

Still, several of them have overcome their difficulties. A few can still be retrieved. The Government has done well, for example, to advance money to HMT, once India's pride, for a restructuring exercise.

What is disconcerting is that the PSUs have been told to shed their holdings. They are making handsome profits and contributing to the government exchequer. Still, the Centre is offering them to outsiders, as much as 49 per cent shares in certain cases. The operation is called disinvestment but it is like selling part of your house to a purchaser who is certain to occupy the rest in time to come.

The argument advanced is that you have to put in the market your best things to attract customers. But why at a time when the undertakings have overcome their teething troubles and are surging ahead to touch the commanding heights?

The Petroleum Minister, Mr Ram Naik, has done well to withdraw his Ministry's undertakings from the market. Imagine the ONGC, the best in the country, queuing up for customers! Do we not have a sense of honour? What reputation would India have in interna tional circles? How would the ONGC employees feel after putting in excellent work?

No one would support the case of financing the sick PSUs. If they cannot be retrieved, they should be sold to the first buyer. Why not lease them out? Some are in desperate straits because of mismanagement or lack of dynamism. A few are also the victims of perennial labour problems. Surely, workers can see the difference between unemployment, if the undertaking is shut, and employment if it is open. I am not against parting with the PSUs on ideological grounds. But I am against the fetish of selling, wh ich is supposed to be part of economic reforms.

Selling Modern Bread was a good, quick decision. The element of timing is important. I recall how halting has been the exercise to sell the public sector hotels. In 1990, when I was India's High Commissioner in London, I was sent an SOS to find customers . New Delhi gave no reply to the repeated communications that several parties were interested in buying the hotels.

Why is the present Government silent on its sale or disinvestment? The reason is simple: Both ministers and bureaucrats have developed a vested interest in these handy places of entertainment. Were the desire to sell them genuine, the government could co llect the cheque tomorrow. Take another case. All the power -- and passion -- has been used to hawk the national carrier, which is the country's pride. Why the airlines first, not the hotels? What is the criterion of selection? Who chose the array of PSU s to be disposed of, part by part? There has to be transparency in the mode of selection because the nation, though poor, has given its mite to these undertakings.

The task before a developing country is not merely to sell equity in the best of its enterprises to collect money but to mould and refashion them so that they contribute effectively to the realisation of wider and deeper social values. Each country has t o develop according to its own genius and traditions.

Economic and social policy has to be shaped from time to time in the light of the same perspective. The set formula of the World Bank and the IMF, or that of the developed countries, led by America, is privatisation. It suits them because they have reach ed the stage of development where the state does not have to invest or guide development. The Third World countries still have a long distance to cover. They have to find money for certain projects that are essential but not remunerative.

The point to remember in all these efforts is the level playing field. The PSUs are as keen to have it as the private sector is. Take the specific case which is hurting the ONGC. Private hands can import crude without any duty in Gujarat, while the ONGC has to pay 22 per cent. Why? Is it because of the politicians or bureaucrats interested in someone? It would be simple if there is uniform duty at the entry point. No one will have cause to complain. Otherwise, the public sector under a politically motiv ated government will be at the receiving end.

The PSUs require no disinvestment of capital but of labour. It is the proliferation of hands that pulls them down. The undertakings have been a dumping ground for the political bosses, who have their constituency workers or party functionaries to absorb. New technology is making it still the more difficult for the public undertakings to carry the extra flab. This makes them heavier, and they cannot run as fast as the competitors outside India. The government has turned a blind eye to the problem because of party and labour considerations. Still, the wrong cannot be wished away.

The chairmen of pubic sector undertakings make no secret of the fact that the burden of unwanted employees is hampering their performance and profitability. The Prime Minister has announced a 10 per cent pruning of the bureaucracy. I hope this is applica ble to the PSUs as well. It does not look as if they will be covered. Otherwise, we would have heard of steps to make the undertakings lean. At present, the obsession is disinvestment.

If any sector needs privatisation, it is services. Whether power, water, bridges or roads, they need to go to private hands; this may not only push development but also reduce waste and theft. The Government should also privatise certain functions of the Railways and the Department of Posts and Telegraph. The perennial threat of strikes will decline, and there will be competition from within.