State Governments in business

THE NEED TO restructure public sector enterprises at the State level is becoming increasingly evident. Recent protests by employees of various State corporations - particularly by transport corporation employees in Andhra Pradesh, which ended earlier this month, and in Tamil Nadu - should be taken as early warning signs to State Governments that will have to seriously address the politically sensitive issue of restructuring their public sector. The proliferation of such enterprises at the State level has been a result of two historical factors: the post-war reconstruction efforts prior to Independence and the Indian republican conceptualisation of state-led economic growth. No doubt, most of them have done well for the nation by serving as nodes of economic development as well as by taking some services to the people that private enterprise would have found difficult on grounds of either capital mobilisation or revenue generation. While they have made life much easier for the common man, the time has now come for a reappraisal. Such a task is imperative if the spirit of the public sector is to be retained.

A good starting point in this exercise will be to take cognisance of the fact that of the 1,071 public sector enterprises run by State Governments all over India, a mere 247 have been found to be making profits. The operations covered by the States' public sector are spread over so wide a range that very few economic activities have been left out of the business ambit of State Governments. Restructuring this important segment of the economy requires not just bold political initiatives, but also a manageable economic approach. To begin with, enterprises that serve no social purpose by a continued governmental involvement should come as prime candidates to be unburdened from the States' exchequers. The remaining enterprises should be categorised along two lines: the required pattern of ownership and the required extent of control. Needless to say, the complexities involved in the handling of State Government public sector enterprises are much more than those surrounding the Central PSEs. However, the results of this complex operation boil down to a choice of decisions: retention, restructuring and closure.

Given the dichotomies that underscore the Indian economy, solutions to this urgent requirement should take into account the sensitivities of the sections that are likely to be affected and suitable alternatives suggested. That State-level public sector enterprises have not only fallen far short of expectations, but have also run counter to their founding principles is evident from the performance of State electricity boards (SEBs) and transport corporations across the country. If systemic failures worsened the situation of the SEBs, a near-total dependence on governments for finances has come as a major constraint for State transport corporations. While there is a social rationale for both these enterprises to continue their operations, the rapidly declining finances of these entities, as well as the governments that support them, call for urgent correctives. Yet another problem confronting State-level public sector undertakings is multiplicity. Rationalising such superfluous units into single entities, if at all these require the presence of State Governments, will go a long way in reducing the public burden. The stated objective of the economic reforms when they were ushered in was that the financial surpluses made available by governments pulling out of business would go into developing the crucial social sectors, for instance, public health and education. If this end is to be met, it is now time for State Governments across the country to take steps to send out positive signals that India's reforms are indeed on the right track.

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