Is It Time for the Government to Manage Public Sector Companies Instead of Selling Them Off?

Public sector companies (PSUs) are a cornerstone of economic infrastructure in many countries, including India under the governance of the Union Government. Yet, the question of whether the government should continue managing these companies or focus on disinvesting them arises frequently. This article explores the challenges in managing PSUs and suggests potential solutions.

Understanding the Government's Role

The government is not a single entity; rather, it is a complex apparatus composed of various departments, ministers, secretaries, directors, advisors, and other experts. These entities collectively make policy decisions and establish public sector undertakings (PSUs), such as those under the Companies Act. These organizations are often established with the investment of substantial capital and a board of directors, including government officials, to oversee their operations. This supports the growing argument that governments are better suited to manage certain public sector companies rather than selling them.

However, the government plays a role in policy-making and strategic oversight, not day-to-day operations. Once a PSU is established, the responsibility of running the organization falls on appointed officials. If these individuals or the entire system fails to deliver optimal performance, restructuring or oversight by the Central Vigilance Commission can help address the issue. Yet, in cases where systemic issues persist, a re-evaluation of the company's management structure might be necessary.

The Case of HAL and Public Sector Banks

A prime example is the Hindustan Aeronautics Limited (HAL), a public sector entity that has been operating for over five decades. Despite its longevity, it still relies on imported fighter jets from countries like France, Russia, and the USA. This situation raises the question of whether HAL's existence is justifiable when domestic production could meet defense requirements. Similarly, public sector banks receive billions of crores of public money annually but still require support to remain viable, often resulting in ongoing financial drains.

Technological challenges, bureaucratic inefficiencies, and lack of accountability contribute to these issues. For instance, why do public sector banks continue to struggle financially while private entities like Titan Watches have successfully navigated these challenges? These questions highlight the need for a comprehensive review of how the government manages and supports public sector companies.

Privatization and Disinvestment Policy

India's policy of privatization and liberalization, initiated by the government under Shri Narasimha Rao's tenure, aims to reduce government intervention and enhance service delivery. While disinvestment is a part of this policy, the idea is not to entirely sell off PSUs but rather to find more efficient and accountable management structures. The argument against the term "selling" is that the government has already invested substantial sums in these companies and should focus on recovering those investments through strategic measures rather than complete privatization.

The privatization of PSUs can indeed lead to better performance and efficiency. However, it is crucial to ensure that these companies can operate independently and transparently, providing better services to the public. This involves revisiting the current management structures and considering alternative models that can enhance accountability and efficiency.

Lessons from the Emergency Period

The emergency period in India, though challenging, provided valuable lessons on governance and accountability. Key observations include the efficient functioning of public services during this period, such as the timely running of trains and the absence of latecomers in government offices. However, alongside these positives, there were also instances of harassment and a lack of transparency.

One of the primary learnings is the importance of strong, accountable governance. While emergency measures might prioritize efficiency, they often come at the cost of transparency and rule of law. The same principles should apply in the management of public sector companies. Ensuring that the government retains a strategic oversight role while empowering independent management structures can help maintain accountability and efficiency.

Conclusion

In conclusion, the management of public sector companies is a complex issue that requires careful consideration. While there are valid reasons to privatize and disinvest, the government should not entirely relinquish its role in these companies. Instead, it should focus on enhancing governance and management structures to ensure accountability, efficiency, and better service delivery. By doing so, the government can better support the functioning of public sector companies and deliver their intended benefits to the nation.

Keywords

government management public sector companies PSUs management privatization disinvestment