Is Bharat Sanchar Nigam Ltd (BSNL) turning the corner? The company reported an operating profit of Rs. 672 crore and apparently after eight straight years of losses, the company is expected to make a net profit by 2018.
Understandably, telecom minister Ravi Shankar Prasad is preening, pointing out BSNL was a profitable organisation when the Atal Behari Vajpayee government had left office and that it had been run to the ground since then. Now, in the 18 months of this government BSNL is back on the track to recovery.
Earlier this year, the government appointed Ashwani Lohani as the new chairman and managing director of Air India. What dictated his choice? The fact that as chairman and managing director of the India Tourism Development Corporation (ITDC) during the Vajpayee government, he was responsible for turning the company around.
Maybe both BSNL and Air India will be able to become profitable during this government’s tenure. But should the government’s scarce resources – and taxpayers’ money – be utilised for this?
The public sector had a rationale at one point in our history. Our first prime minister Jawaharlal Nehru was a huge advocate of the public sector because there was a widespread belief that, at a time when economic and industrial development was of paramount importance, the private sector would not be able to step up to the plate. Not just Nehru, even his arch ideological rival, Minoo Masani, had spoken of a mixed economy model in which public enterprises would form the second biggest chunk of the economy (the biggest was what he called free enterprise). Masani, too, said these enterprises would fill the gap where the private sector would not be able to meet the country’s needs.
But that was then. Can we honestly argue that this is true of today also? As T. N. Ninan notes in his book, The Turn of the Tortoise, half of new power-generating capacity commissioned in recent years has been in the private sector. He also points out that the public sector now accounts for one-fifth of total investments made in the country against half earlier.
Not much has been heard of the proposal enunciated in the early days of this government to revive five loss-making PSUs, two of which (HMT Machine Tools and NEPA Ltd) had been making losses from 2007 onwards. The revival and restructuring of PSUs has rarely been a success. The Public Enterprises Survey, 2013-14 shows that only 19 of 48 PSUs taken up for revival have been turned around; three of these lapsed into losses again.
Look at the top ten profit-making PSUs and see the sectors they are in. These are sectors where the government has a monopoly (oil and gas, mining) or where it has a huge first mover advantage and where its monopoly was unchallenged till the mid-1990s (power, steel). But in the case of telecom and airlines, even the decades-long monopoly didn’t help; as soon as there was strong competition, the PSUs couldn’t cope. Clearly, government systems are not geared to functioning in a competitive environment. One Steel Authority of India or Bharat Heavy Electricals Ltd will not change anything; they are exceptions that prove the rule.
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