Disinvestment of Public Sector Undertakings (PSUs) is an avowed policy of the Union government. With the dismal track record of several PSUs, the Centre cannot be blamed for the decision to divest. Gone are the days of the Nehruvian euphoria for creating PSUs with their ‘commanding heights’. Times have changed and the economy now has other engines of growth. But it should not be hastily inferred that all PSUs have failed us. On the other hand, in the initial decades after Independence, when private investment of substantial magnitude was scarce and timid, core PSUs kick-started India’s economy and provided a robust framework for economic growth.
Providing employment was also one of the objectives, though not the paramount one. Nevertheless, in the years that followed, several PSUs became white elephants serving neither a social nor economic cause. Many of them naturally became black holes for public money. They were often textbook cases of poor management and aggressive trade unionism, and became umpireless playfields for political parties with myopic objectives. In fairness, it should be mentioned that Central government PSUs are a shade better than several state PSUs, most of which lead a blatant parasitical existence.
By 1991 when the country embarked on the policies of liberalisation, privatisation became a natural credo. Selling off unviable PSUs and phasing out those from areas where the private sector can provide better and cheaper goods and services was imperative. Governments since then have sold several units either fully or partially.
There always has been a rational justification in disinvestments so far. For instance, it was argued, and rightly so, that the government need not be in tourism, hotel industry, consumer goods manufacturing, automobiles and such sectors where private players can provide consumers with abundant choice. The argument was the government could utilise the money gained by selling off PSUs to improve services in public goods like infrastructure, health and education. It was widely held in the nineties that the state needs to concentrate on these areas aimed at human resource development that would facilitate and accelerate economic growth.
All this is sound theory. But in practice, successive governments have found it easy to part with profit-making and strategic industries in the public sector. The present attempt of the government for ‘strategic’ disinvestment in some prime PSUs and the eagerness to mop up around Rs 1 lakh crore need to be viewed in perspective. Let not the ideological blinkers like ‘public sector is bad’ and ‘privatisation is the panacea’ obfuscate reality. Further the temptation to privatise did not stop with PSUs. Contrary to the accepted rationale of privatisation, we have seen the government withdrawing from health and education sectors, leaving the citizen with almost no choice but to seek costly education and unaffordable healthcare offered by the private sector.
Confronted with an unprecedented fiscal deficit and worried by an economy in crisis, the government has to find resources. Disinvestment is a preferred option for ideological and practical reasons. But when a sterling company like Bharat Petroleum Corporation Ltd (BPCL) is also being offered for ‘strategic disinvestment’ along with Shipping Corporation of India and Container Corporation of India, the nation naturally expects to know the strategy behind it. A few more PSUs have been selected by the government where its shareholding will be brought to less than 51 per cent.
The Centre seems to be compelled by the need for liquidity than long-term macroeconomic considerations or the logic of structural adjustment. Short-term exigencies becoming the sole raison d’être for disinvestment in core sectors like petroleum doesn’t augur well. Of course the highly professional BPCL will immediately lure investors. But do the short-term financial gains outweigh the loss of a premier PSU in a crucial sector?
The divestment of a loss-making PSU of course sends out a message. But when a Navratna company is being offered to the private sector, what is the lesson to be learnt? It conveys clearly that regardless of your performance and professionalism, we shall divest (or disown). And should the government not make honest efforts to find out why some PSUs have been wilting, and how successful PSUs are being managed?
Any student of privatisation knows only too well that its success depends on the transparency of the process and the effectiveness of the regulators. While welcoming the private sector, governments should ensure a level playing-field with well-defined rules of the game. The role of effective and independent regulators with statutory power should be well-defined. The country needs to know the policy and yardstick for PSU privatisation. Driving every public sector employee into the precipice of uncertainty cannot beget the best outcomes.
The short-term and long-term plan of disinvestment of PSUs, created by exchequers’ money, need to be shared with the nation. The notion it is all ad hoc temptations and that long-term strategy and socio-economic considerations do not weigh with the government has to be dispelled.
Elected governments have an inalienable obligation to reconcile growth with equity. If the growth narrative is going to be overwhelmingly decided by the private sector, governments should necessarily script their own equity narrative. Or else growth will be nothing but a barren cloud. And as every welfare economist would vouch, growth without equity is worse than equity without growth.