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Lot ought not assail Indian PSUs !

A set of govt. officials have opined that the government’s stake in BPCL should fetch Rs 1 lakh crore and with a premium maybe about Rs 2 lakh crore. The executives of Officers Association of the Company claim that the  valuation of the company is somewhere  around Rs 9 lakh crore. It's said that as per January 2021 market valuation, the government may get merely around Rs 45,000 crore to Rs 50,000 crore. Even if the government nets around Rs 80,000 crore,

   (Sidhartha Mukherjee)

The popular  adage that Government should not be in the business of doing business needs a thorough examination. Is the Government of India really running the businesses of PSUs ? Surprisingly the answer may turn out to be a qualified one.  Reality is that PSUs are run by their respective boards, of course the Government has its representation in that too. It’s true that various Ministries, NITI Ayog and other such bodies of the Government  play a significant role in running of PSUs. But the moot question is has the ground reality not changed considerably? Many PSUs are registered under The Companies Act, have their own Articles & Memorandum of Association, fend for their finances, maintain & present books for auditing, follow requisite  statutes,  SEBI guidelines etc. they can sue and be sued individually and are fully answerable to their shareholders. The Government also tends to distance itself from PSUs. Most statues, financial directives, overall guidelines and  policies are applicable to both private and public sector alike. So should one state in some ways the government runs private businesses too? After liberalization, the ground reality changed for most PSUs. They are now required to arrange their own funds, face competition, be subject to market forces quite akin to the private sector. The government does not allocate funds from its budget to most profitable PSUs and they have to raise their own capital. The Government has always claimed that it does not directly intervene in the functioning of PSUs, in their administration or day to day working. Why then suddenly the Government has lost interest in PSUs and  decided to sell all of them lock stock and barrel? It’s ironical that many profit making PSUs are today contributing handsomely to help the Government  run its own business. Of course all PSUs do not do well but there are several reasons for it. The level playing field which has been the demand of the private sector all along has been denied to many PSUs as well. The government indirectly dictates certain product prices in sectors like  Oil & Gas. Such interventions lead to under recoveries in PSUs; Private sector makes up through limiting its market exposure  and export earnings which the PSUs are not allowed to do. Both the central and state exchequers continue to earn through the taxes levied on these products and are unwilling to settle for a GST regime. Of course, the champions  of complete privatization prefer to step around such issues.

The Government has always preferred to handle PSUs through an intervening layer of   bureaucracy and the syetem has not been a raging success. Various ministries with attendant paraphernalia do the job  of overseeing, policy declarations, review and evaluation of PSUs. Pure business acumen mostly eludes bureaucracy since their orientation and grooming is towards governance and not the business of business. The emphasis of concerned  government departments is on  superintendence and compliance. Maintaining a status quo rather than timely action  on business imperatives. has been the norm. In fact, the government in order to improve affectivity of Ministries, has of late, attempted to induct professionals from the Private Sector into various Government Ministries/ Departments. This seems to be a result of an opinionated view that private sector professionals are better than public sector ones.  This move, at best,  is likely to be a marriage of convenience . The solution of running PSUs successfully,  in any case, does not lie in  piecemeal changes rather on letting go of the stranglehold of  government over PSUs. Busybodies like DPE (Dept. of Public Enterprises, DOPT (Dept. of Personnel & Training) etc. also tend to follow the letters rather than the spirit of policies of the government. Of course none have much concern for the market forces and would rather have PSUs function as  Government Departments. To cite an example, they would rather do away with ESOPs, PLI etc in PSUS which are incentivisation schemes for employee productivity in almost all modern business organizations, as they cannot find any parallel in Government annals. It has to be recognized once and for all that PSU’s carry out various commercial activities which are subject to market vagaries whilst Government Departments have to concern themselves with answering the parliament and legislatures.

Let’s fact check on all out privatization of PSUs in India in light of most immediate realties. No one should dispute the fact that the selloff of Air India was inevitable in view of its huge debt and persistent losses?  But what about those PSUs, Banks etc which are currently making profits and helping in swelling the coffers of national exchequer as well ? Air India  had accumulated losses of Rs 77,953 crore in the year ended 31 March 2021 whereas Bharat Petroleum Ltd., which is the next big ticket disinvestment, had  an income of Rs 2,36,889.57 crore in FY 2020-21;  its profit after taxes was Rs19,041.67 crore. The Government got Rs 6,665.76 crore as dividend and the company’s total dividend payout was Rs12,581.66 crore including a Special Dividend of Rs 7,592.38 crore. By all accounts, the government and other shareholders gained handsomely in the fiscal. Now , for purposes of sale, Now, let’s look at some valuations. A set of govt. officials have opined that the government’s stake in BPCL should fetch Rs 1 lakh crore and with a premium maybe about Rs 2 lakh crore. The executives of Officers Association of the Company claim that the  valuation of the company is somewhere  around Rs 9 lakh crore. It’s said that as per January 2021 market valuation, the government may get merely around Rs 45,000 crore to Rs 50,000 crore. Even if the government nets around Rs 80,000 crore, as is the expectation, in absence of any discernable plan for asset or infrastructure planning for this sum specifically,  the fear is that it will end up in reducing budget deficits only, which is far from ideal. Interestingly, Government’s Tax Collections are picking up.  In the 2020-21, the net GST collection was over Rs 5.48 lakh crore, which is more than the revised estimates (RE) of Rs 5.15 lakh crore. In 2019-20, the net collection was over Rs 5.98 lakh crore, which is 97.8 per cent of the RE. So why the hurry to dispose off Bharat Petroleum ?

All out privatization of PSUs have brought mixed results in many countries. Several important aspects concerning PSUs disinvestment need to be addressed satisfactorily. Any future plans to build PSU like assets will require colossal amounts of money. Other considerations which readily come to mind are the strategic importance of some PSUs, taking away of some of the guarantees which profit making PSUs offer to consumers,  genuine CSR activities, employment generation, employee empowerment, equitable distribution of products & services, support during war,  calamities, charity work  etc. Therefore it makes sense to carry out a detailed value analysis of privatization especially in light of recent global developments. Much of what has been enumerated requires a thorough debate on the public forum. The process of formulation of  the Union Budget of India presents us with a  great opportunity.  Ministry of Finance prepares the Union Budget in consultation with Niti Aayog and other concerned ministries. Bodies like SCOPE, CII, FICCI etc. are also consulted. Of late, we have seen even  the private sector and financial institutions are invited for open discussions and debate held in  public domain with leading media houses participating wholeheartedly. The private sector gets to air its grievances and convey a wish list for consideration of the Government. Somehow, the PSUs never get to be go beyond the so called ‘consultations’ under the aegis of their respective ministries, SCOPE etc., in closed  door meetings. CMDs of PSUs deserve to be heard. It’s imperative for the media and the common man that information sharing on a more open forum about PSUs is done enabling an inclusive debate. To simply assert that the respective secretaries of the concerned ministries, or SCOPE or CII etc., do get associated and their views obtained by  the government, is like saying, in words of  Samuel Goldwyn, ” If I want your opinion, I’ll give it to you”. Anyone familiar with rudiments of communication is  aware that to hear from the horse’s mouth is always better than hearing from a third source.

The powers that be, after the setbacks in legislations concerning agriculture, seem to have momentarily paused in ladling the opiate of privatization to laity. Champions of privatization suddenly feel caution is the better part of valour. Also with the specter of another wave of pandemic looming large it may not be a popular move to shout from rooftops about privatization. After all, the PSUs did a commendable job in the last round of pandemic, what with revving up supplies of medical oxygen, keeping  the supply lines of POL & LPG working smoothly, paying up the MSMEs, scaling up the CSR initiatives, even helping out with PPEs & Sanitizers. While it’s true that the private sector also did its bit but one cannot expect them to chip in as much as a PSU. Their  argument that  compulsory  philanthropy through CSR having already been thrust upon  them, they can do no further is justified to an extent. There is nothing wrong in a  prominent business house when approached for participating in the Hon’ble Prime Minister’s Ujjwala Scheme flatly refusing and conveying they are in the market for business and not charity.

Recently we have seen how the vast majority of urban, rural, uneducated, underprivileged and aged populace were caught in a hopeless situation by the Covid 19 outbreak. The pandemic  seemed like Dante’s version of hell descended on earth. India, also witnessed the helplessness of the government when the entire gamut of its gargantuan machinery crumbled like a house of cards and  a dangerous domino effect played out on one civic system after another. Needless to mention, even during all this, politics got played out in full steam.  One important lesson the pandemic taught was that in such situations  citizens, corporates, tourists et al have to fend for themselves. They cannot simply be dependent  on government bodies and systems concerning health, medicines, supply of essential commodities, vaccines,  banking, law & order, transportation, municipal functions etc. The supplies of basic and essential commodities got adversely impacted, the  much touted e commerce portals also collapsed. Only the PSU supply chains seem to be working. Admirably fuel supplies were prompt and plentiful, LPG continued to be available and the PSUs chipped in the health management as well, providing the vital medical oxygen and ventilators. Today, what hurts common citizens the most is that it can no longer live life with an air of  self confidence and assurance that the government won’t lets things go out of hand. Loss of this trust is indeed very tragic and has a potential to tear the entire social fabric asunder.

The pandemic has made citizens to stand up, create self help groups and play a greater role in civic life for the sake of their own and others survival. They have also realized  that many PSUs played a very positive and significant role during the crisis. Today we are once again confronted with another version of the dreaded virus. Therefore, many have started questioning the decision of  removal of PSUs in entirety.  Already Bank Employees and a section of Tamil Nadu Polity are up in arms against total privatization. The government needs to take serious note of it and hold critical discussions regarding  privatization of profit making PSUs. Consultations in public domain regarding PSUs and their future role,  just like the ones being currently done with Private Sector before finalization of  budget, can go a long way in finding workable solutions for the greater good of India. As the Google Advertisement says  –  “बोलने से सब होगा ” , PSUs को भी बोलना बता दीजिए प्लीज़.  (By Sidhartha Mukherjee)

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