SELL THE SILVER – IT WILL BRING GOLD

about 27 days ago
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“Selling the family silver!!”

“Capitalists!!”

“Making India poor!!”

This and many more such exclamatory rhetorics is what we hear following the Govt’s decision in this Budget to monetise assets, privatise banks and get out of PSUs where the Govt is not required to be. These PSUs were created at a time when India, after Freedom, needed that complete support of the Govt. That was the aim of the PSUs. Do we need them now?  

But truly speaking, this is indeed the best thing to do. The Govt HAS TO get out sectors and companies where it has no business to be in. And yes, the Govt’s aim should be to make profit by selling and at the same time, be guided by the basic economic principle that it should not be in the business to engage itself in sectors where competitive markets have come of age.

Why does the Govt need to be in most of the sectors that it is in – Air India, BSNL, MTNL and to put it really drastically, why so many PSU banks at all? Why not just SBI?  If govt is deciding to disinvest in loss making or profitless institutions or operationally unviable enterprises, isn’t that good money chasing bad?

BSNL wants to stay a PSU and urged the PM a year ago to revive it and make it a strong telecom operator. Really? Are they living under a rock? Reliance Jio has made it difficult for the extremely competitive and more efficient telecom companies to survive and BSNL wants to continue?

At the same time it is important for someone to tell the Govt so much money spent on bank recapitalisations, year-after-year, can instead be used for so many better things, like good roads, improving Govt school quality, modernizing agriculture, building infra; so many things where money is needed badly.  

Today the mere name of a PSU brings to mind the picture of dull, drab offices, with tired and demotivated employees, surrounded by piles of files. Somehow the picture of efficiency and quick work just does not fit into PSUs. In fact the merger of banks has created a scene of complete chaos is many banks, with employees of merging bank also sitting alongside the existing employees; there are scenes of staff sitting on a stool, using another stool as a table and working. How does this in anyway show efficiency?

If we decide to decipher each and every PSU, every one of them will have issues. But most of them have almost the same common problems – the burden of too many employees, unproductive plants, old and rusted plants/machinery/assets, too much political interference, lack of transparency, poor governance. There is simply no will to grow into a world class organization, becoming leaders in technology and innovation. That is what we need to change. Now this is not a mere cosmetic change – we are talking about a change from inside to outside.

The moot point is that the Govt should get out of sectors, which do protect national resources directly.  Again, Modi Govt can plan for reforms but will the huge labor force agree? BSNL is an apt example where even an IPO could not happen thanks to the opposition of the trade union. Most of these PSUs are like MNCs – huge reserves, immense cash balances, gold mine of land reserves and little debt with huge assets. So why can’t we unlock their potential? Why does a PSU necessarily have to be like a huge outdated equipment, which does not work but takes away all the resources?

Someone needs to get aggressive, to push one to the wall and get things done. Or else, many of these PSUs, which are actually potential world class companies, will die a painful death. Or aren’t they already dead?

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