It is true public sector needed a major overhaul as some of the enterprises set up immediately after independence needed to be reformed or closed down because they have outlived their purpose but without public sector India could not have made big strides to become a near $3 trillion economy.

One cannot forget the yeomen service public enterprises had done to nation building and economic development at critical times and even today many of them have been performing exceedingly well. Public enterprises always came to the rescue of the government in times of crises and acted as a stabilising factor to steady the economy.

The good and the bad that public enterprises have done to the economy since independence and the way forward has been succinctly brought out in a new book on Public Sector authored by veteran journalist K R Sudhaman and published by Har-Anand Publications. Privatisation is certainly not the panacea for all ills public enterprises but certainly there is merit in Modi’s decision to exit public sector from non strategic sectors and limiting its operations in strategic sectors to inject competition and efficiency.

The reason for many of the public enterprises not believed to be doing well is because one tends to forget the objectives for which they were set up try to measure from how much profit they have made. Public enterprises had several objectives, which were in conflict with profit. Hence the yardstick for measuring public sector has to be different.

It is unfortunate that “we try to misjudge its valuable contribution to the nation building,” Sudhaman argues in the book emphasizing the fact public sector enters an area which private sector does not want to tread. Also the objectives are different for different public enterprises. It could be job creation, regional development, backward area development, heavy industry development, road-rail development or price stabilisation in an era of shortages. Profit cannot be motive in all these.

Public sector has always bailed out the economy in difficult times, be it 1962, 1965, or 1971 wars or during economic liberalisation or 2008 global financial crisis. Even during East Asian currency crisis, it is public sector that came to the rescue of the government to put the economy on even keel.

There are also several studies to show that public enterprises performed better than private sector in similar circumstances. Soon after independence, government was keen to encourage private sector to contribute significantly in industrialization of the country, but unfortunately they did not respond adequately and government had to depend on public sector to step. Private sector had neither the appetite nor the financial muscle to invest heavily in long-gestation infrastructure sectors like power, transport and heavy and basic industries.

Modern Bread was set up in public sector where there is a shortage of bread in an era of food scarcity in the country. When food grains became available in plenty, bakeries were set up in private sector in every nook and corner of the country. At that time Modern Bread ought to have exited the business after having served the requirement but it did not happen and subsequently it had to be sold as a loss-making company.

Likewise Air India was nationalized in the 1950s as world over airlines were in public sector for security reasons. At one time Air India was one of the best airlines in the World. With open sky policy coming being World over including India, Air India ought to have been privatised but it did not happen resulting in the airlines being in perpetual loss.

“Many public enterprises were set up to deal with difficult situation at a particular point of time and once it is done, it should automatically exit but that does not happen making them sick and patently unviable,” Sudhaman argues in the book stressing that “the main problem therefore is not public sector but the fact that there is no exit policy for public enterprise to get out after fulfilling the objectives.”

Prime Minister Modi has rightly decided to take “the bull by the horn” and privatise many of the public enterprises, which had outlived its utility, Sudhaman said.

The book while highlighting the merit of public sector, analyses why public enterprises should get out of non core business and selectively in core business as well to inject competition and efficiency. This privatisation and disinvestment process will also help government to garner resources. The government has potential to garner as much as Rs 10 lakh crore by unlocking value of public sector. This huge money can be utilised for developmental purposes.

There is no merit in the argument that off-loading public enterprises is like selling family silver to pay the grocers’ bill. Family silver is meant to bail out during rainy days. India did pledge its gold to prevent default in global payments in 1990-91. But it did get its gold back and perhaps a little more from the IMF when the economic situation improved, Sudhaman said.

There is need to unlock value of public enterprises, Sudhaman said adding big ticket privatisation and disinvestment will also ensure enterprises are run efficiently to kick-start the economy. (IPA Service)