[Gaur]

Few years back was discussing this topic with a friend who is deep into these topics (UPSC wala), i mentioned the point of Govt. sellling/disinvesting porfit making PSU's.

his rebuttal, any company which has a known potential of making a 1000cr profit if only makes a profit of 400cr is basically a loss of 600cr, also most govt. PSU's are making profit due to the monopoly they enjoy, put them in the water and then see them sink.

[sramanat]

I read a research paper (don't recall where) that claimed that the Indian government tries to do a lot of things and consequently gets stretched beyond its capacity. The result is that it is unable to do even basic things that a government is supposed to do.
Divesting in PSUs and the resulting money should be put to good use and shrink the government significantly so that its resources are better deployed. In the absence of it, if the money were to be spent wastefully in waiving farm loans or providing free laptops to school children or some such ridiculous program, I wonder if we will be better off.

[Stribog]

Originally Posted by mvadg

Sorry, I don't believe that private sector is any less corrupt than government run entities. This is basic human nature.
The worst part about private entities is that they are somehow protected from complete scrutiny even though they operate and interface with the public. Their operations affect every human (and the planet) just like the government entities.

A BPCL CEO put it perfectly - private enterprises are motivated only by greed. Private entities cheat the consumers, their suppliers and the government and in turn their employees cheat customers, and their own management, if they can get away with it. And of course, management cheats their employees.

We can see corruption among the employees of private sector in many organizations - example - DTH technicians who come and replace perfectly functional equipment after changing some configuration settings at their end to make it look like the equipment is malfunctioning.

Hopefully, in future, organizations will be rewarded for running their operations ethically without favoring certain vested interests. It is not the profit loss statement we should be looking at, but a different metric that tells us if society has benefited as a whole because of the operation of an organization.

This intense fear / skepticism / hate almost of the private sector in India surprises me!

Take any sector that has been privatised, compare it to when it was run under the govt and then see the difference.

Telecom - For decades it was a state monopoly and it showed.

It took years to get a single telephone landline connection, uptime was abysmal (didn't pay bribe to the linesman, then bye bye telephone line) and our data reflected it.

Teledensity till 1991 (despite all the vaunted "Rajiv Gandhi introduced telecom revolution rhetoric") was less than 1 / 100. That is 1 phone for a 100 individuals. Rates were stratospheric too.

The first revolution in our telecom journey was the NTP of Arun Shourie, and this privatized the telecom sector, lifted regulations and the results since then have been astounding!

From a base of 5 Million phones in 1995 to 20 million by 2002 we added more phones (on the back of the private sector and before mobile phones so you can't use that argument) in landlines in 6 years than we did in the 60 years prior to that!

Once the mobile revolution took off, it is the private sector and its competition that has reduced rates to the LOWEST in the world in terms of data.

How many of TBHP users still use BSNL vs private sector providers? I would guess that the results would be something like 1:100 and yet we carp about the private sector!

Every single sector except the POL sector that was under the state was non competitive (globally or otherwise), ruinously run and just a loss making machine.

Watches? Did you know that that while there was no express monopoly for PSU's here (HMT), policies were made to ensure no private sector player was able to ever turn a profit. The result? In the mid 60's till about the late 70's (when this market slowly started opening up to the private sector) you had a freaking waiting list for watches! Don't believe me, ask your parents / grand parents. You basically lined up at the HMT shop, registered and you would get your watch in 2-6 months (based on your luck)

In the 50's when the market was open, you had private sector companies like Timestar thriving, but these were import driven, high quality euro made watches and the govt put restrictions and eventually stopped all imports (quota system says hi), this lead to them going near extinct and HMT got 90% of the market share.

The extent of the moribund sarkari nature was shown when in the mid 60's Quatz watches boomed around the world - these were cheaper, easier to maintain and far more reliable. Howver HMT in its wisdom decided that it would stick to mechanicals and till the mid 80's India was one of the largest mass markets for these watches.

It was AFTER Indira lifted import controls on some products that HMT started to die.

By the mid 90's it was dead.

Like this I can list sector after sector where PSU run entities were utterly useless, and the private sector is what turned things around.

How many of us work in the private sector? Consume products and services made by the private sector (if you had a choice between a 3 star private hotel and an allegedly 5 star PSU hotel, which would you choose?) yet somehow also hate / distrust the private sector?

This is like Schrodingers private sector at this point - hated and not hated simultaneously.

Are they perfect? No, I believe a Nordic style capitalistic / socialistic market is the best - private sector for goods and non essential services, but highly regulated in a transparent manner with the state running education, healthcare and food delivery mechanisms (ration shops for instance)

Originally Posted by AZT

I'm a fan of privatization but not if all of it goes to Adani / Tata / Ambani. This then starts looking like the Russian Oligarchs under Putin.

When an entity costs upwards of some 5,000 crores, tell me how many companies have the financial muscle to buy / operate them? Across all sectors (excluding IT / ITES here), you might have 10? 15?

As long as the markets are regulated, I fail to see why a Putinesque oligarchy will emerge. Irony is this is exactly what happened in "socialistic" India from the 50's till 1991 though.

[Aravind_M92]

I will totally say, it's the government's ignorance and incompetence in failing to run PSUs. Atleast profit making wings could've been held under the government.
ONGC posted huge losses about 5 years back and tried to be sold off, but not only they came strong, they also bought Majority in Hindustan Petroleum. There were rumours of it being sold off to Reliance Petroleum
Another example is of LIC. A PSU literally a money making entity which inturn has given huge investment and finding to government issues.
BSNL has been the communication backbone. And still is functional at the remotest of locations around India. With its huge losses, I believe the ownership will be transferred soon as one major PSU sale has been completed. And no prize for guessing on who'll be buying out BSNL!

If all are privatised, the government's revenue generation would decrease for sure and in the end the common tax paying citizen will definitely be overburdened with filling the gap and inturn might have to pay higher taxes. Already the current ITR plans are planning to phase our tax saving schemes and I wonder what more are to come!

[Nithesh_M]

Originally Posted by androdev

Similar urgency and tweaking will be shown to sell healthy PSUs to A&A at a good discount :-)

Jokes apart, this PSU vs Privatization is a complex issue.

Govt run PSUs have to be answerable to the public no? Isn't that why RTI is a boon for citizens and bane for politicians? I know from first hand experience how govt offices dread RTI requests because somebody pays 10 rs but the office has to furnish 500 rupees xerox worth of documents in response with a 100 rupee Registered post.

What's the equivalent of RTI to investigate private companies? Whistleblowers are either killed or chased out with legal threats. Just see the judges getting bumped off for daring to take on construction firms illegal activities as an example.

PSUs prevented private companies from artificially jacking up prices to suit their greed. This is why a once profitable BSNL was run to the ground so half a dozen private firms can charge you whatever they felt is a good steal. Private data is worth crores in the market and all internet providers and cellular networks mint money while BSNL was not allowed to upgrade their network which led to losses mounting.

More recently the whole cable network dismantled to let in dish networks charge you 10 to 20rs per channel when before that you paid anywhere between 150 to 250 rupees a month for 299+ channels where you didn't have to worry about paying separately for south, hindi, sports packs that now jack up the price 3 folds for far less channels.

You can now see the farm sector being dismantled. Airports gone, shipping ports gone, railways soon enough.
Imagine paying 18% road tax while buying car then paying 100 rs every 5 kms for taking your car out of home on top of exorbitant fuel taxes? And i don't mean highway tolls but even the road that runs through your city because that'll soon be a reality when all roads are privatised.

The more psus go down the more you'll be asked to cough up for the services. Currently it is banks like SBI keeping the interest rates for private banks low, take out state owned banks and you'll be paying whatever these privateers deem fit.

If the solution was to fix corruption, selling PSUs isn't going to fix anything. You just privatized corruption and what's worse is there's nothing equivalent of an RTI to help unearth their secret backdoor deals. Remember Essar leaks? Remember Private oil companies sending 2 spies to steal documents from govt office.

https://www.financialexpress.com/eco...et-data/44979/

This is akin to asking an end to caste based reservation but not exactly asking an end to caste system itself especially if you're from a privileged class.

[Electromotive]

The benefits we are attributing to privatization have not much to do with privatization itself and everything to do with competition and well designed incentives.

The government's job is to regulate the market and ensure fair competition so that industries evolve and prices of goods and services remain in check. This is why there are anti-trust laws. But if the govt. keeps selling off valuable assets for chump change to their friends we are going to end up with oligarchies and virtual monopolies. Look at Russia, lots of private companies, zero innovation and a failing economy.

The fear of failure and greed of greater wealth is what drives the private sector towards excellence. If PSUs were managed such that the PSU employees could stand to lose their jobs for non performance or if there were greater incentive for good performance, PSUs can be as good as any private sector run companies. Because PSUs provide job security without any requirement for performance, you get the typical lazy and often incompetent PSU employee.

[drsnt]

My two cents, quoting a remark by a CEO of big PSU in an informal dinner table talk "When these PSU were established 50-60 years back, Government needed to generate employment and with socialist mindset. Once we start looking at them as a business, they are poorly managed, outdated, lagging behind competitors, and some are white elephants. Government should stop being in the business of running factories in the present era. Some should be even closed if not sold instead of infusing constant money year on year. Thousands of crores are spent on the excuse of protecting employees, the burden of which is beared by 10 times the people we protect ".

PS I am from a family employed in a PSU and I believe that it's purely a place for politician relatives who enter the back door and do NOTHING except getting salary every month. It's not any single government but a series of ones that have sucked blood from government entities.

[mvadg]

Originally Posted by Stribog

This intense fear / skepticism / hate almost of the private sector in India surprises me!...

As many have observed, this is a complex subject, and we each have our own anecdotes and experiences that make us take one side or the other.

I don't have anything particularly good to say about the public sector enterprises. I just wanted to counter the general perception that privately run enterprises are a solution to the poorly run public sector enterprises. Also, while everyone has information about PSUs, their loses and the behavior of their employees, information and ugly bits about most private sector enterprises has been meticulously wiped clean.

It is also difficult to look beyond the profit / loss statement and determine if the perceived losses of a PSU is not actually beneficial to the nation as a whole. You can think of it as a subsidy - for example, what if the petroleum industry incurs huge losses, but everyone gets cheaper fuel and the many thousands of products derived from petroleum at reasonable prices? Same with steel or fertilizer. Pricing, profits, and may other traditional parameters that the public uses to gauge the performance of any organization can be manipulated heavily by powerful global forces. Do you really think that near universal internet access and computing power is solely due to private sector ingenuity?

[DigitalOne]

Public sector is corrupt, Private sector is also corrupt.

But there is a huge difference between the two. When a public sector company/bank employee is corrupt they are stealing from every citizen of this country. When a private sector employee is corrupt, they are stealing from the owners (including shareholders) which is a limited set.

That's the reason why there is national outrage when SBI and other PSBs gives loans to Kingfisher, taking the Kingfisher brand as collateral but not so much when an ICICI bank gives loans to the chairperson's husband's duious business activities. (The ICICI bank scam is not even known amongst the general public).

So please do not equate the two.

[coriollis]

Originally Posted by V.Narayan

Government’s PSU Divestment Programme



The government is targeting to conclude strategic sale of:

BPCL, Shipping Corporation of India, IDBI Bank, BEML, Pawan Hans, Neelachal Ispat Nigam Ltd, this fiscal it is believed. I have been hearing murmurs of PSU divestment since at least 1991 but very little has actually happened. For the first time in my working life of 4 decades do I really believe that these divestments will happen and hopefully happen in good time and put cash into the hands of the Govt. Cash needed for health, education, water, building a robust judiciary and tightening our borders amongst others.

https://economictimes.indiatimes.com...campaign=cppst
https://indianexpress.com/article/op...-india-756441/

My company did a job for Neelanchal Ispat Nigam Ltd (NINL) plant situated in Duburi, Odisha. We somehow managed to complete the job with many hiccups and obstructions from another horrific government organization called 'MECON'. This was in year 2014-15. Till date substantial amount is yet to be received from NINL . We do possess duly signed completion report and other statutory documents, but all our requests / complaints fell on deaf years. We even tried RTI options, but in vain.

My question is, What happens to my claim for money when somebody tries to sell/buy companies with such unsettled businesses. I see a very bleak picture about receiving my dues now.

Nonetheless, I am in support of the intent of this government about PSU divestment

Cheers,
AB

[KeepReading]

Originally Posted by V.Narayan

Government’s PSU Divestment Programme

After several failed attempts, the Union government, earlier this month, announced the sale of the national carrier Air India to Tata Sons. This marks the first major outright privatization of a public sector company in almost two decades. That there was little opposition to the sale from employees of the beleaguered PSU or, for that matter, from political parties, suggests an acceptance of the fact that the government could no longer throw good money after bad. Considering the long-standing struggle to sell the airline, the pragmatism shown by the government this time around in tweaking the modalities of the sale agreement to make it an attractive proposition, sends an unambiguous message — about its determination to push forward with a privatization agenda.

Divestment is interesting topic. There is no right/wrong. Sometimes, it clicks, sometimes not.
I see Govt running PSUs is like socialist approach where it is providing employment for huge population. With divestment, organization will get leaner over the time. PSUs need right CEOs. They doesnt attract external talent due to low salaries. Govt should encourage hiring external talent.
Coming Air India, it is special case. It is abused by system and burden to taxpayers for long time. This is big and bold step on right path.

[GutsyGibbon]

Originally Posted by DigitalOne

Public sector is corrupt, Private sector is also corrupt.

But there is a huge difference between the two. When a public sector company/bank employee is corrupt they are stealing from every citizen of this country. When a private sector employee is corrupt, they are stealing from the owners (including shareholders) which is a limited set.

Private sector without regulation can be quite ruthless in profiteering. The East India Company was a private company. They even collected taxes in India, looted countries, but did not pay Income taxes in the UK. They used the British army to protect their interests, but never paid Income taxes, still came close to declaring bankruptcy. Even today you will see Crown Jewels looted by them in private auctions in the UK. The regular citizens of the UK never directly benefited from the looting.

Without enforcement of regulations - anti monopoly, environment and such, human greed has no bounds. Running a responsible industry respecting labor laws, with minimal impact to the water bodies and air will be expensive and significantly impacts bottomline. This is the main reason American manufacturing has exploited contract manufacturers around the world. Also the reason the rivers and air in the countries who produce for the US are the most polluted. Connect the dots.

I watched Shipbreakers of Alang, the rich people who own these private industries, the labor, and the state of the waterbodies. Just proves that without solid regulation, private enterprises will loot. One can also look at the African countries rich in resource, who are letting foreign private enterprise extract everything while colluding with leaders that are very lax in regulation. It is widespread looting.

[am1m]

Unusual thread, in that I find myself agreeing with every post. So I guess it's not black and white, public vs. private sector, but needs to be judged on a case-by-case basis.

When someone talks about essential PSUs, I remember the frustration on the face of a friend from the armed forces who used to liaise with one of the better-performing PSUs on a crucial defense project and how he wished every day that he was working with a private company instead. When we think about private company efficiency, I think about the instances of corruption I've seen even at the country head and head HR level when it comes to transport and facilities contracts, even at the India offices of 'brand-name' tech companies and how easy it is for them to cover it up.

I see the various dharnas the PSU staff unions stage near my neighborhood and wonder when they get any work done. And we've also seen how "free" our market can really be when the two Big As get regulations and rulings bent in favour of their corporations.

So not black and white, I guess we need to judge each divestment on its individual merits.

Originally Posted by Stribog

Are they perfect? No, I believe a Nordic style capitalistic / socialistic market is the best - private sector for goods and non essential services, but highly regulated in a transparent manner with the state running education, healthcare and food delivery mechanisms (ration shops for instance)

This. Awesome point!

[neerajku]

Way back in 2000-01 It seemed like a settled discussion that privatisation is what the GOI should be embarking on. All kinds of economists used to recommend it as a panacea for all our economic and even social woes. The fact that it is coming up again for discussion is, I believe, for two reasons, faith in private sector is eroding, they are becoming too powerful and have started showing their fangs and shaping our behaviour.

Second, too many black swan events like wars, terror attacks (privatisation of airports security is US for example), pandemic have raised a demand for Governments to stand up with all its might and its resources. Think 2009 recession was the first whiff of it, with near nationalisation of iconic US corporates like GM, Freddie May etc, unheard of in the Mecca of capitalism. More or less it worked well.

However the current set of arguments that GOI should not let go of family silver, Ambani and Adani will buy everything and so on is dominating the media. To my mind specious and I dare say spurious arguments. BPCL is quoted as selling of a profitable enterprise. Question we need to think is, who will buy a loss making set up? And if it was so valuable then why is no one buying it for that last two years.

Fact remains that most of our PSu are saddled with excess workforce, losses, poor workforce quality, working in unremunerative areas and no customer loyalty. Many vested interests want them to remain PSU as contracts, appointments, and even guest houses, cars, hospitality and the peons come from them. No more. Air India was a lucky break and I am sure some gentle persuasion at the highest level would have worked. But look around, banks, power sectors, all struggling. Drain on us tax payers.

What we need is fair auction, better regulation and more competition. Not less and the "any colour as long as it is black" of ITI telephones should be junked now. If there is any emergency we have enough resources and the GOI can commandeer anything it wants. And it did when it arm twisted vaccine manufacturers for the best rates.

Funniest argument is what happens if there is no Air India and we have another Iraq or Yemen type evacuation.

Well US and Europe, most of it, dont have the luxury of national airlines but still get their people out. The difference is they charges their people for such evacuation. Whereas we wait till the last flight and then take the free flight of air India home. and worst cases we have giants of air force planes to pick people up.

The vilification of Ambani and Adani is uncalled for. They may not be the most ethical businessmen around but how may such do we have. At the end of the day, at least in the last few years, they are winning in bids and attracting foreign capital on their own. There might be some tacit support of GOI but not brazen ones now. They are in consumer space, offering good products at competitive prices. we have a choice to buy or not buy if we dont see enough value or have some serious ideological differences. Any other logic of vilification has no basis and it is just vested interests nothing else. We all know that every governments have their own arrangements with such business groups and they thrive does not matter who is in the seat of power.

[Madrasin_selvan]

The government should not manage a business operation but can mandate rules to envision the Industry, that's the reason why we have a separate Aviation Minister and Petroleum Minister. This not only helps them to focus on the betterment of the country but also can help free large assets which eats a lot of public money.

That said, I believe the govt should still hold a minimum minority stake in these divested PSUs. This Stake can create Profit for the government in the foreseeable future.