DRIVERS OF GROWTH

Over the decades, the public sector has been a major source of strength to the Indian economy.
The existence of public sector companies over more than six decades can be divided into three distinct phases; namely, post Independence, post liberalisation and the present. At the time of Independence, state intervention and creation of a public sector was considered vital for the growth of the economy. The core challenge was to achieve economic development with equity in addressing concerns of widespread poverty, removal of regional imbalances, extreme disparities in income, expansion of employment opportunities and building of industrial infrastructure for rapid growth. AT At that time, the private sector was neither capable of making large investments, nor were they expected to take up projects with long gestation periods and low returns. Therefore, India chose to follow the path of a centrally-planned mixed economy and the public sector was deployed as an instrument of self-reliant and inclusive growth. The role assigned to it was nation-building by way of industrial development and creation of infrastructure with an overriding emphasis on the social aspects. Over the years, the public sector in India has evolved into a major force. When the First Five Year Plan began on April 1, 1951, there were about five public sector units (PSU) with an investment of nearly Rs.29 crore. Fast forward to 2016 and there are 290 PSUs (234 operating) with a combined investment of over Rs.9.92 lakh crore. PSUs have shown excellence in all physical and financial parameters. The presence of Indian PSUs in the prestigious Forbes 2000 annual list 2014 is a testimony to their rising status. In total, 54 Indian companies are on the list of the world´s 2,000 largest and most powerful public companies, 30 of them from the public sector, comprising 14 PSUs and 16 public sector banks.

Dr U D Choubey, Director General, SCOPE, believes PSUs can contribute much more. He says, ´If you increase the efficiency by just a per cent more, you can beat the investment proceeds that the government of India is getting through disinvestment,´ he says. ´Disinvestment is not the only way to raise money,´ he adds. The ruling government of the day over the years have long contended that disinvestment would improve efficiency and management but it has largely been taken to meet the country´s fiscal deficits.

He points to the fact PSU companies have contributed Rs.25 lakh crore in the last ten years to the public exchequer by way of profits, taxes and dividends. In contrast, the government has invested just `9.5 lakh crore ´What other business can give you these kinds of returns?´ he asks.

IS Jha, Chairman, Power Grid Corporation, concurs. ´PSU companies may look slow from the outside,´ he says. ´That is because they have to follow procedures. For instance, private companies do not bother about L1, L2 or L3, but we need to follow them. However, at least in the power sector, whichever private company has entered, it is headed by a PSU man only, whether from NTPC or PGCIL. Our personnel are the finest. For instance, you´ll not find hydro engineers anywhere like those at NHPC,´ Jha adds.

However, PSUs have their fair share of problems, largely related to governance. Some of them are with respect to ownership policy, given that there is no ownership policy at all for PSU companies in India whereby the owner can be held accountable and answerable. Other issues exist with regard to autonomy of the board, succession planning, conformance versus performance vis-a-vis multi-regulatory mechanisms, appointment of independent directors and board level positions, etc.

It is only with the introduction of a professional approach and removal of the long-standing interference of the political class that the meaning will truly be restored to the country´s much coveted public sector ratnas (jewels).

DID YOU KNOW
Out of seven Indian companies amongst the 500 largest companies in Fortune 500 List, five are public sector units and one public sector bank.

STAT ATTACK
A Contribution to exchequer
2012-13: Rs.163,212 crore
2013-14: Rs.220,166 crore (Increase of 35 per cent)
Overall net profit
2013-14: Rs.129,109 crore, an increase of 12.29 per cent over 2012-13 Number of profit making companies increased to 163 from 151 in 2012-13 Overall turnover
2013-14: Rs.20.62 lakh crore, or 18.2 percent of the GDP
2012-13: Rs.19.46 crore