In order to sustain in their role of promoting and developing infrastructure it is imperative that the PSUs infuse state-of-the-art technology related to their lines of business while also making sufficient investments in refreshing them at regular intervals, writes Navin Agarwal.
The Industrial Policy Resolution in 1956 assigned the public sector enterprises with a strategic role in the enablement of the Indian economy. Since then there has been a progressive growth in the scope of public sector in India which focuses on the development of infrastructure, key intermediate goods, production and distribution of strategic commodities and provision of social services while also catering to various social welfare obligations such as employment generation, protecting the consumers from being exploited, promoting backward regions and achieving rural development thereby improving the overall human development index.
Demand for infrastructure
To measure the performance of a nation’s economy is commensurate to the extent of infrastructural development in the country in the areas like roads, ports, airports, railways, power, oil and gas, irrigation and water supply and sanitation amongst others. Infrastructure development not only fosters a convenient lifestyle for the citizens but also boosts employment across the various strata in the country. The Governments in India have always laid strong emphasis on infrastructure development plans through budgetary allocations, tariff policies, fiscal incentives and promoting Public Private Partnerships (PPPs). Other drivers for increasing demand could be as below:
• India’s growing economy heightens the requirement of infrastructure system and as per the current rate it is estimated that an investment of $1 trillion would be required to meet the country’s infrastructure requirements
• Ninety Seven million jobs would be created over 2012-22 across different sectors in the country due to which, India would potentially need to build an average of 8.7 billion square feet (sq ft) of real estate space every year.
• Transport infrastructure in India is currently laden with constraints such as high road congestion, poor access to rural areas, capacity constraints in rail¡ways, congested port traffic, strained Airport infrastructure which requires immediate corrective actions
Role of PSUs in enhancing infrastructure
The impact of PSUs in infrastructure development can be assessed in terms of the following:
• Creating demand for infrastructure related services
• CSR activities focused on infrastructure development
• Catering to infrastructure demand of the country
• Promoting funding for infrastructure projects
• Investing reserves of cash rich PSUs in infrastructure projects
Creating demand for infrastructure related services: PSUs can influence the demographics of the location in which they are situated. Establishment of PSUs leads to developing of related infrastructure such as electricity, water, roads etc. PSUs also promote the development of PSU townships, other supporting sectors such as education, health, hotel, banking etc.
A leading power generation PSU played a significant role in regional development of rural areas in and around established township and also contributed to the social welfare of the people in the township. Since its establishment it has laid down various schemes to improve the irrigation facilities, public health and sanitation, medical camps and dispensary, education, provision of roads transport etc. Some of the community development programmes initiated include general hospital supported by eight peripheral dispensaries, family welfare centres, schools, college, central library, education facilities for mentally handicapped and speech and hearing impaired children, rehabilitation centres for displaced persons, housing, subsidised transport facilities, industrial canteens, recreational facilities amongst others. Thus it can be safely assumed that backward regions would develop with the growth of the public sector units there.
CSR activities focused on infrastructure development: Infrastructure development forms core of the Corporate Social Responsibility (CSR) functions of many of the top PSUs. Significant percentages of the CSR budget are allocated to thrust areas which include community development, infrastructure, health/medical, skill development /empowerment, education aids, environment protection, drinking water /sanitation. Some of the leading PSUs have taken steps such as adoption of villages to promote holistic development.
Catering to infrastructure demand of the country: Post independence, the rationale for setting PSUs was multifold ranging from accelerating economic growth, serve equipments related to strategically important sectors such as Railways, Telecommunication, Nuclear Power, and Defence while ensuring s elf sufficiency and develop infrastructure related to transport, utilities such as oil and gas, power and electricity, water supply and sanitation to provide ease of life to the citizens. More than 60 per cent of the Central Public Sector Enterprises are providing infrastructure related services. A snapshot is given in Figure 1.
Promoting funding for infrastructure projects: The country’s seven leading public sector banks and two financial intermediaries have formed a consortium to provide services such as joint appraisal and co-financing of infrastructure projects in addition to evaluating of viability of large infrastructure projects. These steps help in expediting the process of commencement of proposed infrastructure projects.
Investing reserves of cash rich PSUs in infrastructure projects: In a recent development the government is working on a mechanism under which nine PSUs which have sufficient cash reserves and financially sound would be investing in infrastructure projects in a time bound manner.
The PSU Advantage
Pre-independence India was primarily an agrarian economy and hence the nation leaders were confronted by an immediate objective to move the country towards a mixed economy. This laid the foundation of building infrastructure for public sector enterprises. Hence the main objective of The Public Sector is and will always be to enable economic growth and promoting social justice.
The PSUs have contribute significantly in infra¡structure development as they are primarily operating in the areas of public utilities such as railways, post, telegraph , ports airports and power. The PSUs are also dominant players in their respective sector garnering substantial market share. Improvement in the economic infrastructure in the rural areas can be realised through active participation of public sector undertakings in the surrounding vicinities by improving the existing link roads and inside roads to ensure the PSUs are accessible by contemporary means of transport.
The public sector enterprises are in a position to promote capital investment in areas where the private sector does not find attractive to invest and infusing investment in sectors of strategic importance to the nation. For instance, in order to continue capital infusion in the economy, the government of India, through the public sector banks provided lower interest rates to boost sectors like real estate, small and medium enterprises and agriculture. Similarly, oil marketing companies maintained relatively low retail prices of petroleum products when crude oil price hit the roof. This step ensured check on food prices and helped the government in keeping a check on rising inflation in the economy. Public enterprises continued to spend in infrastructure sectors which ensured that the unemployment levels in the country do not rise to alarming levels. The public sector receives the allegiance of the government policies and subsidies to realise their economic objectives. Since it is a highly regulated sector it enjoys the distinction of being a highly transparent sector and hence can be provided with the responsibility of improving the countrys infrastructure.
In order to sustain in their role of promoting and developing infrastructure it is imperative that the PSUs infuse state-of-the-art technology related to their lines of business while also making sufficient investments in refreshing them at regular intervals. These measures require sufficient funds and mandate long term commitment from key stakeholders within the PSUs and the government. It is imperative that the PSUs attract and retain world class talent to ensure new objectives are realised keeping in mind the latest developments in technology, strategy and holistic corporate development.
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