Nationalisation or Privatisation, which best suits to India?

Nationalisation or Privatisation, which best suits to India?

Nowadays a group of people are claiming that Govt is privatising many business activities earlier managed by Government sector. Few people are claiming that Govt is selling many organisations or properties. Whether this claim is totally baseless or there is any logic behind it? Whether peoples are scared of the private sector or do they like it? Let us evaluate the pros and cons of both options and find out an optimum format that suits India. As we know that there are two types of economies in the world i.e. Capitalist and socialists. Almost entire western countries are called capitalist economies where resources/business activities are controlled by private players. Govt activities are restricted to policy formulation and monitoring activities. In the case of socialist economies, almost the entire supply chain was under the control of Govt agencies. Once upon a time entire the Soviet Union was called socialist countries and they did well and became developed.

After the independence of the Prime minister, Nehru was influenced by the Soviet Unions model so he adopted the Soviet Union, socialistic economy model. Although at that time there were licensed market players in the private sector too who continued the operation. In a way, a mixed economy option was chosen. Even prior to that India was a self-sufficient country where all goods were locally produced and exported out of India. The business setup was built on a spiritual model. Businessmen earned money from the public and used it for public welfare. In this way, all groups of society got benefitted. 

After the fall of the Soviet Union people thought treated it as a failure of the socialist model. People thought that now capitalist model only is the option. However economic depression of the USA punctured the bubble of the capitalist model too. Therefore, now we can believe that none of the models has a solution to all social needs. India liberalised its economy in 1990 in great leadership of PM Narsimharao. Govt of all parties followed almost the same path subsequently. Slowly many Public Sector Undertakings were privatised. Still many public sector undertakings are working well like ONGC, NTPC, Indian Oil etc. However, most of the public undertakings are generating huge losses to public ex-checkers. Let us try to analyse the causes of the failure of PSU’s.

Root-cause of Failure of PSU’s

There may be different root causes for the failure of different undertakings at the micro-level. However, the main reason for failure is its being cost-effective. Just think why public sector undertakings become loss-making. A few of the reasons are given below-

1-Lack of Management Responsibility- In the case of private enterprises future of promoters is synonymous with the future of the enterprises. Growth of the enterprises means growth of the promoters. So, they themselves remain responsible and ensure a responsible atmosphere in their organisations towards their customers and stakeholders. They are ready to identify the taste of their customers and re-align their supply chain to fulfil their needs. They have flexibility and promptness in decision making and its implementation.

In the case of PSU’s people lack their responsibility. Although there are responsible persons who take pain even at cost of being unpopular and deliver results through their consistent effort. However, their numbers are few only. I have personally seen a few excellent officers working diligently but most of them found themselves busy in organisational diplomacy. No worry for performance or future, no respect for processes and controls. Simply enjoying the benefits of getting employed in public sector undertakings.

2- Outdated Work Culture

 Now come to the situation of PSU Management. Although some of the PSU’s like ISRO, DRDO etc are doing well most of them are still working on green sheets. Where a file starts at the lowest level of the employee at hierarchy say at Assistant Manager for every single work and travels to Manager to DGM to GM level depending upon the case size. Sometimes the files in physical form move from one office to another office in different departments multiple times before a silly clarification. Just think about the waste of time and resources. Same work which generally gets concluded in private offices on single mail, that takes 2-3 months in few PSUs to get signed-off from their internal management. Some of the PSUs has wasted crores of rupees in modernising their infrastructure and purchased the costliest ERP’s, mailing systems, team viewers but still, they are functioning on green sheets. PSU’s have to encourage their people to utilisation of resources that are getting wasted day by day in form of depreciation and unproductivity. I took a vehicle loan from a nationalised bank. When I asked for the facility to view my loan account online, bankers denied such facility without having a savings bank account. The same facility is available from private sector banks. Now just compare how PSUs can compete with private players.

3- Lack of Effective Performance Management System

In most organisation's peoples get time-bound promotions and increments. Some people who do not deserve a promotion or who are not interested to take higher responsibilities get promoted. What happens next is the automatic outcome of point no-1.

a -Lack of Motivation

In my job profile, I used to meet different types of people in different types of organisations. In PSUs, we met many talented but demotivated professionals. PSU’s lack the policy of the right person at the right job. You can easily find technical people dumped in non-technical areas where they just waste the time. I have seen Engineering Graduates dumped in petty administrative works. No upskilling program, no process innovation no job satisfaction. In a way as a nation, we are wasting our costly human resources.

b - Cost Effectiveness

In many PSU’s or Govt. departments, you will be surprised to know that almost all functions are already privatised. For even to fix a single pin in-wall, an outside vendor is hired. For peons work who are supposed to support the function through cleaning the table and chairs, arranging tea and coffee etc everything is outsourced. Since it is almost impossible to get the work done from a Govt peon. Same work done throughout sourced peon costs one-tenth as compared to Govt part. Overt to it, tendering process, evaluation patterns etc result in cost escalation and quality deterioration. Overall if you go into detail, you will find that most of the resources are used in overheads.

c - Poor Sense of Belonging

We have seen how Japan and Germany established them as strong economies after world war. Did we have some sense of belongingness? Probably no. Neither Govts could develop a sense of belongingness for peoples nor peoples think any belongingness for the Govt. Lack of this civic sense had caused great risk for the PSU’s. Even today we could not develop a sense of service amongst many PSU’s employees. Entire creativity, innovation and experimentation lie till being selected in Govt Jobs thereafter only files rule the world.

4 - Poor Control Mechanism

For name’s sake, there is a vigilance cell in almost all Govt Sector Enterprises. However, in absence of a broader vision they also just fulfil the minimum requirement to remain in Job. Different types of corrupt practices remain under their nose but they are not supposed to see it until someone comes to them with valid proof. Although in some offices I have seen 90 degrees change in the working pattern by a change in the approach of top leadership that is too not sufficient. Top leaders have to take initiative and come over their petty gain for the broader benefit of the organisation.

Whether the Private Sector is the only Available Option?

We have seen the root cause for the failure of Public Sector Enterprises. Can we conclude that only privatisation is the only option? Probably no. Like Govt organisations, private organisations suffer from different types of problems. A few of them are given below-

1 - Lack of thought for Social Welfare

In India, most of the private enterprises are family owned and family managed. Earlier Indian Business Houses had a sense of duty towards society. Even today TATA, Sriram, In-Mobi type business houses have such employee-friendly culture. Otherwise, in some companies, there is no honest thought towards social welfare. Most of them work for profit exclusively. You will hardly find any corporate that is ready to invest in an undeveloped area. It is seen that one person establishes the organisation and next-generation demolishes their values mercilessly. There are a lot of examples in this line.

2 - Poor Regulatory Controls

Although there are SEBI, Company Law Board, Income Tax Department etc to supervise the operations. However, they fail to detect the corrupt practices by many businessmen. Nowadays it is often seen that company is in liquidation and promoters are investing heavily in luxuries. The company is failing in payment of bank loans and owners enjoy the beauty. The company is feeling liquidity problem and pandora papers reveal secret investments. These are a few practices only in reality a lot of things are there which can not be written here.

For name’s sake, there is the provision of Board of Directors, SEBI and CLB but decisions are taken on dining tables and the culprit flew away without any hindrance.

3 - Poor Job Security

In the private sector, the primary concern is the Job Security of the Employees. It is seen that the private sector generally does not show responsibility towards employees. In the Corona pandemic, we have seen how many organisations laid off many of their employees mercilessly. Some of the organisations are so dynamic that they have developed a culture of hiring and firing. They search for well-doing people from their industry and bring them into their company. Immediately another team starts working against them and situations are created for them to leave the organisations asap. In a way, such experience becomes a dent in the life of good people.

From the above facts, we can say that neither the public sector nor the private sector can deliver up to the expectations of the nation in isolation. Both are necessary for dynamism and growth. PSUs need to be made dynamic by removing the obstacles and proper training. In the same way, private players need to encourage to adopt moral values. 

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