A case for privatisation: Why monopoly of public sector enterprises is a bad idea

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October 25, 2020 7:30 AM

The 1991 reforms made it clear that privatisation is the way forward and there is room for the government to exit businesses where the social contract is minimal.

Modi’s decision in May this year to privatise all public enterprises in non-strategic sectors will do “more good than harm” to revive the economy with the phased lifting of lockdown in the coming months, writes the author.Modi’s decision in May this year to privatise all public enterprises in non-strategic sectors will do “more good than harm” to revive the economy with the phased lifting of lockdown in the coming months, writes the author.

Debunking the argument that sale of public enterprises is like selling family silver to pay the grocer’s bills, veteran journalist KR Sudhaman in his book Public Sector: The Good, The Bad, The Ugly has showered praise on Prime Minister Narendra Modi’s ability to take the decision to privatise public sector undertakings, many of which have outlived their utility.

Modi’s decision in May this year to privatise all public enterprises in non-strategic sectors will do “more good than harm” to revive the economy with the phased lifting of lockdown in the coming months, writes the author.

Along with the decision that might fetch the exchequer around Rs 12 lakh crore, Sudhaman says the decision to limit public enterprises to just four in strategic sectors will open up all sectors of the economy to the private sector and unleash a wave of consolidation, mergers, divestment and privatisation, as economic revival gathers steam post-lockdown.

This will also ensure that enterprises are run efficiently. Analysing various good, bad and ugly aspects of public enterprises, the book, while highlighting the merit of the public sector, makes a case for public enterprises getting out of non-core businesses to “inject competition, efficiency and garner resources for developmental activities”.

The 1991 reforms made it clear that privatisation is the way forward and there is room for the government to exit businesses where the social contract is minimal. These include tourism, hotels, consumer goods manufacturing, automobiles and such sectors where private players can provide consumers with abundant choice. “But 30 years down the line, this aspect of reform agenda has remained unfulfilled.” Experience shows that government ownership has failed to deliver, particularly in the service sector, writes the author.

Sudhaman also holds successive governments responsible for causing the downfall of Air India, saying the reason for the downfall is nothing but “lavish” spending that got institutionalised in the 1970s and 1980s, forcing the present dispensation to look at 100% stake sale in the flag carrier, which has now accumulated losses of over Rs 70,000 crore.

“If a private airlines can have more passenger flying miles than Air India with the same number of aircraft, staff, buildings and managers, then there is something wrong with this public enterprise as this is one way of measuring productivity,” he writes.

The author, however, does not endorse the idea that there should not exist any PSUs. He says PSUs should continue in areas of strategic importance, but private sector also needs to be allowed to ensure a win-win situation for both.

Public Sector: The Good, The Bad, The Ugly
KR Sudhaman
Har Anand Publications
Pp 136, Rs 595

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