Given how PSU oil companies played a big role in making LPG available to 3.57 crore rural consumers and PSU banks in opening 25.4 crore Jan-Dhan accounts, it is not surprising prime minister Narendra Modi wanted them to work on the development of 115 districts identified by NITI Aayog for special focus and to take up skill development as part of their corporate social responsibility (CSR)—indeed one of the 2022 goals he set for them was optimal utilisation of their CSR funds, apart from maximising their ‘geo-strategic reach’. There are, however, many problems with the approach of viewing PSUs as a development arm of the state. Apart from the fact that both the central and state governments have large bureaucracies primarily for doing development work, the primary job of PSUs is to make enough money to be able to invest in running and expanding their businesses; if CSR activities are to be done, this has to be in addition to the core business, it cannot be a focus area. PSUs have to be judged by how they do their primary job, not by how many people they skilled; that is the job of the skills ministry.
What Modi should have asked PSU chiefs, instead, was for a check-list for what he needed to do to allow them to be nimble enough to run their businesses well and gain market share. Since Modi came to power, by way of illustration, the share of PSUs in overall market capitalisation is down from 22.7% to 13.5% and, in the case of the banks, from 42.9% to 27.1%. Such a colossal loss in value, of Rs 13.5 lakh crore, should be a top priority for the prime minister. Indeed, while there was an 11.7% increase in profit growth of central PSUs in FY17, the bulk of profits came from sectors in which PSUs are either monopolists or, like ONGC, got the best acreages/plants. Worse, while the government is now talking of selling Air India, it has done little on MTNL/BSNL whose losses were Rs 7,734 crore in FY17, which have no credible revival plan and whose market shares are falling—8.7% in the mobile market for BSNL and 0.3% for MTNL.
Despite the operational autonomy, the government claims to have given PSUs, as any PSU chief will tell Modi, they are hobbled by rules that treat them as an arm of the state and force them to get public bids for any purchase/hiring. Between FY07 and FY17, ONGC’s gas production rose from 22.4 bcm to 23.3 bcm, but crude oil production fell from 26.1 million tonnes (mt) to 25.5 million, despite ONGC claiming to have increased gas reserves from 540 bcm in FY07 to 788 bcm in FY16 and oil from 561 mt to 578 mt. The only explanation for this is that ONGC is inefficient—in which case, sell it—or that it is hobbled by existing rules. In the case of banks, PSUs have a problem in hiring specialised staff and in shutting unviable branches. In that sense, Modi didn’t really focus on the real issue—of how he will fix the operational environment for PSUs. Also, till such time that he fixes government policy, as Vedanta chairman Anil Agarwal wrote in this newspaper, a sensible minerals policy—both in terms of taxation and clearances—could reduce imports by half and create 20 million jobs. So, when Modi asked PSUs to come up with a strategy to lower the import bill, he needed to address the question to himself.