Liberalisation-privatisation-globalisation, or LPG that began in the backdrop of crisis of early 1990s, has been a magic potion for Indian Economy. It not only injected new energy into the slow growing Indian Economy, but also proved to be a death knell of the public sector parasites that were inhibiting its development.

The Public sector in India was born out of a planned economy model, which was underpinned by a Nehruvian-Fabian socialist philosophy. The PSUs were conceived as torchbearers of a resurgent India and were called the “temples of modern India”.

  • ·In the newly independent India, rationale of a planned economy model was that the private sector unlikely to invest in a large, capital intensive, long gestation period with slows returns or high risks.
  • ·PSUs were, therefore, set up for steel plants, oil refineries, aircraft manufacture, heavy machinery and such-like; over time, they got into a range of other fields too.
  • · PSUs were also intended to secure the ‘commanding heights’ of the economy, so as to guard against any monopoly, cartelisation or market manipulation by the private sector.
  • · In the last two decades of LPG, the private sector is able to raise substantial funds, aided by the fact that foreign investment is permitted in most sectors. With this background and in new economic scenario, the role of PSUs has obviously to be very different from the days of monopoly.
  • · Here are some of the roles which PSU’s should play in the new economic scenario:
  • · The PSUs should work as market shapers and influencers. PSUs in hi-tech areas must be leaders in R&D, and invest in long-gestation developmental programmes.
  • · Some of the country’s best talent — especially in the engineering domain — is in the PSUs; also, with the exception of the pharmaceuticals sector, the quantity and quality of their R&D is far ahead of that in the private sector. PSUs must leverage this
  • · Unlike private sector companies, they do not have to worry as much about the day-to-day reactions of the stock market, nor be driven by the quarter to quarter mentality of their private-sector peers. The relative independence from these pressures means that they can afford to focus on the long term.
  • · PSUs should be leaders in environmental issues: conserving energy, water and resources in their processes; recycling waste and water; minimising their carbon footprint and promoting environmental consciousness amongst employees, suppliers and the community
  • · PSUs should set benchmarks for customer service, transparency, corporate governance and ethics. In sectors where they have a substantial presence, PSUs can ensure that no cartelisation or exploitation of customers takes place, especially when there are demand supply mismatches.

Challenges ahead:

  • · The roles and responsibilities of PSUs require appropriate managerial frameworks, and these will be impossible without a major revamp of the overall governance paradigm of PSUs. Reform at the board level is the first requirement.
  • · PSUs must become truly board-managed organisations, with the government stepping back and giving full power to boards. At most, the government could retain a say in very large investments entailing debt or raising of new capital, and any fundamental changes in the stated objectives of the PSU.

· Like any promoter in a private company, the government can nominate board members, but — like listed companies — it must have independent directors and these must be selected by the board, through its nominations committee, rather than nominated by government. Also, it must be the board — and not the government — that selects and appoints the CEO. The board and professional managers must run the PSU, not the owner or promoter. (Adapted from Economic Times)

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  • Anurag Patel

    Thankyou Google!!!!!