Similarly, in the case of BSNL, it is true that from an operating loss of Rs 692 crore in 2013-14, the company reported an operating profit of Rs 672 crore in financial year 2014-15 (FY15). Yet, at the same time, its net loss increased from Rs 7,020 crore in FY14 to Rs 8,234 crore in FY15. That's because managerial inefficiencies have not been adequately addressed. No wonder, in the face of ever increasing competition, the company has been losing its already meagre share - from 8.5 per cent in FY11 to 5.3 per cent in FY16. There is no outstanding reason to believe that BSNL will be able to reverse this trend, especially when it is saddled with structural constraints such as employee costs accounting for 55 per cent of its revenue. Compare that to the five per cent figure of its private sector competitor Bharti Airtel.
The lack of clarity about how to evaluate a PSU's performance, the distinction between operating profits and net losses, and what truly ails a PSU is central to the confusion surrounding the government's approach to public sector disinvestment. If anything, it is made worse by the lack of conviction about the role of PSUs in the current day Indian economy. In an interview to the Wall Street Journal in late May, Mr Modi had said, "You can't suddenly get rid of the public sector, nor should you." Nothing exemplifies this confusion about the role of PSUs more than the disinvestment episode of IDBI Bank. In his Budget speech in February, Finance Minister Arun Jaitley had said, "The process of transformation of IDBI Bank has already started. The government will take it forward and also consider the option of reducing its stake to below 50 per cent." However, in late July, Minister of State for Finance Santosh Gangwar categorically answered "no" to a question asking whether the government was proposing a strategic sale of IDBI Bank. This doesn't augur well for the government's ambitious disinvestment target of Rs 56,500 crore for FY17, out of which Rs 20,500 crore was expected to come from strategic sales.
The PM's preference for turning around ailing PSUs makes this target uncertain. In 2014, Mr Modi's dictum of "minimum government, maximum governance" had struck a chord with investors looking at an economy just waiting to take off. Any understanding of that dictum would involve the government not only making space for the private sector in areas where it is not needed, but also, in the interim, allowing managerial autonomy to PSUs so as to bring about a real change in the work culture. The status quo on PSUs must end.