The Holy Grail

Public sector enterprises are still denied autonomy

Speaking at the BRICS conference on competition policy held in New Delhi last week, Prime Minister Manmohan Singh touched on what has become a never-ending theme in the Indian policy discourse: the autonomy of public enterprises. For decades, there has been a near-unanimous clamour that these enterprises be allowed greater freedom to make choices about products, people and technology. And there have been some significant initiatives in this direction - notably the creation of the navaratna and mini-navaratna categories of enterprises, which came with some concrete movement towards autonomy for these companies. Disinvestment and listing of such companies have also subjected several of them to market scrutiny and managements have had to learn to deal with an entirely new set of stakeholders.

And yet, as the prime minister's comments clearly suggest, the overwhelming impression is that meaningful autonomy is still far out of reach, a kind of Holy Grail that the entire establishment aspires to find, but will never do so. The ways in which the government continues to exert an iron grip even over enterprises with significant private shareholding are many and varied, but the impact is always the same: virtual subordination of managements to ministers and bureaucrats and short shrift to the private shareholders. In the process, inefficiencies are perpetuated, opportunities are lost, incompetence and corruption overlooked and sometimes rewarded and anybody's but the nation's interests are served. Over 22 years after the economy swung away from public sector domination, these enterprises are a frustrating reminder of a failed promise.

Going forward, the imperatives of accelerating growth may put renewed demands on public enterprises. The large cash balances held by some of them were seen by the government as a potential source of reviving investment activity. Not much seems to have come from this so far, but it remains on the table. However, if these resources are invested, will they be done on the basis of national priorities or the political whims of the ministers in charge? Beyond this, the perennial dilemma posed by the way in which oil subsidies are dispensed to the oil marketing companies also shows how the interests of private shareholders may be compromised. The government is using these companies as an instrument of policy, which is being implemented in ways that have significant financial impact on the companies. The Children's Investment Fund, a foreign shareholder in Coal India, has vociferously objected to the government's pushing through fuel supply agreements. These and other instances of lack of autonomy suggest the system has not reached a point at which independent public enterprises run by competent and accountable managements can play an enhanced role in building desperately needed infrastructure. It is essentially in this context that the prime minister's comments need to be seen - not simply the re-echoing of old sentiments, but a policy objective that has enormous significance in the current economic environment, in which the economy risks falling desperately short of its infrastructure requirements. Lament is superfluous; action is essential.