'Healthy PSUs should take care of sick ones'

Q&A/ Nitish Sengupta

In his maiden speech in the 13th Lok Sabha, of which he became a member by winning elections from the Contai (West Bengal) Lok Sabha constituency, retired IAS officer Nitish Sengupta said he "fundamentally maintained that government management and service industry do not go together." The 73-year-old Sengupta has held a number of senior positions in the government, including revenue secretary at the Centre, and has had a career as a management consultant after retirement. He was recently appointed Chairman, Board for Reconstruction of Public Sector Enterprises, a part-time advisory body established by the UPA government in December 2004 to advise it on the strategies, measures and schemes related to strengthening, modernising, reviving and restructuring PSUs. Siddharth Zarabi met him to discuss his latest assignment and plans for sick PSUs. Excerpts:

In your maiden speech as an MP, you had said we need to get away from the decades-old mindset that everything should be in the nationalised sector. What are your views today, now that you are heading the PSU revival board?

Ownership and management are two different things. It doesn't matter that ownership is 100 per cent government or 51 per cent. But, the point is that you have to induct the private sector norms of efficiency and productivity.

Isn't this something that has been tried and said in the past, that as long as PSUs are run on private sector principles, everything will be okay?

No, I don't say that everything will be okay. Basically, every undertaking must make a profit. Now, what is the situation today? A lot of PSUs were created in a situation where they were given the task of producing in a market with very little competition and had an almost captive market with price preference in government purchase programmes. Whatever they or even private sector companies produced was consumed.

But, a sea change took place around 1991. By allowing imports, competition was created automatically. Many were able to compete and succeeded, and for them, the sky is the limit. But some public as well as private companies could not succeed. So, it is not correct to say that the public sector is necessarily inefficient.

Many of them have grown in multiples over the past six-seven years. Today, if you look at the stock market, many top performers are public sector firms "" Bhel, for instance, whose order book is totally full. NTPC has done very well, oil companies have done well, though you must forget the oil pricing bit. I hope the government takes a final decision on that issue.

How do you see your current domain?

From the government resolution setting up the Board, I find that it has a tremendous role. It is not just restricted to closing sick PSUs. It is wrong to think that. We are also concerned with strengthening the public sector, sick or efficient. We also have the power to study cases suo motu. So, let us first deal with the sick PSUs and then we will move on to strengthening other companies.

How many sick companies are you dealing with at the moment?

Well, only about 40. Quite a number of companies have turned the corner over the last two-three years. They are no longer very sick. I am trying to project a general kind of policy prescription that we should try to persuade healthy public sector undertakings to take charge of sick units.

Can you give us some examples and specific proposals?

Like Bharat Heavy Electricals Ltd taking over Bharat Heavy Plate & Vessels Ltd, and Coal India being given the responsibility of bailing out Bharat Coking Coal Ltd. That process should be clear and there are many cases. Some of the oil PSUs should also be in a position to take over sick companies "" after a year or two, not now.

Will you recommend some sops for companies doing such takeovers?

Yes, why not? We will look at the specifics. I will talk to the finance minister.

Have you also suggested that all PSUs should be mandatorily listed on the stock exchanges?

We have suggested that. Listing the stock is the only way one can understand the true worth of the company. All that is necessary to list a company should be done. By this, I do not necessarily mean privatisation or anything like that. A small percentage of the holding should be sold off to the public. Take the case of Coal India. It is sitting on enormous cash reserves and is very under-capitalised. If only a small portion is offered to the public, it will straightaway walk into the Fortune 500. I am waiting to have a discussion with the chairman of the company. There are many other examples that can be cited.

What is the procedure for decision-making on the Board's proposals?

Right now, the ministry refers cases to us and we give our recommendations and then the ministry puts it to the Cabinet. But I am trying to take a slightly more dynamic position. For instance, I have held discussions with the fertiliser ministry as to how long you can allow five or six companies to remain closed. We have discussed what the problem is and what the long-term arrangement could be. The idea is to ensure that the public sector must emerge as one of the strongest drivers of economic growth.

What about the internal functioning of the Board? Are you doing something on that front?

I intend to focus on participative decision-making, involving and taking into confidence the officers of the Board.

Till now the Board's approach has been to pump in money and recommend bail-outs...

I don't believe in that approach. To my mind, we must focus more on reviving the company by looking at whether there is a market for the goods and services it produces, whether there is scope for technology upgrades and training of staff, and so on. A mere reorientation of the finances is not the best way to revive a unit.

Do you expect opposition from the Left parties?

Not really. Let us see.