Let go

The newly created Board for Reconstruction of Public Sector Enterprises has started functioning, replacing the Disinvestment Commission.

This is in line with the UPA government's policy of not looking at disinvestment as a serious option while determining the future of public sector units.

Such an approach is not very logical as nobody can seriously argue that all troubled public sector units can be revived.

In fact, there are any number of units that are known to be beyond redemption, and there should be a window which allows the government to disinvest in such units in favour of private entities willing to try and run them. That is not all.

The reconstruction board is functioning even as the BIFR, which has been dealing with companies that are sick or about to become so, continues to function.

The BIFR is not being given a decent burial because the National Company Law Tribunal, which is supposed to replace it after being armed with the necessary statutory powers to take quick and binding decisions, is yet to be set up.

If both public and private sector companies in trouble continue to be referred to the BIFR, what does the new reconstruction board do?

There seems to be a case, therefore, for a new Parkinson's Law which stipulates that sick public sector companies will not only not die but bodies to revive them will proliferate.

The root problem is the unwillingness of political elements, now a part of the ruling UPA, to admit that not only do chronically sick public sector units need to be closed down if private parties cannot be found to take them over, even many healthy public sector units need to be privatised.

It is not the business of the government to run commercial enterprises that can be privately run in a competitive environment.

To do so is to take away from the time and attention space and resources needed by the government to devote to matters which must remain in the public domain, like the development of health and education facilities, formulation of policy, promotion of competition, protection of consumers, and regulation of various sectors and natural monopolies.

The experience with Maruti Udyog illustrates why the government ought to get out of the business of running even healthy public sector units.

An enormous amount of energy was dissipated in the past in public argument over various aspects of running Maruti Udyog and in trying to disentangle issues like what to do with a managing director whom the foreign partner and technology supplier (Suzuki) did not like.

By making a strategic disinvestment and passing on control of the company to Suzuki, the government has won on several counts. It has made good money for itself and also created a body of happy public shareholders.

Suzuki is today not only bringing in newer and better technology, next generation technology is now being developed by the company in India, making it a sourcing hub for Asia. Finally, the Indian car owner is getting better-quality cars from the Maruti stable.

There is no automatic loss of public good simply because a company is privatised, and frequently there is a lot of gain to the general public.