It is high time people gave up the tendency to run down India's public sector and commend the private sector by contrast. In the aftermath of the 2008 Wall Street meltdown and the tsunami waves that it sent across the world, our private sector started sending distress signals. Its image was further dented by the Satyam scandal. But the public sector, in contrast, stood up magnificently. No lay-offs, no wage-cut, no dividend skipping, but still better working results on the whole.
A great majority of public sector undertakings have established records of steady profitability and performance. And, several amongst them, such as Bharat Heavy Electricals Limited (Bhel), Coal India Limited (CIL) and National Thermal Power Corporation (NTPC), have attained global standards. Bhel has regularly declared dividends for 20 years now. Its order books are full for the next 10 years. CIL has broken new grounds by acquiring coal mines overseas. It has paid the government a dividend of Rs 1,700 crore. About 41 Central public sector enterprises are listed, and they account for around 40 per cent of the total capitalisation of stocks listed on the Bombay Stock Exchange (BSE)! That's not all. As many as six out of the top-10 listed companies on the BSE are public sector enterprises.
If the Left had not scuttled the UPA government's excellent objective of throwing open parts of its shareholding in some select public sector enterprises without changing its majority ownership, these companies would have been much more largely-held ones by now. Here it should be emphasised that if companies like BSNL or CIL throw open 10 per cent of their shareholding for public subscription, they would straight away walk into the Fortune-500 league.
The last few years have seen phenomenal changes in the government's policy, delegating authority to the chairmen and boards of public sector enterprises. Now, they are required to go for the approval of ministries concerned only on fewer occasions. The experience of Navratna and Miniratna companies and the annual MoU exercises have vastly improved the performance of public sector enterprises. Now there is a new profitability orientation among them. The number of companies making profits has been steadily rising, and the number of sick companies is fast declining. The newly-constituted Board for Reconstruction of Public Sector Enterprises has, out of 63 cases referred to it by the government, recommended the revival of 52 and closure of two companies. Of these 52, the government has approved revival of 34 Central public sector enterprises, out of which 18 had made profits in 2007-2008. In several cases, the reconstruction board's policy of entrusting the task of reviving a sick unit to a healthy peer has met with remarkable success. Owing to these measures, the number of sick public sector enterprises has declined from 109 in 2001-2002 to 54 by 2007-2008. Now, their number is estimated to be around 30. And the process of revival so far has benefited 1,78,666 employees. History was made when, recently, following the report of the Justice Jaganath Rao Pay Revision Committee, the government announced a substantial upward revision (around 50 per cent) of salaries and made these emoluments payable from the company's profits rather than subvention from the government. It also de-linked these salaries from the corresponding levels in the government. Many chairmen of public sector enterprises would now draw emoluments higher than those drawn by secretaries to the Government of India.
This revolutionary change, as also the fact than unlike some private sector enterprises, public sector companies did not go in for retrenchments and reduction of emoluments after the Wall Street meltdown, set a new trend. While previously these public sector enterprises could hardly attract MBAs from good business schools, top b-school students are now making a beeline for joining these companies. In fact, central public sector enterprises have now become knights in shining armour in a recessionary economy. It has been reported that 41 out of the 234 students of the 2009 batch of IIM Ahmedabad, one of India's premier b-schools, signed up for public sector jobs. The picture is the same for IIM Kolkata and several other institutions which, for years, boasted about having only MNC bankers as their main recruiters.
Not only has the Indian economy escaped the devastating effects of the Wall Street crash relatively unscathed, but the country's public sector enterprises have also been able to face the raging recession much better than the private sector companies, thanks to their conservative approach, which exposed them in the past to criticism from management pundits. They have not had to significantly curtail their staff strength or stop recruitments, unlike some of their private sector counterparts. The job security that they provide, which was often lampooned in the past, has now emerged as an invaluable stock in trade.
Interestingly, there are reports that some public sector managers, who were lured by lucrative offers from the private sector in recent times, are on a comeback trail. It is also learnt that some senior bureaucrats, who were thinking of taking early retirement to join the private sector, have put such plans on hold. They have now discovered a new virtue in the job security that the public sector offers in contrast to the private sector's job-today-gone-tomorrow management style. The private sector is no longer the acknowledged paragon of virtue.
Both in insurance and banking, public sector enterprises have performed much better than most of their private sector counterparts. Life Insurance Corporation's (LIC's) market share has gone up impressively in 2008-2009; public sector banks have increased their business and profitability. In the December quarter of 2008-2009, deposits of the State Bank of India (SBI) increased by 36 per cent as against 24 per cent of the entire sector. In the same quarter, SBI's profits rose by 37 per cent, while the profits of ICICI Bank went down by 3.5 per cent.
An interesting straw in the wind is that on January 13, 2009, Infosys transferred Rs 1,000 crore from ICICI Bank to SBI. In doing so, it followed thousands of small depositors favouring the safety of public sector banks over private sector lenders. All this amply demonstrates that the public sector, much maligned in the past, has scaled glorious heights in recent times. It has convincingly shown its inherent strength and capability in the face of the ongoing global meltdown. The Government of India deserved kudos. If India hopes to be a model growth engine and a change agent for today's troubled world, her public sector will surely be a major element in its strategy.
(Nitish Sengupta is the chairman of the Board for Reconstruction of Public Sector Enterprises)
