<p>Finance minister Arun Jaitley’s statement on shutting down unviable public sector companies and reviving ailing ones hopefully marks a new approach to the management of these undertakings.<br /><br /></p>.<p> He told parliament last week that four government-owned companies which cannot be revived will be shut down and seven other ailing ones will be revived through divestment or joint venture route. The government’s plan of action should cover more companies because by the minister’s own figures, out of 79 PSUs which are incurring losses, 49 are sick. There is no reason to keep consistently loss-making units alive with the infusion of public funds which can be more usefully deployed for the growth of the economy and the welfare of people. The UPA government was not serious about reforming the public sector though it had said that it would take steps in that direction. <br /><br />The minister’s statement is welcome because it may signal a change in policy. The government should speed up the disinvestment process and fix a time-frame to complete it. The recent SEBI directive that public shareholding in PSUs should be increased to a minimum 25 per cent provides an opportunity. There are strong reasons for the government to even go beyond the recommended minimum. The stake sales from the PSUs can be used to finance infrastructure development programmes in which the private sector investment will not be forthcoming. The proceeds from disinvestment will also improve the fiscal position of the government. Many public sector units are considered family silver but there is the need take a hard look at them in terms of their utility and public purpose. <br /><br />The government should not be doing business in areas which can be best served by the private sector. Air India is a prime example of wrong investment. What is called the national carrier which had a near monopoly in the market, is now fourth after competition came in. But the loss-making, debt-ridden airline was given a Rs 30,000 core bailout with public funds two years ago. <br /><br />Only two of its 175 routes are profit-making. There is a clear case for closure of such units which only bleed the exchequer with no hope of return to viability. Unless there is a reason in terms of strategic need or national security, the government should withdraw from large areas of the economy where it is present now, wasting public resources. It calls for a new definition of the state’s role in the economy. </p>
<p>Finance minister Arun Jaitley’s statement on shutting down unviable public sector companies and reviving ailing ones hopefully marks a new approach to the management of these undertakings.<br /><br /></p>.<p> He told parliament last week that four government-owned companies which cannot be revived will be shut down and seven other ailing ones will be revived through divestment or joint venture route. The government’s plan of action should cover more companies because by the minister’s own figures, out of 79 PSUs which are incurring losses, 49 are sick. There is no reason to keep consistently loss-making units alive with the infusion of public funds which can be more usefully deployed for the growth of the economy and the welfare of people. The UPA government was not serious about reforming the public sector though it had said that it would take steps in that direction. <br /><br />The minister’s statement is welcome because it may signal a change in policy. The government should speed up the disinvestment process and fix a time-frame to complete it. The recent SEBI directive that public shareholding in PSUs should be increased to a minimum 25 per cent provides an opportunity. There are strong reasons for the government to even go beyond the recommended minimum. The stake sales from the PSUs can be used to finance infrastructure development programmes in which the private sector investment will not be forthcoming. The proceeds from disinvestment will also improve the fiscal position of the government. Many public sector units are considered family silver but there is the need take a hard look at them in terms of their utility and public purpose. <br /><br />The government should not be doing business in areas which can be best served by the private sector. Air India is a prime example of wrong investment. What is called the national carrier which had a near monopoly in the market, is now fourth after competition came in. But the loss-making, debt-ridden airline was given a Rs 30,000 core bailout with public funds two years ago. <br /><br />Only two of its 175 routes are profit-making. There is a clear case for closure of such units which only bleed the exchequer with no hope of return to viability. Unless there is a reason in terms of strategic need or national security, the government should withdraw from large areas of the economy where it is present now, wasting public resources. It calls for a new definition of the state’s role in the economy. </p>
