Time for government to get out of bleeding PSU business

The government’s unflinching resolve to keep infusing thousands of crores of rupees of public money to revive profusely bleeding public sector enterprises does not seem to be well thought out. For long we have failed to comprehend why would the government continue to be in business, from flying to mobile-telephone services.

On his maiden official US visit as Prime Minister, Narendra Modi had said that it was not the government’s business to do business, its job was that of a facilitator to create new opportunities. But the way the loss-making PSUs continue to operate with impunity at the cost of the country’s growth puts a question mark on the government’s position.

Whether it’s the inability to find a buyer for debt-laden Air India and running it using taxpayers’ money, or the decision to pump in a massive Rs 70,000 crore to revive sick telecom public sector undertakings BSNL and MTNL, the government’s lack of grit and prudence is absolutely apparent.

However, the Centre’s recent move of inviting bids for its entire 100% stake in AI along with its complete share in Air India Express and ground handling arm AISATS, is being looked as a bold reform and a resolute effort to exit the bleeding national carrier. As per the new deal on offer, the second attempt in the past two years by the Modi government at privatising AI, the government has still to absorb Rs 56,334 crore in liabilities, including Rs 36,670 crore in debt.

Can India afford this eternal bleeding? More so at a time when the country’s economic growth has hit a six-year low of 5% in the first quarter of the current fiscal, there is a spurt in unemployment, consumer demand is sluggish, and when there is a need for massive investments in healthcare, education and infrastructure.

Tackling critical levels of air pollution in key cities is another area of urgent attention and action. The sale of multiple sick PSUs could help the government fund these and restrict further economic downturn.

According to the Public Enterprises Survey 2017-18, the total losses of the 71 central PSUs stood at a staggering Rs 31,261 crore, with BSNL, MTNL and Air India incurring the highest losses for the second consecutive year.

Over 92,000 employees of the two ailing telecom firms have opted for the Centre’s generous Rs 30,000-crore voluntary retirement scheme. Another Rs 20,000-crore worth of 4G spectrum will be allotted to the two companies, which if auctioned to private players, could garner massive funds for the government.

The list leaves out 21 bleeding public sector banks. The total losses of these banks in 2017-18 stood at a staggering Rs 85,371 crore but that has not prevented the government this year from deciding for an upfront capital infusion of Rs 70,000 crore in public sector banks.

And still less known is the dismal state of PSUs run by the states. There are 1,309 PSUs owned by various state governments and the losses incurred by them are nearly thrice that of Central PSUs.

The perpetually loss-making PSUs, of both Centre and states, are a huge burden on the country’s already sagging economy and its struggling taxpayers. The colossal amount of capital stuck in these firms could be used to considerably boost public spending in healthcare, education and infrastructure, create new job opportunities, leading to increase in consumer spending and upswing of the manufacturing sector facing its worst crisis in decades.

Let’s focus on health and education, the two key growth parameters of any nation. India’s per capita health expenditure is among the lowest in the world with the percentage of public spend on healthcare just hovering around 1.5% of the country’s Gross Domestic Product (GDP).

There is an urgent need to fill the existing gaps at the primary level healthcare delivery including severe shortage of doctors, nurses and midwives apart from crumbling infrastructure of primary healthcare centres and district hospitals. These gaps put pressure on the tertiary hospitals, further increasing the out of pocket expense of patients.

Health budget

India’s health budget for 2019-20 was less than Rs 63,000 crore, most of which was allocated towards the National Health Mission and Ayushman Bharat Yojana launched last year to provide health insurance of up to Rs 5 lakh to the disadvantaged. Massive allocation is still needed to considerably enhance the population coverage and cap of Ayushman Bharat. Also, with more Indians suffering from lifestyle and non-communicable diseases, we need to substantially increase our spend to tackle them.

While our country has the largest number of malnourished children in the world, the other stark reality is that they don’t even have decent public schools to study. At a time when there is a compelling need to restructure our education system and fill the gaping holes, the share of the Central budget for education fell from 4.14% in 2014-15 to 3.4% in 2019-20.

What’s more disturbing is that the allocation to school education has decreased from Rs 38,600 crore in 2014-15 to Rs 37,100 crore in 2018-19. The primary and higher education sector is facing manifold problems such as poor infrastructure and facilities, shortage of qualified teachers, disparities in access particularly in terms of economic class, gender, caste and ethnic belonging; poor student enrolment; and high dropout rate.

Now, let’s talk about clean air and water, an absolutely non-negotiable right of all living beings, which India has failed to ensure its citizens. With the country home to seven of the world’s 10 most polluted cities and few of the world’s most polluted rivers, it is time to get our acts together before it is too late.

The government must draw up a robust action plan, bring stringent laws and allocate generous funds to tackle the problem. However, the helplessness of the authorities and the allocation of just close to Rs 3,000 crore for Environment Ministry in 2019-20 makes the government’s sense of urgency apparent.

The Centre’s decision of strategic disinvestment in both loss and profit-making PSUs earlier this year and recently of five big PSUs is welcome though the selection of Maharatna oil company BPCL has raised many eyebrows. Disinvestment has long been the government’s weapon to tackle the cash crunch. It is more crucial now to figure out how to put the enormous amount of money it is expected to raise to effectively address the key issues blocking the growth story.

(The writer is a freelance writer and co-head of Bengaluru-based think tank Antardhwani)