Modi Govt Should not Waste Money and Ef­fort on Re­viv­ing PSUs

The Economic Times - - Personal Finance & Economy -

im­proved some­what from what they are to­day, but that doesn’t mean any­thing. Some parts of this vast and ru­inous busi­ness em­pire may be less de­funct than the rest, but taken as a whole, the pub­lic sec­tor will be an un­con­scionable sink of cap­i­tal and — even more im­por­tantly — po­lit­i­cal at­ten­tion. The only good rea­son to try and im­prove the per­for­mance of those PSUs that are not bas­ket cases is to get a bet­ter price for them. Ac­tu­ally, whether the sec­tor can be re­vived or not is ir­rel­e­vant to the larger point, which is that the govern­ment should not be in busi­ness. Even if Air In­dia were a very well-run air­line (which, ac­cord­ing to a leg­end, it used to be once), the ba­sic prin­ci­ple would still stand. It’s use­less to point out the spe­cific rea­sons why Air In­dia de­clined, or MTNL or BSNL or many other bas­ket cases did. Un­der­ly­ing all those rea­sons is the lack of in­cen­tive and ac­count­abil­ity. Ex­cept for out­right mo­nop­o­lies like the rail­ways, which can ex­tract how­ever much they like from their hap­less cus­tomers, it’s im­pos­si­ble for PSUs to com­pete.

Of course, it is pos­si­ble that through some great mir­a­cle of good gov­er­nance, the Modi govern­ment is able to turn around a hand­ful of PSUs. The point is, so what? What would have been achieved by putting in time, money and ef­fort in do­ing some­thing that will in­evitably be un­done at some point in the fu­ture? The only sen­si­ble course is to en­sure that the max­i­mum value can be ex­tracted from dis­pos­ing off the pub­lic sec­tor, whether as run­ning businesses, or out of the phys­i­cal as­sets of the ones that can­not be sold as vi­able businesses. For the last many years, this has in­volved the fi­nance min­istry set­ting an un­re­al­is­tic sell­off tar­get and then scam­per­ing around at the end of the year to get what­ever it could. In ef­fect, the UPA govern­ment has ap­proached pub­lic sec­tor dis­in­vest­ment the same way as a drug ad­dict ap­proaches his last saleable pos­ses­sions. Re­gard­less of the Gu­jarat ex­pe­ri­ence, the Modi govern­ment should not com­mit the folly of wast­ing money and ef­fort on the pub­lic sec­tor.

The mar­kets seem to be­lieve that the new govern­ment would com­mit to the folly of try­ing to re­vive the pub­lic sec­tor in­stead of just sell­ing it off

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