Modi Govt Should not Waste Money and Effort on Reviving PSUs
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