Do more by doing less
- The government’s creativity and persistence in divesting the national carrier must be replicated with most of the remaining 360+ central PSUs
- Air India’s sale is important for three reasons — priorities, resources, mindset — and is a template for the Indian state to do more by doing less.
Issues in running Public enterprises by state
Unfair disadvantages in human resources
- Air India had 12 trade unions, employees per plane were double global standards, and employee cost was an abnormal 20 per cent of revenues.
Neglect over sectors of Human resources
- The resources are diverted from state’s core job — security, primary healthcare and education, research funding, justice delivery, etc which suffered after Independence because scarce public resources were diverted to doing things that the private sector could do better.
Investment hunger
- State sector firms indulge in “investment hunger” and don’t fear losses because they know they will be bailed out.
- Air India costed the government only Rs 2.5 crore to buy, but it has incinerated Rs 1.1 lakh crore since 2009.
Way forward
- Government’s creativity and persistence in divesting Air India must be replicated with most of the remaining 360-plus central PSUs.
- In parallel, with state government finances also ravaged by the pandemic, states privatising over 1,500 poorly run state PSUs could ease fiscal woes.
- Leaving the command, control and conquer mindset and regulating private sector only where needed in larger public interest.
- Focussing on performance rather than merely doing the job by officials.
Conclusion
- Privatisation hardly means a weak or small state; a modern state is a welfare state.
- Under Deng Xiaoping and Zhu Rongji, China converted over two-thirds of its state-owned enterprises to private ownership, boosting productivity manifold.
- China is powerful because of a $14 trillion GDP fuelled by private entrepreneurs, foreign investors, and multinational companies.
- The top ranks of Norway, Sweden, and Finland in government spending as a share of GDP are financed by their private efficiency.
- Thus India should look for ways to improve the efficiency of its private sector rather than state occupation of sectors.