Even in the protected world of India's sick PSU, it takes a special kind of govt company to lose Rs 8 cr a day, while earning just Rs 10 cr as revenue
T N Ninan / New Delhi Jun 11, 2011, 00:59 IST
Even in the protected world of India’s sick public sector units, it takes a special kind of government company to lose Rs 8 crore a day, while earning just Rs 10 crore as revenue — and that in the booming field of telecommunications. That’s Mahanagar Telephone Nigam Ltd (MTNL) for you. Its big sister, the Bharat Sanchar Nigam Ltd (BSNL), also loses Rs 8 crore a day, though it earns much more revenue — about Rs 90 crore daily. BSNL blames the jailed former minister A Raja for its troubles, but there must be more to the story. Now the two companies propose to merge; expect an Air India kind of situation, with staff from the two companies battling over pay and seniority many years into the future.
Air India, meanwhile, provides more proof that the government is a lousy shareholder. One minister destroyed the airline. Another now watches while the airline cuts flights because it has exhausted its credit and credibility, and therefore has to pay for fuel in cash. The staff, meanwhile, is not paid incentives that are equal to something like half their monthly salary in most cases — and the government expects this de-motivated staff to fight and regain lost marketshare, to offer service with a smile to passengers.
And what about Prasar Bharati, the once supposedly autonomous broadcaster which is now once again little more than a government department? It employs 38,000 people, and loses Rs 2.5 crore a day, to earn about as much revenue. Someone should ask the obvious question: Why is the government in the business of running phone companies, airlines and news broadcasting when it is losing large dollops of money, when private providers are doing a reasonable job, and when there is no shortage of competition? For that matter, does the government need to make watches (at HMT), cement (at Cement Corporation of India), tyres (at Tyre Corporation of India), or shoes (at Bharat Leather)?
These questions were asked frequently till a few years ago. But the United Progressive Alliance (UPA) government has become so inactive on the reforms front that most people have simply given up arguing the case for even the most obvious steps. For instance, a quarter of the 48 units that come under the department of heavy industry are lying closed, or have ceased operation (but are not “closed”). Many others are close to being irrelevant — like Hindustan Photo Films in the era of digital cameras, and Nepa which makes the poorest-quality newsprint at a substantial loss. The shuttered companies include two bicycle makers (imagine them competing against Hero), and Mining and Allied Machinery Corporation which goes back to the heavy industry planning phase of the Second and Third Plans. Many of the firms still up and running are companies that were taken over by the government in the heady days of nationalisation, 40 years ago, and the majority of these have struggled to make good ever since —like most of the textile mills of Mumbai that were taken over in 1982.
Privatisation is of course a risky business, because controversies erupt over valuations. Also, unless a defunct company has substantial real estate (like Scooters India, which is on the block), it is not likely to attract very high bids; and that would make a sale look unappealing. The point, however, would be to clean up the books, get rid of dead assets, and use the sale proceeds productively — as so many other countries have done. To the UPA, however, this would be capitalism red in tooth and claw. So we’ll keep using our tax money to pay for MTNL and BSNL and Air India and the rest.
The question is not of PSU or PVt sector.One willbe able to identify large no of institutions which have fallen prey to greed, corruption and bad management.It is importnat that autonomy, independence, professionalism and corporate governance be essential to any business activity. No institution can stay for long unless it legitimately earns profits for its owners and shareholders. However, if the owners or managements have ulterior motive the no company pvt or public (ownership does not matter)can survive perpetually. Unfortunately the most of the time the politicians who run their writ are bad managers.Every economic activity should run on the prinicpal of viability, no sooner the viability is questioned the same should be closed or sold out. Do our manager/politians have these guts?
Why is it always said that our tax is used for MTNL/BSNL/Air India. Earlier, When these companies were earning huge profits and were paying dividend to Government , no body said thanx to MTNL and Air India who is paying for our petrol subsidies or building roads.
Presence of any government agency is must in sectors like telecom and airlines otherwise private operators will take prices too high.
What don't need to sell these PSU but to improve production efficiency using outsourcing model
What to say of this (or for that matter any) Govt. which treats Baba Ramdev the way they did June 1-3 and then suddenly finds them 'thug', money launderer, tax eavders, criminal, etc. by mere statements And has done nothing about all these allegations for over 5years of his campaign against them. They found CD for Bhushans but didn't do anything on Amar Singh and Nira Radia, etc in their possession all these years.
Evidently, the shortcomings of Government controlled management styles doesn't allow the the enterprises to be profitable.But, the enterprises do productive by allowing lacks of families from lower& middle class background to become economically sufficient and contribute to the productivity of the society.If the Government PSUs are privitised poor and rural citizens cannt pick up mobile signal in their villege/cannt dae to board a train/watch tv for free.The views of the writer are of stomochfull uppermiddle class thouroughly urbanised minority report
The author has mentioned about one minister having destroyed Air India. I wonder why no action or CBI enquiry has been initiated against him. In fact he has been appointed minister to "destroy" Heavy Industriesnow. I agree with the author that the government should get out of these loss making industries. But there are some PSUs which are competing with Private Sector on equal footing. BHEL comes readily to mind.
My opinion is that until the board of directors sincerely act in the interest of the company and withstand the pressure from the minister, the minister can not do anything.
BTW the minister who was referred by the author was more interested in propping up Jet Airways. Is'nt that conflict of interest a la Dayanidhi Maran, only difference being both the protagonists are not related to each other
MTNL and BSNL had been accorded Navratna and Miniratna status by the GOI. They should be excluded from the respective lists and transferred to Tax-beggars List (can anyone suggest an appropriate title?), "as we'll keep using our tax money to pay for MTNL and BSNL".
I disagree with this concept of garage sale. Most of the companies have been made to die by the constant interference of the Ministers, at both the central and state level, who for their own benefit have ensured these corporations do not grow.
Classic case is Air India, Prasar Bharti etc. The govt also suffers from the same mentality as our private promoters cannot differentiate between ownership and management. This is the core problem.
Let us take the case of Air India. One minister destroys the airline (we all know who is it) by making the airline order for aircraft, cancel routes to benefit private airlines etc. however, he cant get the airline Rs 800 Cr that the govt owes the airline. What kind of accountability is this? The minister is neither the good owner nor a good manager.. he proved to be lousy at both.
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