Other elephants in the room

The impending sale of the justly maligned Air India has caused much excitement. Apologists for the airline offer lame alibis such as the burdens placed by the merger with Indian Airlines and additional aircraft purchase and say that operations of the original Air India are still worth saving.  Decades-long personal experience of both domestic and international flights of India’s flag carrier convinces me that such is not the case.  Air India’s standards started falling soon after J R D Tata’s removal as its chairman in 1978. That process has not bottomed out yet. The less said about our erstwhile one-choice-suit-all Indian Airlines the better. The suffocating experience of passengers of a recent Bagdogra-Delhi flight is not an exception.

Air India is in august company. I have used the Ashoka hotels in places ranging from the pre-IT days Bangalore to Shillong and Bhopal to Bhubaneswar, invariably because there were no other hostelries worth staying there in those days. Not one of those experiences was even remotely satisfactory.

I got a telephone in 1984 because the then communications minister, the late V N Gadgil, personally intervened. Those were the bad old days of the licence-permit raj. A generation later, I had to very nearly request the intervention of the current minister for getting that Bharat Sanchar Nigam Ltd (BSNL) landline disconnected.  Maintaining accounts and a safe deposit box in a public sector bank proved so cumbersome that we closed these two weeks ago. We opened them 35 years ago responding to the request of the manager of the newly opened branch for a favour, but their closing met with complete indifference.

Welcome to the wonderland of public sector undertakings (PSU) in the business of providing hassle-free service to consumers, ca 2017, in the age of liberalisation and ease of doing business.

Wikipedia lists 298 central PSUs. About a quarter of them have a direct interface with final consumers in areas such as travel, hospitality, textiles and banking. That number is misleading, as many subsidiaries of companies such as Air India and India Tourism Development Corporation (ITDC) are listed separately but all public sector banks merit only a single entry. State public sector entities and departmental enterprises are also not in this list. We can safely infer that a very large number of government-owned and controlled bodies are directly engaged in providing services, some essential, to the public at large.

Therein lies the rub. These entities came into being (or were nationalised) in the time of shortages and strict government regulations covering distribution of goods and amenities. The maibaap sarkar took it upon itself to deliver everything, including, literally, our daily bread and butter. Rationing supplies and exercising control bordering on the coercive got ingrained in the PSU operations and became a part of their DNA. Public perception of and satisfaction with their performance affected not their business and certainly not their survival.

And survive many of these entities did well into an entirely changed atmosphere of competitive choice. Consumers abandoned their former providers of services in droves as soon as affordable alternatives became available. Neither patrons nor their business have registered growth with the likes of Air India, BSNL, ITDC, Doordarshan, interstate buses, among others. Public banks, too, face the wrath of personal banking clientele.  Even when costs of private service are higher, as in education and health care, people shun public facilities as much as possible. So a decline in service and delivery quality is a result foretold.

That makes no difference to these relics of a bygone era.  They continue in their indifferent ways. This manifests itself in not just poor service, but also shabby appearance. Air India planes are poorly maintained, with tatty interiors and non-functioning fixtures, matching the surly attitudes and looks of the cabin crew. Public banks, except in a few elite areas, resemble government offices in appearance and working.

Most PSUs, already bloated and top-heavy, show no signs of adopting lean ways of doing business. Subordinate staff resist stubbornly any changes, especially those meant to improve productivity. Personnel costs increase. The upper echelons follow the hierarchy-bound government structure. Managers often consider it infra dig meeting aggrieved customers, leave alone seeking their feedback.  Complaints are registered but seldom produce results.  Meanwhile, losses mount.

Consider BSNL. In 2015-16, its revenues were nearly Rs 33,000 crore and losses nearly Rs 4,000 crore, despite government patronage and universal service obligation subsidies. In that year alone, its long-term borrowings increased to Rs 5,000 crore from Rs 56 crore. No prizes offered for guessing where the funds came from. With a comparable turnover of Rs 36,000 crore in that year, Idea earned a pre-tax profit of Rs 4,000 crore after providing for interest on much higher borrowings. While Idea seeks to consolidate its position through a merger with Vodafone, BSNL goes its merry unaccountable ways.

T N Ninan persuasively argues that “there is no escape from building state capacity” (“Be careful what you wish for,” Business Standard, July 8, 2017).  But surely that should not cover redundant and dysfunctional enterprises such as BSNL and ITDC. Pulling the plug on these other elephants in the room would be an act of mercy for their hapless customers and the managers of government finances.

The writer is an economist