This book studies past central governments to analyse the current regime’s push for privatisation

In October 2010, the Planning Commission constituted a “Panel of Experts on Reforms in Central Public Sector Enterprises (CPSEs)”, under the chairmanship of SK Roongta, former chairman of SAIL, the Steel Authority of India Ltd, to examine issues relating to corporate governance, human resource strategy, the Memorandum of Understanding (MOU) system, effective partnership with the private sector, diversifications and mergers, consolidation in CPSEs and to suggest measures for the development of public enterprises. Its report was submitted in November 2011. The Panel gave as many as forty suggestions on various issues, such as better corporate governance, more autonomy to CPSE boards and better utilisation of resources and transparency.

The Panel recommended that every CPSE should have a strategy and business development committee and the said committee should formulate a strategy regarding diversification, acquisition, joint ventures and new business lines for the CPSE. The Panel further suggested fixing a minimum three-year tenure for CMDs/Directors of CPSEs. It also suggested that the CAG should bring out a report about best practices prevailing in diverse fields in different CPSEs, and that this report should, among other things, focus on important cases of indecision and delayed decisions. The report would help CPSEs to learn from each other and avoid mistakes. The Panel felt that the applicability of Article 12 inhibited the functioning of CPSEs as commercial entities and therefore the matter should be reviewed by the authorities concerned.

The Panel also recommended that CPSEs should be provided autonomy to formulate their own recruitment policies for all positions below the board level. They should also have the power to decide their own levels of pay and compensation. The CPSE boards should have greater autonomy for the selection of consultants, technology partners and JV partners. It was also recommended that at least thirty more CPSEs should be listed in the next three years, going up to fifty in the next five years. It was further suggested that the government should identify loss-making CPSEs for privatization and if the government was not inclined to privatise such CPSEs then it should consider auctioning them, limited to other CPSEs. It was also suggested that as R&D helped to enhance the core competence of an organization, the current level of expenditure on R&D should be scaled up.

The government did not take any decision on the report. However, there was a consensus in the government that many policies governing PSUs had outlived their utility and therefore needed to be replaced with new ones suited to changed business needs. To compete with nimble-footed private players, the CPSEs needed more functional autonomy and some viable distance from the ministries.

The performance of the UPA government, both in the first term and the second term, was a disappointment so far as public sector reforms and privatisation were concerned. During the entire period of ten years, the government did not shut down even a single chronically loss-making unit. It is true that the NCMP had set down that profit-making enterprises would not be privatised but then there was no prohibition on privatisation of loss-making units. The government should have gone ahead with some concrete steps in this direction.

In the second term, the scenario had changed as the UPA had returned to power without the support of the Left parties and there was no NCMP breathing down its neck. But the government remained satisfied with the piecemeal divestment of minority shares only and privatization as a strategy was completely shelved. In October 2021, when the Business Standard asked Montek Singh Ahluwalia, Deputy Chairman, the Planning Commission from July 2004 to May 2014, to pinpoint the missed opportunities during UPA rule, he had no hesitation in voicing his disappointment that one of the UPA’s failures was its inability to carry out privatisation. As Manmohan Singh had explained: “We are a coalition government, and that limits our options in some ways. Privatisation happens to be one such area.”

The remarkable economic growth which was witnessed in the first term of the UPA did not carry over into its second term. The growth, which was 8.9 per cent in 2010–11, dipped to 6.7 per cent in 2011–12 and further to 4.5 per cent in 2012–13, though in 2013–14, it slightly increased to 4.7 per cent.

There were several reasons for the decline, important among them being the global financial crisis which had adversely impacted India’s economy accompanied by several negative agricultural shocks which continued to occur after 2009. Public investment, which had powered economic growth in the first term, had slowed down in the second term. The government was in the grip of a policy paralysis and though the NAC had spearheaded three critical rights laws – the Right to Education Act, the National Food Security Act and the Land Acquisition Act – the fate of several other important proposed laws remained uncertain for long periods. A series of scams – the Adarsh Housing Society scam, the 2G spectrum scam, the AgustaWestland VVIP chopper scam, the CWG scam and the coal allocation scam – hit the headlines in the second term of the UPA one after another, creating a perception that the government was neck-deep in corruption.

Perhaps, perceptions outweighed the facts. In the elections held in 2014, UPA-2 lost to the NDA. KM Chandrasekhar, former Cabinet Secretary, in his memoirs, As Good As My Word, sums up the role of the UPA and Manmohan Singh. He recalls a conversation with him that “a hundred years later, history would recognize him [Manmohan Singh] and his comrades in arms during those exciting years of change as the saviours of India.”

Excerpted with permission from The Public Sector and Privatization in India, Sheela Dubey, Speaking Tiger Books.