"PSUs — dead or alive" by Abhigyan from Team Neutral
By: The Note
Tags: India, Psu, Knowledge, Company

PSUs explained

A PSU or Public Sector Undertaking is any company owned by the union or state government or even both. When India got independence, it focused mainly on agriculture. The country demanded economic sovereignty and to achieve it, Prime Minister Jawaharlal Nehru advanced an economic policy to replace foreign imports and establish domestic production. Establishment of domestic production to replace foreign imports is often referred to as import substitution industrialisation or ISI. This is similar to the economic part of the Aatma-Nirbhar Bharat mission. Not only he promoted ISI, but believed that India should practise mixed economy. Dr. V. Krishnamurthy forwarded Nehru’s vision. Dr. V. Krishnamurthy has huge contributions to this idea and is also called the father of public sector undertakings.

Mixed economy is a type of economy which aims to implement both socialism and capitalism. It allows the government to interfere in the economy along with economic freedom to individuals and companies.

PSUs have a huge importance to our daily lives, but it plays a vital role in the Indian economy. Funded by the government, PSUs are committed to deliver cheap high-quality products to the common person and do not intend to make profit. Private companies fail to achieve low prices as they aim to make profit. PSUs also provide employment to a huge number of people. In fact, several surveys reveal that people opt for a job in PSUs instead of private companies. This might be because PSUs also provide better job security, as believed. Bharat Petroleum Corporation, Hindustan Petroleum Corporation, National Thermal Power Corporation, Coal India, Indian Oil and Power Grid Corporation of India and Bharat Sanchar Nigam Limited are the most profit making PSUs, whereas India Post, Air India, Mahanagar Telephone Nigam Limited and State Trading Corporation of India are the most loss making PSUs of the 2018–19 session.

There are various ranks of PSUs. The highest earning companies are called “Maharatna” companies and companies just below are “Navaratna” companies.

The present

The Modi government is out of money. This has been discussed in my previous article “Vaccine is OK, but…”. Here is an excerpt from the article reflecting that the government is out of money.

The country is currently suffering from a technical recession. A dearth of money is observable. Several economists said, “India has entered a technical recession in the first half of 2020–21 for the first time in history”. This recession was widely discussed on social media platforms such as Twitter and Reddit. “India’s economy contracted by 7.5% in the July-September quarter following a record slump of 23.9% in the previous three months, pushing the country into a recession for the first time in its history.” said the Hindustan Times newspaper.

It seems the government is unable to fund many PSUs and hence it has decided to sell many of them. The Narendra Modi government has opened doors for private players in the railways. 151 trains and 50 stations bid to run by private companies. More than Rs. 30,000 Crores to be invested by private entities. People fear that a private company may get monopoly harming the whole railways. If this happens, the most affected will be the poor. The company in monopoly is free to raise the ticket fares. Almost two-thirds of India counts under poverty. Travelling for the poor will become impossible. However, it has been said that the driver and guard will be of the government, whereas all other employees will be managed by the entity. If this happens, India may witness worker exploitation. In their defence the government said that the Indian Railways was during the year 2018–19, 8.85 crore passengers were on the waiting list and Indian Railways was able to provide only 16% reservation out of these waiting list passengers. Railways have increased 5.35 crore seats; out of these 70% is in AC Coaches and 30% was only left for the sleeper coaches. These decisions reflect that the poor are being exploited poorly. The ongoing farmers’ protest supports the argument. “While going in for privatisation, the government will destroy the Railways and make travelling costlier. We outrightly condemn the government’s move. After discussing the issue with our central members, we would launch protest against it”, said National Federation of Indian Railwaymen president Guman Singh in July 2020. 2021 will start soon and no one has touched this topic again. 13% stakes of IRCTC have been already sold.

GOI on its way to sell 5% stakes of the Steel Authority of India (SAIL) Ltd., reported Press Trust of India on 9 February 2020. Today, the government holds 75% stake in SAIL. It had last sold 5% stake in the steel CPSE in December 2014. Note that this is 5% stake of steel in the Central Public Sector Enterprises.

Scared? There is more. Almost half, 53% of stakes, of BPCL or Bharat Petroleum Corporation Limited sold. BPCL, a Maharatna, is the second-largest fuel retailer and third-biggest oil refiner of India. BPCL made a total profit of Rs. 7,132 Crores in 2018–19. This jewel is being sold. The Vedanta Group has bid the highest to invest in BPCL.

“Government can sell as much as 26.4% of its holding in Indian Oil — valued at about ₹33,000 crore — and still retain indirect control”, reported livemint.com.

Bidding for Air India also started late 2020. GOI divested 76% of Air India’s stakes. Sale of 100% equity share capital of Air India held by the government can lead to huge disruption in ticket fares and the common man would suffer at the end of the day. Air India is also one of the most loss making PSU. In 2018–19, Air India lost Rs. 8,475 Crores. Air India’s debt is at Rs. 23,386 Crore. Recovery of Air India now seems very difficult when the Government is busy building a new Parliament, PM House and statues.

Bharat Heavy Electricals Limited or BHEL also witnessed huge disinvestments in 2019.

I have only two lines to say. India is known as the golden bird. The government has excoriated and sold the gold from the bird.