Should Public Sector Be Restructured or Abolished | Social Issue Essay, Article, Paragraph for Class 12, Graduation and Competitive Examination.

Should Public Sector Be Restructured or Abolished

Scheme of the essay

Expositions: The investment in the Public Sector had been very high but the return had been very low

Rising Action: High-level committees have suggested restructuring of the Public sector.

Climax:

(1) Functional autonomy should be given

(2) MOU was to keep bureaucrats at a distance but it is not practised.

(3) The relationship of the Public Sector with the Minister and the parliament should be well-defined

(4) As compared with Private Sector they are at a disadvantage

(5) Long-winding procedure-oriented system is not good. Falling Action: Structural adjustments and economic reforms are underway

Ending: SAIL has improved and others can improve.

The massive investments, estimated at about Rs. 300,000 crores, made by the Central and State Governments have helped the public sector attain the “commanding height” of the national economy. But the return on the investment in 246 Centrally-owned public sector enterprises Public Sector was barely 2.75 per cent in 1993-94. The drain on resources was colossal. Long before the Narasimha Rao regime unveiled its new industrial policy in 1991, several high-level committees such as the Economic Administration Reforms Commission under the chairmanship of L.K. Jha, the Arjun Sengupta Committee and the Economic Advisory Council to the Prime Minister under the chairmanship of Sukhamoy Chakravarty had called for drastic restructuring of the Public sector enterprises.

They were agreed that if the enterprises were to operate as commercial organisations, they needed a “functional autonomy” and not treated as the field of either ministers or the bureaucracy. Five years after economic liberalisation and deregulation of industry, the plight of the public sector enterprises remains unchanged since old habits die hard and those at the helm are reluctant to change the mindset.

Ministerial or bureaucratic intervention in the day-to-day affairs of the Public Sector are not rare even today. The Government-owned Steel Authority of India Ltd. (SAIL), which accounts for over half of the saleable steel market in the country, is obliged to carry a large inventory of over a million tonnes worth about Rs. 1,500 crores owing to the sluggish consumer offtake.

The Visakhapatnam steel plant of Rashtriya Ispat Nigam Ltd., also Government-owned, faces a similar inventory problem. They need to step up their marketing campaigns to ensure a better cash flow. Yet news reports, attributed to Union Steel Ministry sources, say that both SAIL and RINL would be required to cut their publicity campaigns.

The all-pervasive fear of the Central investigation agencies in the wake of scams involving senior public sector bank officials is blamed for the reluctance of many public sector officials to exercise their discretion in making vital commercial decisions at a time when the market is becoming increasingly competitive. When budgetary support was withdrawn to the Public sector by the Narasimha Rao regime, the public sector were asked to compete in the market. Competition implies “risk-taking”. But even senior Public Sector officials are willing to strike commercial deals across the table.

The Memorandum of Understanding (MOU) culture was introduced by Rajiv Gandhi to ensure a functional autonomy for the Public sector. The MoUs have undergone many changes but failed to serve the purpose as senior bureaucrats and power-hungry ministers still have a hold on the Public sector The MoUs have naturally turned out to be mere rituals.

According to a senior public sector official, the management is required to deliver under the MoUs, but the Government as a signatory makes no commitment on the availability of funds or spells out its obligations. The “arm’s length” relationship envisaged by the MoUs to keep the bureaucrats at a distance has, in effect, not been practised. Thus, the MoU has become an unequal agreement.

When some Ministers tend to use the Public Sector under their control to promote their own personal or political interests, the managements are subjected to untold pressure. Soon after the Narasimha Rao regime was installed in power, the bizarre style of his Cabinet colleague who was in charge of the Union Mines Ministry ruffled many a feather. A senior public sector executive even put in his papers unable to cope with the Minister’s demands. The affected Public Sector inexorably drift towards industrial sickness often beyond redemption. The Ranchi-based Heavy Engineering Corporation Ltd. is one of the many examples. However, poor management and changes in government policies alone cannot be blamed for the crisis in HEC.

Private enterprises are managed by their Boards of Directors, elected by the shareholders who as investors and the owners delegate to the Board the authority to manage the company affairs. But in the case of the Public Sector, according to a senior Government official, the Government as the owner “continues to hesitate on the delegation of powers to the management.” He says “There lies the crux of the problem.” For the Public Sector set up as commercial entities, this is a self-defeating situation. Where public funds are involved, some form of Government and Parliamentary control is no doubt required but this cannot be exercised by “negating the concept of corporate democracy and functional autonomy,” says the official.

Restructuring of the public sector should begin by redefining the relationship between the Public Sector, on the one hand, and the Government and Parliament can lay down a broad policy framework on the performance, nature of review and assessment.

The Committee on Public Undertaking (COPU) and the Standing Committees of Parliament anyway make a detailed appraisal of the performance of the Public Sector for public debate. This should help strike the right balance between accountability and operational autonomy.

In the context of the emerging highly competitive business and economic environment, the survival and growth of the Public Sector depend on speedy decisions to compete effectively in the marketplace at home and abroad. Under the liberalised regime, imported goods and products are favoured by the users.

It is a challenging situation which can be met only by speedy decisions. Decision-making in the Public Sector is a major constraint. In a fast-changing market, their responses are slow and sluggish. In the steel trade, for example, the sluggish demand has triggered a trade war in the market with the major players outbidding and outpricing one another. The privately managed Tata Iron and Steel Co. Ltd., being a member of a major industrial group, has inherent advantages. It has outlets through its distributors and conversion agents based on its own terms.

On the other hand, SAIL has tie-ups with its customers under the MoUs signed earlier. The device was useful when SAIL began marketing the bulk of its hot-rolled coils in 1993 but questions were raised on the ethics of such tie-ups much to the embarrassment of the management.

In a cash-strapped situation, private producers offload their products on special terms. The Bombay-based Essar Steel is reported to have offered to its buyers HR coils on special terms, but these discounted products found their way into the market. Another producer found the patronage of a former Minister helpful in arranging supplies of rails to the Railways. The State lobby was active in helping these new entrants in the steel business.

A major problem faced by the Public Sector is the long-winding, procedure-oriented system of clearances and approvals from one or more agencies of the Government such as their administrative Ministers, the Department of Public Enterprises and the Union Cabinet.

The delays in obtaining clearance from the Public Investment Board (PIB) is a case in point. Often vital investment decisions are stuck at the PIB and other levels resulting in huge cost and time overruns. The management of the Public Sector does not enjoy the freedom and flexibility in decision-making on these issues like their private sector counterparts.

Competition is indeed expected to improve the efficiency of the Public Sector and some of those enjoying comparative advantage can even emerge as global players. But, according to Mr. M. Gopalakrishna, Chairman, and Standing Committee of Public Enterprises (SCOPE). “This objective can be achieved only if there is a commitment on the part of the Government to remove all the obstacles, both legal and procedural, faced by the Public Sector.

If the Government is committed to continuing the economic reforms and liberalisation programme of the Narasimha Rao regime, it has to address the problems facing the public sector. But its Common Minimum Programme (CMP) has failed to spell out the policy details about Public Sector except in an ad hoc manner.

Withdrawing the Public Sector from the non-core and non-strategic areas will be carefully examined. According to the CMP, but this is a ticklish issue for the ruling coalition. The Left Front, a vital component of the United Front, is opposed to the closure of even the sick and ailing Public Sector. Several Public Sector in the core and strategic sectors have built their manpower and technology resources to face competition. Some figures in the Fortune 500 list. The public Sector also ask for a ‘level-playing field’ vis-a-vis the private sector.

Stressing the urgency for giving the Public Sector autonomy, Mr. Rajendra Singh, Chairman and Managing Director, of National Thermal Power Corporation, says a structural adjustment programme in the public sector should be formulated to meet the needs peculiar to the Indian Public Sector.

To make the Public Sector competitive, their autonomy should be ‘institutionalised’ on a solid foundation. The Union Finance Ministry’s guideline on divided payment ranging from 20 to 30 per cent by the profit-making Public Sector has stirred the honesty’ nest as this is tantamount to curtailing their freedom in the deployment of surplus funds for diversification or technology upgrading programmes.

Economic reforms and structural adjustment programmes are underway in over 100 countries as part of their globalisation effort. These programmes need to be designed to suit the particular requirements of the national economy in question. Given a level-playing field and adequate autonomy, the Indian Public Sector can take a quantum jump in their financial and commercial performance and play a catalytic role, asserts Mr Singh.

As the CMP gives only a broad outline of the Government’s policy on the public sector, it should provide details of the institutional arrangements it plans to develop to help the Public Sector meet the challenges facing them.

Even in a liberalised economy, some Public Sector such as SAIL have done well by improving their market share and profitability of operations in the face of stiff competition. The public sector will earn its credibility if we have more organisations like SAIL.