India’s largest public-sector entity is the Railways. It’s perhaps ironic that there’s hardly any mention of it in the current budget. Why is the government making a virtue out of the fact that it isn’t setting targets for the next round of public disinvestment? The truth is that, while many PSUs are generating massive profits, they are also strapped for cash when it comes to fresh investments. So, where does this leave us? How are our public sectors perceived today? Are they seen as cash cows? Are they still capable of entering new areas with the same muscle and heft as in the past? Or are they just being dusted off and preserved for a future sale at the right price.
The evolution of India’s PSUs has been somewhat of a roller-coaster ride, from the early days of independence, when they were seen as the cornerstone of the nation’s industrial and economic policy, to the present day, where their relevance is constantly being questioned. Born in the 1960s, they aimed to achieve self-reliance and foster rapid industrialisation. Key projects like the Bhilai, Durgapur and Rourkela steel plants became symbols of national development and ambition. These entities were instrumental in building the country’s industrial base and infrastructure, playing a crucial role in employment generation and economic integration across diverse regions. Icons like Bharat Heavy Electricals Limited (BHEL), Steel Authority of India Limited (SAIL) and Oil & Natural Gas Corporation (ONGC) became synonymous with India’s growth story. Bharat Electronics Limited (BEL) and similar entities have also shown consistent profit growth, reflecting the positive shift in their operational dynamics. These enterprises were not just companies; they were national assets that symbolised self-reliance and ambition.
Fast forward to the 1990s. The economic liberalisation wave hit India and the role of PSUs started to be re-evaluated. The private sector was unleashed, and the inefficiencies and bureaucratic red tape associated with PSUs began to become glaringly obvious. The government initiated a policy of disinvestment, aiming to reduce its stake in these entities and improve their efficiency. This was a turning point. Some PSUs adapted and thrived, while others struggled to find their footing in a more competitive and less protected environment.
Today, the landscape is mixed. On the one hand, we have success stories like Bharat Petroleum, which has consistently delivered strong financial performance and value to shareholders. On the other, entities like Air India have been a drain on public resources, struggling with inefficiency and mounting debts. In the latter case, it has yet to get its mojo back even after privatisation. The government’s approach has been a balancing act – trying to maximise value from profitable PSUs while attempting to reform or offload the laggards.
As a policy analyst who has closely witnessed the evolution of PSUs over the decades, I remain cautiously optimistic about their future. At present, PSUs are at a curiously interesting juncture. The government seems to be in no rush to set disinvestment targets, as seen in the recent budget. This wary approach might be due to market conditions or a strategic play to get better valuations. However, strategic disinvestment remains on the cards. Expect to see more PSUs being prepared for partial or full privatisation, especially those in non-strategic sectors.
There’s a growing emphasis on improving efficiency and competitiveness within PSUs. Modernisation, professional management practices and greater operational autonomy are key focus areas. The goal is to make these entities more agile and market-driven, shedding the bureaucratic baggage that has long been their Achilles’ heel. Despite the cash constraints, there’s a push for PSUs to venture into new and emerging sectors. Renewable energy, digital Infrastructure and advanced manufacturing are areas where PSUs can leverage their scale and expertise. This diversification is crucial for their long-term sustainability. We’re likely to see an increase in public-private partnerships (PPPs). This model allows PSUs to tap into private sector efficiencies and innovation while retaining public ownership. PPPs can be a win-win, combining the best of both worlds to drive growth and development.
PSUs have a unique mandate to balance profitability with social objectives. Expect this dual focus to continue, with an emphasis on inclusive growth and nation-building. Whether it’s rural electrification, infrastructure development, or healthcare, as cash cows, pioneers of new industries, or guardians of public interest, PSUs will continue to be an integral part of our national fabric. With the right policies and strategic direction, our PSUs can not only survive but thrive in the years ahead.