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India Can’t Wait for the ‘PSU Culture’ to Die a Slow Death. It’s Time for Unsparing Reforms

Public sector enterprises should be made to compete in the market with private enterprises for resources, markets, personnel and technology. Representative image: Reuters

Public sector enterprises should be made to compete in the market with private enterprises for resources, markets, personnel and technology. Representative image: Reuters

Global competition allows survival of the fittest. The Indian economy cannot place its bets on slow runners and allow the ‘PSU culture’ to thrive with cosmetic makeovers for an indefinite period.

Minimum Government Maximum Governance
India has almost left COVID-19 behind. The challenge now is to synergise all positive economic forces for a revolutionary upturn in the Indian economy. It is time for path-breaking administrative reforms, and pump-priming entrepreneurship, innovation and production processes in the Indian economy through liberal financing, cutting the red-tape, delays and regulatory corruption. It is the moment for unleashing the fullest potential of all sectors of the Indian economy.

It is time to unshackle the private sector of the chains that pull it back. And, to drastically reform the ageing public sector entities (PSUs) through an overhaul of ownerships, managements and processes, dis-investments, partnerships, turn-key operations, or throwing open their management to global domain specialists. Even if retaining the public sector character of some of the PSUs is required, it is time to separate operational freedom and ownership. It is time to end the age-old colonial outdated governmental management hegemonies. It is time to chop the dead wood off the growing tree. It is time to cure the bleeding ulcers. It’s the time to act, and act decisively.

Perform or perish model

Red tape is the bane of public sector undertakings. “Skewered through and through with office-pens, and bound hand and foot with red tape,” just as Charles Dickens famously described the malady of his times, the PSUs are held back by needless red tape and paperwork, and their R&D, technology and operational initiatives cannot be capitalised, unlike in the private sector. Red tape is powered by rigid, outdated framework of self-created rules, which suffocate PSUs and retard their efforts to create value and jobs, rendering them non-competitive vis-a-vis the private sector and making them take shelter under the State’s protection. The price of inefficient processes and lack of managerial accountability in non-competitive PSUs is paid by the poor tax-payers.

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Global competition allows survival of the fittest, and PSUs will have to either perform or perish. However, time is of the essence here, and the Indian economy cannot place its bets on slow runners and allow the ‘PSU culture’ to thrive with cosmetic makeovers for an indefinite period. India cannot silently wait for their peaceful demise, one by one. There is an imperative need for bringing unsparing reforms in the prevalent PSU culture—operating upon them and replacing their bone marrow, without any loss of time.

Giant steps are needed to further focus on domestic and external deregulation for encouraging new entrants and allowing free imports. Substantial changes are required in the trade and payment systems. Foreign Direct Investment (FDI) process needs further facilitation. Capital market and tariff reforms need to be a continuous feature. Public sector enterprises should be made to compete in the market with private enterprises for resources, markets, personnel and technology. Need for fast and flexible commercial decision-making has become more important than ever and public enterprises have to get used to it.

The present global outlook revolves around the point that the private sector is hugely investing in its workers and communities, because it knows it is the only way to be successful in the long term. These modernized principles reflect the business community’s role to continue to push for an economy that serves all. The private sector puts the customer first and invests in its employees, shareholders, communities and the nation, which is the most promising way to build long-term value. Therefore, no mental blocks or romanticism should stand in the way of path-breaking reforms, in restructuring and dis-investment.

The age of super-specialisation

A dynamic society needs a dynamic governance model, not a time-frozen heritage institutional structure cast in concrete. The idea to open up governance to draw expertise from the industry, academia and society into the services cannot be disputed. Many developed countries of the world have such systems in place. Concerns regarding conflict of interest can easily be addressed by well-drafted and vigilantly enforced agreements and binding undertakings.

Focusing on administrative reforms, Narendra Modi, with his long administrative experience as the chief minister and now as the Prime Minister, understands that the ‘Steel Frame’ concept in the services was visualised and brought about by Sardar Patel while overruling the highly critical junior members of the Constituent Assembly. It was basically a ‘perpetuity and continuum’ of the British day’s ICS, meant to be the anchor of the status-quo in a hierarchical system of governance, where no one person has the final say on anything, and the ‘checks and balances’ make it a perpetual tight-rope walking where the speed and thrust are compromised. Times have changed, and India has new challenges, inviting altogether new approaches and processes to emerge as a global leader.

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If the political executive is outsourcing former All India Services officers to man the ministerial offices in the Union, and if there are secretaries and joint secretaries drawn from outside the services, time has come for a fast-growing economy to have access to a larger pool of talent for governance. It is undoubtedly an age of super-specialisation now. A general medicine practitioner treating every ailment with minimum basic academic benchmark relying upon his experiential clinical sense is no longer enough. The same is true of other professions, where lack of up-to-date super-specialised domain knowledge is erroneously believed to be a dispensable pre-requisite in the face of experience. The result: there are islands of individual excellence in a vast sea of mediocrity.

Economy needs the best, there is no place for the mediocre to lead the management. Therefore, the ‘one size-fits all’ approach, with IAS officers doing everything under the sun, does not fit into the modern context.

There are a large number of brilliant scientists, doctors, engineers, architects, lawyers, academicians, chartered accountants, bankers and others who opted for different career routes in the initial years of their lives. Over the years, they super-specialise and acquire both macro and microscopic precision in their respective domains. They need to be roped in as administrators to reach global standards in management.

There is a strong case for lifting the human resource barriers and utilising the best talent available anywhere, within or outside the government, for managing the government and its public sector entities. This would ensure a free flow of specialisation, expertise and experience, which coupled with another thrust of economic reforms can synergise into a massive spurt in quality and quantum of output in the Indian economy.

(This article is the second in a series on ‘Minimum Govt, Maximum Governance’)

Disclaimer:The author holds post graduate degrees in History and in Economics, and a Bachelor of Laws. He is a former Chief Secretary to the Government of Punjab (India). Views are personal.

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