New “Public Sector Enterprise Policy”

New “Public Sector Enterprise Policy”

The government of India has released a new 'Public Sector Enterprise Policy', under which atomic energy, space, defence, trans and telecom, power, petro, coal, other minerals, banking, insurance and financial services will be classified as strategic sectors. Before we going through the article we have to know what 'Public Sector Enterprise Policy’?

About ‘Public Sector Enterprise Policy’

Public Sector Enterprise Policy is a highly specialized area of study in public administration and in particular, in public finance. It is the study of a particular non-financial entity with the objective of studying how it spends money and manages its resources in order to achieve economic growth and particular objectives. The policy classifies public sector commercial enterprises into the strategic and non-strategic sector:

Strategic Sector: The strategic sector is a term used to describe a specific area to focus on in economic development. There would be a maximum of four public sector companies in strategic sectors. State-owned firms in other segments would be privatized eventually. The 4 sectors covered under strategic sectors are Atomic energy, Space and Defence; Transport and Telecommunications; Power, Petroleum, Coal, and other minerals and Banking, Insurance, and financial services.

Non- Strategic Sector: Non- strategic sector is like support service in other words it gives support to other businesses but it is not related with its profit. Under this sector you can find all sorts of non- profit organization related with social welfare, health, education and many others. They are involved in projects which can improve the lives of people all over the world in different ways.

Issues Related to Privatisation of PSEs

Issues related to privatisation of Public Sector Entities (PSEs) and ease of access to information are being discussed very widely these days. Protests have been popping up all around the country against PSEs being taken over by private companies. The government has promised to look into the accusations and ensure that all possible changes are made to improve service delivery as well as transparency in the process. Let’s discuss about some major issues related to the Privatisation of PSEs.

1. No Buyers for Loss-making PSEs: No one would buy PSEs with their huge debt and employee liabilities. If shares of public sector enterprises are offered for sale to the private sector, the latter will naturally be interested only in the shares of profit-making concerns. Therefore, the government may even have to pay the buyer, as it happened in the case of the Delhi Discom privatisation.
2. Privatisation not the first option: In India, privatisation is not a default option; rather, it is resorted to only out of extreme necessity. This may explain the hesitation to privatise some of the largest loss-making PSEs like Air India, BSNL and MTNL.
3. Excessive Bureaucratisation: Public sector industries in India are plagued with inefficiencies due to excessive bureaucratisation. Their chairman-cum-managing directors are bureaucrats who may not have domain knowledge or technical service people bereft of business acumen. Also, monopoly/oligopoly of certain PSEs leads to the administrative price mechanism. For example, oil PSEs have been allowed to make a profit as they can dictate oil pricing, this allows them to have profits but there have been no innovations in the oil marketing sector.