Last week, when different central public sector undertakings (PSUs) were observing the ‘Public Sector Day’, there was a concern at different employee forums. Should the state-owned sector remain as important to the national economy in the days to come?
The fear was unfounded. After Independence, PSUs had to take charge of the industrialisation agenda to compensate for the weakness of the private sector. That job is now largely over. The gross capital formation of the country stood at 31 per cent of the GDP in 2018-19. Two-thirds of it came from the private sector.
In tomorrow’s India, PSUs may willy-nilly follow the playbook created by the Chinese state-owned enterprises (SOE). Essentially, there should be fewer but bigger PSUs. Backed by mega PSU banks, they should go out shopping for natural resources and critical technology, around the globe to facilitate the private sector to earn the cake for India.
In the process, the contribution of PSUs in the national economy should grow. In 2019, Manish Sinha, MD of Dun & Bradstreet India (D&B) pointed out that PSU contribution to India’s GDP, which was down from 8 per cent to 5 per cent between FY08 and FY18, should go up to 10 per cent for the country to become a $5 trillion economy.
Strategic role This is doable and evidently matches the line of thought of the government. There were 249 operational CPSUs in FY19. According to D&B, only four oil PSUs - ONGC, HPCL, BPCL and IOC – contributed 58 per cent of the total GDP generated by PSUs. Another 16 CPSUs – including SAIL, NTPC, Power Grid Corporation – contributed 34 per cent.
Remember, refining and marketing company HPCL became a 54.9 per cent subsidiary of the upstream oil major ONGC to create a mega integrated entity in 2018. On the other end of the spectrum is Indian Oil, which accounts for one-third of the country’s refining capacity. India has the fourth-largest refining capacity in the world.
The entry of Nayara Energy has a geopolitical significance which is crucial to the energy security of the nation. BPCL was a private company that was acquired.
Nothing moves in this sector without strategic, geopolitical significance and if BPCL is disinvested the benefits will not be restricted to monetary gains, which are important too. Whatever is happening has been in consideration for at least a decade. The Narendra Modi government is taking the lead in putting thoughts into reality.
Read More at https://swarajyamag.com/ideas/psus-are-crucial-for-indias-growth-but-only-if-they-play-a-strategic-role