Privatisation: Let’s learn from Tanzania

I wonder what this for-and-against ballyhoo is on privatisation of PSUs in India. It is simple; Government has no business running businesses. Other than the inevitable reduction in unnecessary manpower and therefrom creating some unemployment, there is generally no downside to privatisation. Is it then a debate on efficiency versus spurious employment?

Tanzania — much smaller economy – privatised over 400 public companies within 10 years. They knew the manpower complements were 3 to 10 times bigger than what the work called for.  The country chose to bite the bullet and directed their attention to finding gainful employment opportunities thus making a positive contribution to the economy.

  

In India, PSUs showing reasonable gross profit are only in the oil and gas space, and in power and its distribution. These are areas the government is in a comfort zone because they fix the product prices. Coal India—not in the two above mentioned business areas—is perhaps the only notable exception. But then, its performance is nothing to write home about. Its gross profit has been nosediving; it fell by over 20% in 2019.

Well, if a rare PSU is showing a positive bottom line, it is pretty much certain it is in a monopolistic situation. Air India, though a monopoly within India to begin with, has succeeded in failing like none ever has when it had to compete with international and domestic carriers. It has been a gargantuan money guzzler where politicians have creamed away crores of rupees. 

Same goes for telephony. When faced with competition, they are found out. BSNL and MTNL are in an intensely competitive space where technology upgrade has to be prompt, costs have to be watched like a hawk, and marketing has to be innovative. It is no wonder they are big time losers. 

It is axiomatic then that in any cutthroat business area, PSUs shall not survive. 

Granted that in the immediate aftermath of our Independence from the British, there was paucity of well-heeled private business houses. Tata’s TISCO started steel production in 1907, but they too would not have been able to invest on the scale the Government of India built those large steel plants in Bhilai, Bokaro and Rourkela. It made sense then. But, from there, our government went on to make bread. Surprised? Don’t be. Yes, the Government of India made ‘Modern’ bread because we were supposedly left high and dry without toasts in our morning breakfast. It was as recent as year 200o, when Modern was sold out to Hindustan Unilever.

 

To be fair, some PSUs were initiated for and imminent need and private investment was shying away to put up with the initially required R&D expenditure. Hindustan Prefab (HPL)—initially a department of the government—is a case in example. It emerged back in 1948 from the urgent need for meeting the housing needs of people who migrated from Pakistan. It obviously serves no purpose now when nearly a hundred private companies, big and small, are in the ballgame. The irrelevance on similar criterion applies to Scooters India, Pawan Hans and many more.

It is encouraging that the Government included the profit-making Bridge and Roof Co. in the list of 20-odd companies earmarked for privatisation. It has thankfully dawned on them that Bridge and Roof is faced with crying needs for technology upgrade and capital infusion that would take the company to another level.

We are on our way, but far too slow. We need to learn from Tanzania.