PSUs - A COMPLETE MAKEOVER REQUIRED

By Ruma Dubey

Coal India, truly a treasure of India, is literally on fire on the bourses. The stock has been hitting new highs consistently, with more and more investors flocking to the counter.

The reason for this overwhelming love for Coal India – a news report, saying that Modi was looking at breaking down the company into independent companies and making respective state Govt’s the equity holders, while opening up the sector to FDI to spurt production and thus bring down imports. Modernising the mines and using modern mining technology to boost output; there is a lot which apparently the new PM wants to do.

This is fantastic to say the least, exactly what the Doctor had prescribed! If indeed these changes are brought about, maybe India’s coal imports will come down and we will realize the true potential of the gold mine in the form of Coal India that we have.

The talk about Coal India has now raised expectations of a ‘revamp’ of many other PSUs which are truly uncut diamonds. And like diamonds, they have also been categorized. Just as Emperor Akbar had accorded a status of Navratna to nine of his most prized and able ministers, the Indian Govt has accorded the same status, of being a priceless Navratna to some Public Sector Undertakings (PSUs) and are leaders in their own right in the Indian corporate world. But this was later split into two – Maharatna and Navratnas and the rest all fall in various criterions of Miniratnas.

The Maharatnas includes:

Bharat Heavy Electricals Limited

Coal India Limited

GAIL (India) Limited

Indian Oil Corporation Limited

NTPC Limited

Oil & Natural Gas Corporation Limited

Steel Authority of India Limited

Then come the Navratnas. And these like all things Govt, confuses and does not stick to the count of nine. Navratnas includes 14 companies:

Bharat Electronics Limited

BPCL

Hindustan Aeronautics Limited

HPCL

MTNL

National Aluminium Company Limited

NMDC Limited

Neyveli Lignite Corporation Limited

Oil India Limited

Power Finance Corporation Limited

Power Grid Corporation of India Limited

Rashtriya Ispat Nigam Limited

Rural Electrification Corporation Limited

Shipping Corporation of India Limited

Today the mere name of a PSU brings to mind the picture of dull, drab offices, with tired and demotivated employees, surrounded by piles of files. Somehow the picture of efficiency and quick work just does not fit into PSUs.

If we decide to decipher each and every PSU, everyone of them will have issues. But most of them have almost the same common problems – the burden of too many employees, unproductive plants, old and rusted plants/machinery/assets, too much political interference, lack of transparency, poor governance. There is simply no will to grow into a world class organization, becoming leaders in technology and innovation. That is what we need to change. Now this is not a mere cosmetic change – we are talking about a change from inside to outside.

This above list does not include two PSU behemoths which need urgent revamp. First is the Indian Railways and then Air India. And Oil companies, aren’t they facing excessive Govt interference? In fact the department of public enterprises (DPE) has time and again questioned the prized status of the public sector oil companies - IOC, HPCL and BPCL. According to the DPE, as these companies are now getting budgetary support in the form of oil bonds, how can they still remain either a Mahartana or a Navratna as this is in direct contravention of the guidelines of a Maha/Navratna company.

There is a wonderful report - “Public Sector Enterprises in India: Transformation, Empowerment and Sustainability” prepared by CII and KPMG.  This report talks about how China manages its PSU and another model is that of Singapore. (Have a read at this link - http://www.cii.in/ResourceDetails.aspx?enc=KKQ5Pb/56vdFHjQCNWwvF8Td0RSKSyuJJZZrRPelJSQT3fH0x8jOZ5NM+VKnVgZiDYE5XtkVxFDiz6snvtD7Pw== OR http://www.kpmg.com/IN/en/IssuesAndInsights/ThoughtLeadership/Public-Sector-Enterprises.pdf)

The moot point, whether it is KPMG, CII or ASSOCHAM is that a major revamp or makeover of PSU’s is imperative. Govt should get out of sector, which do protect national resources directly.  Again Modi Govt can plan of reforms but will the huge labor force agree? BSNL is an apt example where even an IPO is not happening thanks to the opposition of the trade union. Most of these PSUs are like MNCs – huge reserves, immense cash balances and little debt with huge assets. So why can’t we unlock their potential? Why does a PSU necessarily have to be like a huge outdated equipment, which does not work but takes away all the resources?

Someone needs to get aggressive, to push one to the wall and get things done. Or else, many of these PSUs, which are actually potential world class companies, will die a painful death.