The sick men of our economy

While it is not difficult to fathom the reasons why nearly half our state run companies are running at a deficit consistently, it is difficult to understand why the administration is allowing this situation to exist year after year. Out of the 18 listed government owned companies seven have been running at a loss while the rest made profits in the last fiscal year. As a report in the paper reveals, the seven loss-incurring companies are producing sugar, motorcycles, hotel services, cables and glass sheets. They are facing stiff competition from the private sector as well as our liberal import policy which accord very little protection to our public sector undertakings (PSU).

It is interesting to note that some of the loss-making PSUs had been running at a profit till such time the private sector took over and edged the PSUs out of the market by making their products available at a cheaper rate than what the PSUs offered. On the contrary, the state-run companies, which enjoy natural monopoly and do business in strictly regulated markets, are in the green. But the saga of the PSUs doesn't end here. There are nearly a hundred more state run un-listed industries that are like white elephants draining the public exchequer. Reportedly, these state-owned enterprises will run up a loss of more than two thousand crore in operating losses in the fiscal year 2020-21.

We understand that that government's priority is on the private sector enterprises. Its guiding philosophy that the private sector is the engine of growth of our economy is manifest in its policies related to it also. However, something immediate should be done to arrest the wastage of public money on the PSUs.  We feel some immediate remedial measures regarding the PSUs, which do not require additional financial input, can be employed immediately. For one thing, efficient management, efficiency in production process to obviate system loss and reducing cost of production, providing some kind of protection without affecting the market mechanism may be ensured. But for the long run, the government should decide once and for all whether the vast drain on our economy caused by the investment of public funds in public industries that are running at a loss should be endured any further. It must also answer once and for all whether the government should be in business at all or be merely the facilitator of good business environment?