Freedom From Bureaucratic Control A Must To Make PSUs Competitive: PM

At a time when the private sector in the country is excelling and continuously improving its competitiveness, the government counterparts seem to be left stranded somewhere and are fast losing their sheen. It is well known that the competitiveness of public sector companies is fast declining owing to delayed decision-making and undue governmental interference.

The Indian government also seemed to be concerned by such inefficiency of PSUs. The Prime Minister Dr Manmohan Singh today (November 21, 2013) categorically pointed towards this challenge. “Government ownership inevitably brings with it a bureaucratic style of decision-making, and the end result is that the enterprise cannot compete in a market populated by equals”, Dr Singh asserted in his address at a function today.

In his inaugural address at the 3rd BRICS International Competition Conference in New Delhi, the PM was very blunt on the performance of PSUs and also spelled out his desire to give more autonomy to the state-owned companies to improve their competitiveness. About these companies, he remarked that, “By virtue of their ownership, they have been shielded from competition and have long enjoyed captive markets. A crucial issue is the exposure of these firms to increased competition”. 

This is the first time that the PM has, in a sense, criticised the style of working of the country’s PSUs and called for a change in their approach. Not only this did he point to the root cause of PSUs’ inefficiency, but he also gave a prescription for rectifying this ailment. He said that the solution lies in giving public sector firms greater functional autonomy and freeing them from bureaucratic control, and not in tolerating slip-ups in their competitiveness, nor shielding them from competition. This is particularly important in the present scenario, where all the functional ministries are treating PSUs working under them as entities to serve their needs and routinely hamper their decision-making.

The PM noted that the current situation will not go a long way and future governments will have to increasingly adopt competition-neutral policies. “Several possible distortions can arise because of the advantages some public sector businesses have due to their government ownership. Competitive neutrality, therefore, requires that the government not use its legislative and fiscal powers to give undue advantage to its own businesses over the private sector”, said Dr Singh.