A symphony for state capitalism
Backbone of India’s economy in the six decades since independence, public sector undertakings (or PSUs) were the shining stars on July 24 as the first Governance Now awards for PSUs celebrated the spirit of state capitalism at New Delhi’s Le Meridien hotel.
Giving away the awards, union minister for heavy industries and public enterprises Praful Patel lauded the PSUs for working in hinterlands and remotest of areas. “After independence, the government set up many public sector units and asked them to go to strategic locations, which today, even 65 years on, many people do not fancy to explore and set up businesses across the vast length and breadth of our country. Today I can say that even after so many years (and) decades of private and public private partnership, the public sector alone has actually gone far and to even the remotest corners of the country and has truly contributed to the nation-building,” he said.
“I think this is a huge effort and a huge task. If today somebody is still doing business in interior parts of the country, the hinterland, the northeast and remote and inaccessible areas, including places affected by Naxalism and ulta-left wing extremism, it is the public sector.”
At the same time, he added a caveat: “Amid challenges of the global economy we can’t live in an insulated world. To say what was relevant in the 1950s, 1960s and 1970s is relevant even now in the 21st century (is not correct). It is a changing world, a globalised world, and a very liberalised world in many senses; and that is where the public sector also has to evolve and be ready for challenges of today – and, more importantly, for tomorrow.”
By the time the event wound up, one thing was clear: the state-run enterprises, despite the general image, are no pushovers. Far from it, in fact – they are the new-age fighters, recouping but far from relapsing, licking old wounds to get back in the fray.
Lauding the PSUs, Patel said, “I have been watching many public sectors undertakings very closely from the administrative (point of view) from the department of public enterprises (DPE), and I know for sure that some of our PSUs are fine companies, extraordinary companies and truly global companies. It is reflection of changing mindset and I am sure we are not going to stop here.”
He said the DPE is consistently trying to engage with PSUs because “we know that along with you if we don’t work, and if we don’t facilitate the kind of changes required and the flexibility required” then it would not be possible for the state-run companies to take the competition head-on not only in India but also the rest of the world.
Admitting that the private sector works with “speed (and) timely action” that the public sector even with the “best intentions” fails to follow at times, Patel said it is due to the processes these units have to follow – “not because anybody trying to deliberately put pressure but the fact is that these are the ways and the system that we have built over the years.”
But, he added, “I think over a period of time the government has recognised this, is recognising this, and in future will recognise it even more. The classification of the companies like miniratnas, navratnas and maharatnas is also a step in that direction. As you go higher in terms of operations, turnover and profit, your categorisation goes up, the power of board proportionately goes up and I think these are steps in the right direction. But increasingly there has to be further flexibility and motivation.”
Stressing that people heading most of the major infrastructure, engineering or power companies, as also sectors like petroleum or gas, come from the public sectors, the minister said today, though, the younger generation is increasingly craving for private sector jobs. “That deprives the public sector the opportunity to engage fine young people – boys and girls who are fresh out of colleges.” He said for these youths the private sector is a greener pasture, adding, “But we have to see that this mismatch doesn’t go for long. We must see that we bring PSUs to the forefront.”
However, he added that just because the government is the stakeholder in these firms does not mean laxity. “You (PSU executives) are as much a businessman, or should be a businessman, as anybody in the private sector.”
About the image of PSUs, Patel told the honchos: “We may be undervalued today (but) as things evolve I am sure all your inherent strengths ultimately will come to fore, and PSUs can truly demonstrate that we are no less than anybody else in the world… I think you should be given complete flexibility and freedom to work in a very competitive environment and we, at the DPE, will do everything possible (to be the) facilitator for growth.”
Stressing the need for more awards and rewards like this for PSUs, Patel said last year was a landmark because it was the first time the prime minister had a one-on-one meeting with heads of several PSUs. “Usually you read the PM has invited captains of industry (read private sector) to discuss the economy. (But) captains of the public sector are no less, or even bigger, than the so-called captains of private sector,” he said.
Lauding Governance Now for initiating the award, Patel said, “I am sure this will not be the first and the last (such award). In fact, this should be the beginning of many more award ceremonies in years to come. I think this magazine will certainly take this initiative forward.”
Department of Public Enterprise
State capitalism, as it is known to the economists, is long dead. The obituary of state capitalism was written in the early nineties with the breakup of the Soviet Bloc. But in this world, all organisms have an enormous capacity of mutating, to bring new strength, to bring new ideas, to sustain new life and to deliver new things. And that is what has happened to state capitalism today. Whether in India, China (or) Brazil, the largest companies...belong to public sector undertakings.
Vertical structures supporting lower ends of production enterprises have come up and this combination is challenging the liberal capitalism of the Thatcher and Reagan era because Europe and America (which were) following that almost blindly are having the adverse effect of global slowdown, whereas most emerging economies – be it India, China, Brazil or even Russia – have withstood slowdown in different manner. And most of the credit (for this) goes to the public sector – the representative of state capitalism.
However, to remain growing, to remain strong, to remain moving, we have to ensure that we further renovate, further make production of goods and services, matching the needs of emerging market... And here I would like to repeat what the minister already said: the department of public enterprise will stand with you (PSUs) and ensure you are facilitated (and that) nothing comes in your way.”