Given his success in turning around the Gujarat economy, including its PSUs, it is not surprising that BJP prime ministerial candidate Narendra Modi should say PSUs need to be professionalised, not privatised. Indeed, former disinvestment minister Arun Shourie told a TV channel that since Modi believed PSUs can be turned around, he was unlikely to expend political capital on privatising them.
Giving more operational freedom to well-run PSU like BHEL is one thing, how is a Coal India to be professionalised till some serious action is taken on its employees who find it easy to hold not just the management, but even the government to ransom—even a 10% stake sale, vital to meet disinvestment targets, had to be put off due to union opposition; and the process of opening up the coal sector has been put on hold only because of CIL’s opposition. Employee remuneration accounts for 47% of CIL’s costs and its productivity is a fraction that of its global peers—while CIL reports 1,100 tonnes of output per employee, this is 2,800 tonnes at China Coal and 36,700 tonnes at Peabody Energy. In the case of telecom PSUs BSNL and MTNL, where losses have mounted over the years—from R1,823 crore in FY10 to R8,198 crore in FY13 for BSNL and from R2,611 crore to R5,300 crore in FY13 for MTNL— it is difficult to see how these PSUs can ever be turned around. As compared to the industry average of 5%, MTNL’s wage payments are more than its revenues—BSNL is better in comparison but its wages add up to a whopping 49% of turnover. Indeed, the history of PSUs is of one failed professionalisation attempt after another.
Fixing this will require Modi to ensure PSUs are brutal in hiving off excess workforce, it will mean freeing PSUs from the clutches of what is best known as L1-itis, the CVC-rule that forces PSUs to float tenders for everything instead of simply choosing the best supplier and moving on. Not only has BSNL lost precious years in creating fresh capacity with the losing party going to court when tenders have gone the other way, ONGC has found it difficult to retain partners that it desperately needs to be able to drill in the deep seas—the partners have tired of all the bureaucracy around its functioning. Professionalising the PSUs that can be saved is a good idea, but for the rest, the option