The cricket world is about to start with India as a participating team. The ICC suddenly decides to make Virat Kohli(Indian captain) the umpire for all matches. Kohli can play for India and do the umpiring for all matches including India’s matches. In such case, who will win the world cup? Will other teams play sincerely? Will the viewers find the matches exciting? If such a system continues, the people would stop watching cricket altogether, is that not true?

Same has been the state with Indian PSUs. Many Indian PSUs had been monopolies. The Govt. purposefully, did not allow private sector because they knew the PSUs cannot compete and due to this most PSUs became corrupt and uncompetitive. Not only that, many PSUs became lossmaking and are are surviving on taxpayers money.

Come 1991, the economy is opened up for private sector. What happens? Most PSUs become terminally sick. Employees have not gotten their salaries for decades. Whenever Govt. wants to privatize the communist trade unions have taken to street. Inspite of all these, many PSUs were privatized, and have successfully turned around. For e.g. BALCO, CMC etc.

Lets come back to understand the role of the Govt in a society, let me list some here.

  1. Make laws
  2. Manage international relations
  3. Collect taxes
  4. Implement welfare schemes in education, health etc.
  5. Maintain law and order.
  6. Build infrastructure

We all know that Indian government is poor doing the above, it should rather focus to improve its performance on the above aspects. In stead of that, why is it trying to do business? I see state govts. into selling milk, opening restaurants. Why don’t you let the private sector do it? What value is Govt. adding by selling milk? It is understandable for Govt to own a company manufacturing fighter jets, but govt. selling milk is absurd, isn’t it?

Modi govt. has identified strategic and non-strategic areas. The following areas are identified to be strategic areas:

  1. National security like (HAL, DRDO etc.) .
  2. Critical infrastructure like Highways and communication (NHAI etc.).
  3. Energy and minerals (Coal India Ltd etc.).
  4. Financial services – banks and Insurance(SBI, LIC etc.).

Govt. will limit itself to 3-4-5 PSUs in strategic areas, and privatize rest of the PSUs. All the PSUs in non-strategic areas will be privatized.

Lets understand what will be the impact of such a policy?

  1. Most PSUs have become loss making. Govt. pours tax payers money every year to such PSUs, and in most cases the money has simply sunk. With the PSUs getting privatized, the wastage of tax payers’ hard earned money will reduce. The same money can then be used for providing better roads and schools etc.
  2. Govt. would then have to focus on managing less number of businesses. The bureaucrats, IAS officers who are serving for the PSUs will be diverted to making the governance better. Law and order, law making, implementation of welfare schemes will improve as a result. Modiji’s vision of “Minimum government and Maximum governance” will come true.
  3. The PSUs have resulted in creating the culture of industrial unrest which will go down. After the policy of privatization being pursued by both the BJP and Congress Govts., we have seen strikes reducing and industrial peace improve which has resulted to better growth.
  4. The privatized PSUs will become more competitive. For e.g., BALCO has made astounding turn around after being sold off by Vajpayee’s Govt.
  5. The culture of corruption will reduce as most PSUs are hot beds of corruption.
  6. The communist influence will go down, as the communists derive their maximum support from the PSU trade unions.
  7. Customers will get better services. Due to the entry of private banks, airlines and telecom providers competition has increased, as a result customers have gotten better services. All of us know the quality of services provided by BSNL v/s JIO or Airtel.
  8. Having few PSUs in strategic areas like say banking will help implement the welfare schemes(like Jan Dhan) more effectively or make us independent of foreign countries for defense equipment.
  9. Lastly, with fiscal deficit reducing, taxes will also reduce.

I consider Indian economy being modeled on communist lines the single biggest mistake in our economic policy and it is important that the mistake is corrected at the earliest.

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