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Book Review

NAME OF BOOK: THE WHY, WHAT AND WHITHER OF THE PUBLIC SECTOR ENTERPRISE

This is a publication containing the papers and proceedings of three panel discussions rounded off with an overall seminar organised in 1985 on certain aspects of functioning of Public Sector Enterprise in India.

2.    Dr. Malcolm S. Adiseshiah has provided in the Introduction, an over-view of the Public Sector in India noting the following:-

1. Public Sector in India has fulfilled its major economic objective of occupying the commanding heights of economy in Heavy Industry and infra-structural sectors. It helped in rapid industrialisation, but the annual rate of growth of economy in 35 years was only between 4 and 5 percent as against at least 8 percent needed for take off. The capital output ratio in Public Sectors varied between 0.14 percent for petroleum companies to 7.5 percent in steel and 11 percent in coal sectors, posing a question whether there is excessive capitalisation.
2. The Public Sector has discharged its social obligations in an impressive manner; annual increases in employment ranged between 3.6 and 5.4 per cent; the percentage of employees belonging to socially and economically backward classes increased from 2.24 in 1971 to 8.81 in 1984. However, the benefits did not seem to have spread widely. The proportion of workers in sick industries taken over by Government from Private Sector, to the total employees in Public Sector, was 51 percent.
3. In resource generation, the Public Sector has fallen short of expectation. The net profit on capital employed averaged less than one percent in the decade 1974-84. Even the small return came from the petroleum group and the rest of the Public Sector provided no returns. However the Seventh Plan (1985-90) envisages reliance on the Public Sector for major part of resources for this Plan. This is a grim qualitative change the country faces.

Contributions for the first panel discussions, on the 'Role of Public and Private Sector in Indian economy' have come from two top executives, one each from Public Sector and Private Sector and two former Secretaries to the Government of India in charge of Ministries with major Public sector enterprises. Mr. K.L. Puri, from Public sector, has stressed on the immensity of Public Sector and its dominance in critical areas, achieved in three phases. Mr. Loveraj Kumar, has pointed out that there are a large number of Public Sector activities which fall within the purview of administered prices; in many cases, the fair price judged by expert bodies was in fact not accepted by the Government and even by Parliament, because of the concern of the cascading effect of the price rise. Mr. H.P. Nanda, a leading Private Sector Industrialist, speaks about discrimination against. Private Sector, politicalisation in Public Enterprises and the low remuneration to Chief Executives of Public Sector as compared to Private Sector; he claims that the Private Sector is doing better than Public Sector because Chief Executives in Private Sector are delegated both responsibility and authority unlike in Public Sector. Mr. R.C. Dutt, refers to the slaughter mining of coking coal by Private Sector before nationalisation, which had led to major fires continuing even now and loss of coal. According to him, economies of scale in Private Sector's view is very limited and confined to a few tractors and motor cars without consideration for large infra-structures like telephones, power, etc. He also notes that the Private Sector does not bear the cost of township and provision of social amenities to workers, like schools, hospitals, which have to be met out of public funds only.

The second panel on 'Problems of loss making units in the Public Sector' has identified the reasons for losses as cost over-runs, high levels of inventory, excessive manpower, low productivity etc.

The third panel on 'Autonomy and accountability in the Public Sector' notes that there are limits on autonomy that could be granted to Public enterprises in

3.    view of Government's social objectives. It has been said that public undertakings lack freedom and there is too much accountability. There are operational advantages for Public Sector, while the style of functioning in Private Sector is entirely different. Still there are public enterprises which are doing exceedingly well, because of good management. Mr. Satish Aggarwal, a former Chairman, Public Accounts Committee draws attention to the inability of one Parliament Committee to scrutnise the performances of the large number of public undertakings. His suggestion is that the organisation of the Comptroller and Auditor General should be strengthened and there should be more comprehensive audit of public undertakings and more Parliamentary Committees should be created in order to have a better and effective scrutiny of all public sector under-takings.

4.    The second panel on 'Problems of loss making units in the Public Sector' has identified the reasons for losses as cost over-runs, high levels of inventory, excessive manpower, low productivity etc.

5.    The third panel on 'Autonomy and accountability in the Public Sector' notes that there are limits on autonomy that could be granted to Public enterprises in view of Government's social objectives. It has been said that public undertakings lack freedom and there is too much accountability. There are operational advantages for Public Sector, while the style of functioning in Private Sector is entirely different. Still there are public enterprises which are doing exceedingly well, because of good management. Mr. Satish Aggarwal, a former Chairman, Public Accounts Committee draws attention to the inability of one Parliament Committee to scrutnise the performances of the large number of public undertakings. His suggestion is that the organisation of the Comptroller and Auditor General should be strengthened and there should be more comprehensive audit of public undertakings and more Parliamentary Committees should be created in order to have a better and effective scrutiny of all public sector under-takings.

6.    The Seminar discussions led to six general conclusions as below:-

1. The take over of sick private units by Public Sector should stop,
2. There is need to redefine the role of Public Sector,
3. There is need for a monitoring mechanism in particular in relation to whole wages, salary, remuneration and man-power scene,
4. A managerial reform including the control mechanism and the boards was indicated,
5. Social functions, as apart from economic functions, of each Public sector unit should be looked into,
6. There is no escape from a unit-by-unit examination of the problems faced by Public Sector.

This is neither the first nor the last forum in which problems facing Public Sector have been discussed. However, the merit of this publication lies in bringing at one place, conflicting view points for better understanding of the subject.

The problems faced by Public Sector in India are too complicated, to be resolved by general solutions. Retrenchment of excessive manpower is not politically acceptable, especially in the case of sick units which have been taken over by Government to safeguard employment. Greater autonomy to the Public Sector again may not be feasible. An answer may be in more and better accountability, but this is inevitably linked with the degree of autonomy.

The Prime Minister in his Budget speech had indicated early in 1987 the intention of the Government of India to bring out a White Paper on the Public Sector, which will no doubt cover all aspects like autonomy, accountability efficiency, productivity, workers participation etc. This White Paper may indicate the broad approaches which the Government hopes to adopt for improving Public Sector in India.