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Public Sector: A Pride to Say Or a Price to Pay....

BY: Ajaya Sethi | Category: Finance | Submitted: 2013-05-25 02:38:01
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Article Summary: "This article is a depiction of lost glory of public sector enterprises in india and what should it learn from other public sector undertakings across the world..."


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Following the tyranny of capitalism, power had to be restored in the hands of the public of the country. The basic function that the public sector enterprises carry is to be the nexus between the government and the various sectors of the economy so that the laws can be mandated as well as maintaining the sanctity of the development and innovation objectives of the country.

The public sector enterprises cover ail those undertakings which are wholly or partly owned to the extend of at least 51% of the share capital by the state. There are normally 3 forms of public sector companies in India (i) Limited Companies formed under Companies Act in which at least 51 per cent shares are held by the state (ii) Statutory Corporations set up through an Act of Parliament, for example, Food Corporation of India, Life Insurance Corporation, Industrial Finance Corporation, Unit Trust of India etc. and (iii) Holding Companies formed under Companies Act. These Companies have a hold on the already set up Companies Act as an institutional buffer between the companies and the Government, for example Steel Authority of India, National Textiles Corporation etc.

Through public sector enterprises the idea has always been to implement superior technology and develop the best facilities in the country in various sectors of country, thus contributing to the GDP of our country. But has the Indian government been really successful in contributing the best and effective use of the public sector enterprises in achieving the much desired goal. We shall see the some of the examples of PSE (public sector enterprises) some major GDP contributing sectors that have led us to ask ourselves the questions.. how proud we are on our PSE's?

1. ENERGY Sector:

If we talk about he energy sector, then we are bound to see the basic building block of power that is coal. If we talk about coal, the biggest controlling factor comes into picture which is the giant coal India limited. CIL ( coal india Ltd.) was recently announced to be framed ti into the " Maharatna" frame. Since 2000, CIL has been vested with powers to control the production, logistics and dynamics of coal. It has also been vested with autonomy of pricing power. CIL recently has also implemented a differential pricing regime in February 2011. This pricing move was much anticipated good move turned out to be another bottleneck for implementing proper pricing of coal. CIL is the biggest player in coal sector which has more than 75% market capitalization in this sector. In spite of all the powers and autonomy why is CIL not performing as it is expected to. Some of the problems have been discovered to bee attuned to the inside in the form of land clearances and project allocation. some of the projects have been allocated to it after 36-48 months after the filling of the application. It is one of the reasons for slow and cramped growth of CIL in reply to demand which is growing at much accelerated levels.

CIL is most valued company in terms of market capitalization But the structural problems have been haunting it ever since. The various problems in management, procurement and logistics has led to erode the shinning status of this great public sector. This is a very alarming question as to how this great organization can be given a much needed flip to turnaround to the path of objectives that were led down for it. PPP (public private partnerships) can be an answer. But this answer is being seen as skepticism as the failed PPP projects between government and private companies in road and construction sector. More than 39 projects were stalled and failed in this very arrangement. This has led to find some innovative ways to unlock this deadlock.

2. AVIATION SECTOR

Aviation sector has been the sore in the eye for our country since the demise of the great Indian PSE Air India limited. I think we all know about the never ending strolling problems for Air India with a huge debt that is being carried by it. It has greatly contributed to the worrisome problems of debt our country is facing. Th basil out plans that the government rolls out is not only the cost the government has to pay but it also adds up to the debt to GDP ration of our country which sickens the CAD ( current account deficit).This great organization was enjoying the monopoly in aviation sector until the private sector rope in and played the price wars which Air India was unable to complement and thus landed into more trouble.

However it is reviving slowly now from the days of uncertainty But we can just hope this bail out of the organization can stand out again among st the private players.

3. TELECOM SECTOR

It is one of the most controversial sector since licenses games played during Mr. A raja raj. however we focus here on the one of biggest player in telecom sector to most loss making company since recession. In 2007, BSNL was valued in billions and most respectable and profitable organization of the decade. But since 2007 till now the company has lost all the glamour in valuation and captioned as one of the biggest loss making company in this sector.

At almost the same juncture was the biggest British telecom giant British telecom ltd. But like British telecom can the BSNL take a turn around in again establishing itself as the biggest player in telecom. we have to see if BSNL is learning from its own mistakes. If we see the salary department of BSNL we will see that it shells out a 105 % of revenue where as other private players contribute 15-20 % of the revenues. The government has already told BSNL to introduce voluntary retirement schemes to expire the excess manpower that the company is carrying out as burden.

It has also outdated innovation in field of advertising itself. BSNL holds 90 % of broadband users and 80% telephone users, but the bet result is a loss of around 8000 crores this quarter. It has to find a way for reinventing itself as british telecom did and prove worthy of the legacy that it carries.

4. ENTERTAINMENT SECTOR

Last but not the least of the so forgotten name that once used to rule our houses. Yes the very name we use to start and end our day " DOORDARSHAN". where is this name? what happened to it? It had the highest no of subscribers that any channel can have today. Doordarshan was not only associated with giving us entertainment quotient but also also the educational syrup for the day. I remeber watching tarang, a children show depicting many educational messages to be delivered Today anyone hardly watches doordarshan. It was the best Infotainment channel anyone could ask for.

But there was the same story with BBC (British broadcasting corporation). But it understood the value of the assets it had and put them to a use to reinevent itself. BBC used the huge amount public data that can be put to use. There is huge amount of public data that doordarshan also has access unlike any other counterparts. But unlike BBC doordarshan has not been able to value the asset and learning the innovation to present the data. I don't know if doordarshan can uplift itself like BBC and be the channel that once had the golden throne among our hearts.

All these examples poise a question supplemented with skepticism of the public sector enterprises. Now only the time will give us an answer that we are looking for or the questions that remains a mystery..

About Author / Additional Info:
I am MBA grad from Symbiosis International university and graduate from NIT, surat. I have an active interest in financial topics. I like to analyse the facts and interpret the effects it can have.

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