A Number of PSUs Look Desperately for a light at the Tunnel End, Or even a Moving Train...
On an average, more than Rs.20 billion per annum is spent on sick and loss-making public sector undertakings, especially in the last eight years. For the uninitiated, a company is termed as sick “if at the end of any financial year it has accumulated losses equal to or exceeding its net worth.” According to the Finance Ministry, losses on “sick PSUs” alone were more than Rs.146.5 billion in the last eight years. However, this amount seems meager if the total amount invested or spent on loss making (including sick PSUs) is calculated. The restructuring packages of all PSUs stands at whopping Rs.170 billion, in last eight years. The same report suggests that on an average, over Rs.76,000 per employee has gone to the workforce in sick public sector undertakings.
Most of the 246 PSUs don’t carry a high brand equity, as more than half of them are either loss making or confined within their operations. A recent media report reveals that a total of Rs.284 billion worth of fixed assets are trapped in loss-making PSUs. Add to this another Rs.78.24 billion, which is wasted on 3.8 lakh workers as salaries and wages. Thus total cash flow to these unproductive PSUs touches a figure of Rs.450 billion comfortably! The accumulated losses by these PSUs have crossed the Rs.650 billion mark.
All in all, besides a chosen few, most Indian PSUs are in a state of utter distress. They are neither minting money for the economy nor providing any meaningful contribution to society. Privatising management is not an option, as our government – whenever it gets the chance – sadly privatises profit making PSUs than loss making ones; and even expends a lot of energy in planning stake sales of top performing PSUs. It is far more important to look seriously towards unlocking the wealth that’s stuck in the hopelessly under-performing ones.
Most of the 246 PSUs don’t carry a high brand equity, as more than half of them are either loss making or confined within their operations. A recent media report reveals that a total of Rs.284 billion worth of fixed assets are trapped in loss-making PSUs. Add to this another Rs.78.24 billion, which is wasted on 3.8 lakh workers as salaries and wages. Thus total cash flow to these unproductive PSUs touches a figure of Rs.450 billion comfortably! The accumulated losses by these PSUs have crossed the Rs.650 billion mark.
All in all, besides a chosen few, most Indian PSUs are in a state of utter distress. They are neither minting money for the economy nor providing any meaningful contribution to society. Privatising management is not an option, as our government – whenever it gets the chance – sadly privatises profit making PSUs than loss making ones; and even expends a lot of energy in planning stake sales of top performing PSUs. It is far more important to look seriously towards unlocking the wealth that’s stuck in the hopelessly under-performing ones.
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
and Arindam Chaudhuri (Renowned Management Guru and Economist).
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