Mounting losses and debts: Have Indian PSUs been plunged into an abyss under PM Modi’s rule?
Notably, during the last four years, at least five PSU giants in India are facing huge losses and are struggling to survive under the burden of debt.
From the Oil and Natural Gas Corporation (ONGC) to Bharat Sanchar Nigam Limited (BSNL), more and more Public Sector Units (PSUs) seem to be incurring big losses and piling up debts, so much so that they are unable to pay the salaries of millions of employees.
“There is no difference between the private sector and public sector units right now, as per general perception,” said Jothi Sivagnanam, an economics professor at Madras University. He observed that in the 1990s, India introduced the new economic reforms policy under the assumption that Public Sector Units were found to be ‘inefficient’. Hence, PSUs were made to be exposed to competition from the private sector in the hope that they become more efficient.
“We wanted to encourage the participation of private sector then. Now, the government is intent on doing the same so much so that it is trying its best to make PSUs more inefficient than ever,” laughed Sivagnanam.
Energy: Oil and Natural Gas Corporation
India’s biggest energy company, Oil and Natural Gas Corporation (ONGC), is reported to have come under a debt of Rs 25,000 crore in 2017. In fact, in 2018, the trade union of ONGC came out saying that the energy giant was accumulating debts due to government decisions.
Sivagnanam pointed out, “Government is asking ONGC to buy your disinvestment of other PSUs. They are keeping resources for investment. So those opportunities are deprived. Government is misusing their resources.”
Interestingly, the company is said to have not faced any debt until 2014.
Telecom: BSNL and MTNL
Telecom giant, Bharat Sanchar Nigam Limited (BSNL) tumbled into a debt of around Rs 16,000 crore in 2018. Struggling with the burden, BSNL was unable to pay salaries to over 1 lakh employees on time for two months. Most recently, some media reports said that BSNL would soon be laying off over 50,000 employees and was planning cut down the retirement age. However, BSNL chairman Anupam Shrivastava strongly denied the reports and said that no such thing was planned.
Meanwhile, Mahanagar Telephone Nigam Limited (MTNL) also reportedly has a debt of around Rs 20,000 crores and is fighting to survive. Both BSNL and MTNL are facing tough competition from their private peers, including Reliance Jio, which grew in leaps and bounds incredibly in a very short time.
Defence: Hindustan Aeronautics Limited
Amid the tussle between the ruling NDA government and the opposition over the Rafale jet deal, Hindustan Aeronautics Limited (HAL) is in financial distress. In January 2019, it was reported that HAL had to borrow Rs 1,000 crore to pay its employees for the first time in 20 years.
A report by a popular newspaper attributed the main reason for the distress to the non-payment of dues owed by the Indian Air Force (IAF). However, later, a top HAL official denied that the company was facing a financial crisis despite admitting that the IAF and the Army had delayed their payments.
Media reports also point out that the NDA government has scrapped a few projects that were supposed to be undertaken by HAL.
Aviation: Air India
Air India was unable to make salary payments to its employees for the second consecutive month in December 2018.
The national carrier is surviving thanks to a bailout package extended by the previous UPA government. Although the UPA government was criticised for the poor sustainability of Air India, the current NDA government has also not been able to revive or disinvest it.
According to a PTI report, the NDA government had initially planned to offload 76% equity share capital of the national carrier as well as transfer the management control to private players. The buyer was required to take over Rs 24,000 crore debt of the carrier along with over Rs 8,000 crore of liabilities. It, however, did not attract any bidders.
“Government should allow private players to work freely and not interfere when it comes to disinvestment. Government is having 51% stake and doing all the mess,” criticised Sivagnanam.
Research: Tata Institute of Fundamental Research
This economic cash crunch is not restricted to PSU companies. The government-run Tata Institute of Fundamental Research (TIFR) had allegedly released a circular saying it would pay its employees only 50% of their salaries for February 2019 due to insufficient funds. However, a day later, the institute paid its staff their full salaries. It is still a mystery why such a circular had been put out.
“Most of the Indian PSUs are far more efficient than their private sector peers. Political intervention is what is making PSUs inefficient. PSUs are increasingly being mismanaged,” said a worried Sivagnanam.