PSUs make strong case for PSU reform

Four steel enterprises in the public sector are chipping in with a cumulative Rs 2 crore, to set up a school in steel minister Beni Prasad Verma’s constituency, Gonda, in UP. Mahanadi Coalfields, a Coal India subsidiary, is setting up a medical college and hospital in Talcher, Odisha.

Now, India does need more good quality schools and medical colleges. But it is ridiculous for PSUs to meet this demand by diverting money meant to expand steelmaking capacity and make good the coal deficit that has rendered many power projects stillborn and created huge non-performing assets for banks. Such acts of philanthropy represent a strong case for radical reform of the public sector. Granted, there is some kind of PSU social spending that is eminently desirable.

For example, SAIL’s schools and hospitals in the backward areas where their plants came up and liberal scholarships that tribal students received to go on and become engineers on SAIL’s shopfloors. Such expenditure averts the kind of local hostility that Vedanta’s alumina project ran into at Niyamgiri. However, the only potentially hostile force to be propitiated at Gonda is the steel minister. Similarly, it is not a coal company’s job to allocate funds for medical education. If it has surplus funds it has no use for in its own industry, it should return the money to its shareholders, so that they can decide how best to spend it.

It is vital to remove the linkage between politicians and PSUs, exercised through the administrative ministry. It is feasible and desirable for ownership of all public enterprises to vest in a holding company, and take meddling ministries out of PSU life. The government can nominate eminent people to the holding company board, which in turn can appoint the boards of individual PSUs with clear mandates and autonomy.