Rahul Gandhi made a desperate attempt to drag the unnecessary Rafale controversy further. He visited the HAL facility which was attended by only a handful of HAL employees. The Congress president made some more wild remarks and tried to extol the HAL. However, what was striking was the fact that how one of the HAL employees gave a speech in which he addressed his colleagues as “my fellow Comrades”. This shows what is wrong with the HAL. It has, like most other PSUs become an organization that thrives on unionism and inefficiency. The PSUs in general have become symbols of inefficiency and have either been making losses or not making as much profits as they should have given the investment in each. The camaraderie among the employees is the reason why PSUs are in the shape that they are in.
PSUs were created out of a phobia towards the private sector during the Nehruvian era. India’s first prime minister, Jawaharlal Nehru, was the flag bearer of socialism in India and an ardent supporter of the PSUs-run economy who thought it fit to make the PSUs pillars of India’s economy. These PSUs were supposed to become engines of national growth and at the same time achieve goals of social and economic justice. The State tried to do everything and invest in every given sector of the economy through its PSUs. Trying to do too many things on its own, it has ended up doing almost all of them in an unsatisfactory manner.
HAL is a shining example of the case in point of how the PSUs have been abject failures. The undertaking has recently been in news even as the ardent supporters of the PSU culture have been arguing that the Rafale deal should have involved HAL instead of Ambani led Reliance Defense Limited. However, if one were to take a close look at the situation, HAL has been a highly incompetent and under performing organization. Its inefficiency makes it clear that HAL was not competent to manufacture Rafale. Out of an obsession for a PSU controlled economy, the government established HAL as the main defense manufacturer of the country and significant amount of resources were put into it. However, it is flummoxing that despite decades of its existence, HAL has not been able to achieve anything commendable in its entire history. In fact, India was forced to import its defense equipment and technology from private manufacturers in other countries like the United States and the United Kingdom. This shows the difference between the working of private sector and the PSUs. While private defense manufacturers are engaged in export of defense equipment, HAL has been unable to cater to even domestic needs, leave alone manufacturing equipment worthy of being exported to other markets.
An argument that came out in support of HAL was that how can an organisation with a turn over of 18,00 crore could be called inefficient. However, this argument misses the debate on the inefficiency altogether. HAL gets defense contracts directly from the government with no bidding whatsoever and as such it does not have to compete with any other organisation. There is absolutely no competitive bidding involved in the contracts that HAL gets. As such, the question of choice in quality does not even arise. HAL keeps pushing substandard equipment to the government without worrying about losing its only client and in that scenario it has lost the incentive to innovate.
In fact, it is not only the HAL, but the PSUs in general share the characteristics of inefficiency, poor management, excessive unionism, under performance and negligible profits/outright losses. Most of the PSUs are no match for the private sector enterprises. In fact, the performance of Navratnas and Miniratnas, which are a category of PSUs, (17 and 73 in number respectively) has been much lower than that of their private counterparts. The seven maharatnas (the biggest PSUs) holding total assets worth Rs 10 lakh crore, i.e., one third of the total PSU assets, seem to be performing well. But of late, the private sector is catching up with them as well and the fortunes of these PSUs are also on the decline. Then, there are a number of other PSUs which the government doesn’t even consider a ratna. This is sufficient to show that the PSUs which suffer from substandard work and unprofessionalism accompanied with lack of transparency and accountability lag far behind the private sector firms.
This needs the most urgent attention of the Modi government as the PSUs have only become a burden upon the State. Every one in six Indian rupees spent goes to a PSU. In this sense, India is next only to China. The returns have evidently not been that great. India, thus needs to decide the sectors of economic where it must remain present through the medium of PSUs and exit the remaining. The fact remains that running PSUs comes at a great opportunity cost and exiting sectors where it is no longer needed, will open up and unblock funds for social and economic infrastructure.
As far as modernizing the rest of the PSUs is concerned, the government which is the majority owner of these entities must make it clear that it will not tolerate even the least bit of laxity among the employees. Performance based appraisals and stricter working rules are the only remedy to solve the unwanted camaraderie similar to the one which became evident in the HAL employee’s address to his “fellow comrades”. Unions must not be self-centered but must work towards betterment of both the organization and the employees. Finally, the government must also end the practice of multiple bosses. The hierarchy of a PSU must be that of a self-sufficient business enterprise and the practice/ norms of reporting to different ministries must be changed accordingly.
India is a rising power and in this era it cannot afford to carry the dead weight burden of remnants of the socialist era. The government now ought to slim the amount of investment into the PSUs and reform the rest in order to match the performance of private corporate.