Email: rgopal@themindworks.me
(*The writer is a best-selling author and corporate advisor. His latest book is titled “Wisdom for startups from grownups”. He was Director of Tata Sons and Vice Chairman of Hindustan Unilever).
SEBI introduces new regulations for listed companies to reduce the influence of promoters and to empower independent directors. Several promoter-driven companies do deserve such regulations. But what about cases where the government is the promoter? PSUs get exemptions from SEBI regulations for board governance. Why are they treated like a special case for applying the Companies Act and SEBI supervision? Surely the same corporate regulations must apply. Research on the problems faced by PSU management are well documented. (https://web.iima.ac.in/assets/snippets/workingpaperpdf/17499772842018-01-04.pdf)
Renewed and transformed business institutions, whether government, promoter or professionally led, are strategically important to the national economy. They alone can generate the resources required to enable national investments in health, education, and culture. Among the major reasons for India’s inadequate economic and social progress over 74 years, one is surely the policy failure to nurture enough “sustainable and honest” business institutions. Private sector malfeasances get written about. PSUs too offer valuable and instructional narratives. It is time to blow a whistle on unacceptable PSU performance. This is not a plea to eliminate PSUs, but to run them more efficiently.
PSUs have played a well-defined role in India’s progress over 74 years. Some have delivered sterling outcomes that the return-seeking, capital-poor private sector would have been unable to do. However, tax paying citizens expect that, at some stage, PSUs will generate a return on capital, which may not be mouth-watering, but is higher than the cost of capital. PSUs are not a license for poor returns and inefficiency.
It is a pity that political and bureaucratic structures misuse PSUs for their own benefit. RC Bhargava, bureaucrat turned business leader writes in his book, The Maruti Story, “PSU managements have not been able to create companies where continuous improvements in productivity and quality takes place…. because it is the government, and not the management, that takes key financial, technological, and commercial decisions…. unlike private sector promoters, ministers and officers have not invested their own money…. creating immense scope for a political party to use PSUs for its own political advantage…. boards make little difference to management quality, and thus a major instrument of corporate governance is blunted.” In his autobiography, former civil aviation secretary, MK Kaw, wrote about the aviation industry, “…. a fascinating saga of benami ownership…. unwarranted purchase of aircraft, mismanagement by bureaucrats and politicians…..”
The Indian public has long been aware of what these authors have merely emphasized! The ugly truth is buried in the commercially irresponsible way in which governments of all hues have supervised and controlled PSUs over 74 years. Consider the sad example of Air India, metaphorically represented in this narrative as a lady.
I view Ms Tata Airlines as a lovely baby girl born in 1932. The baby was born after some difficulties in the pre-natal and maternity phases. The child was raised with exceptional love and affection to be a beautiful young lady. In 1953, at age 21, she was forcibly taken away from her family and was betrothed to a sarkari groom. She was now called by her married name, Ms Air India. Initially the biological father could continue his association with the young lady, but the sarkari husband ruled Ms Air India’s life. In 1978 when she was 46, her link with the biological family was brutally severed. When the relationship was mercilessly cut off, the father happened to be in Jamshedpur, where he said, “I feel as you would if your favorite child was taken away from you.” (JRD Tata was crassly removed—yes, removed—as chairman of Air India).
Now in 2021, Ms Air India is 89 years old. Her husband, the sarkari groom, would be happy for someone to take her away, preferably her original family. The biological father may or may not do so. That is not the question in this article.
The crucial question posed here is who in the sarkari family is accountable for ruining the life of Ms Air India? Air India insider and former Director, Jitender Bhargava, wonders in The Descent of Air India, “Do we blame the government…. or the board…… or successive chairmen…. or the union leaders who made unreasonable demands?”
Of course, there are happy exceptions among PSUs, led by strong and competent leaders like V Krishnamurthy in BHEL and like DV Kapur in NTPC. DV Kapur describes how NTPC built ‘people power.’ Recruitment, training, and talent density were the most important priority while operationalizing the new company. His book The Bloom in the Desert reads as an institution builder’s narration would.
Surely then, it is possible to set up and run PSUs which are efficient. Why should it be a rare occurrence? Energy sector PSUs are much sought after by foreign investors: for example, NTPC, Power Grid, ONGC, and BPCL. These are successful probably because of great leaders, sound systems, or monopolistic benefits.
For at least thirty years, India has desperately needed better-managed PSUs. To achieve this, sarkar must stop acting like the irresponsible amomg private-sector promoters, on whom the sarkar is piling on new regulations. India requires sarkar-mukt and board-yukt PSUs. That is what will lead to less government and more governance.
