The government’s policy on public sector enterprises (PSEs) offers scope for different kinds of innovations in creative entrepreneurship, apart from disinvestment. Not more than four State-owned entities in a sector and State presence only in strategic sectors — that is the nub of the policy, as reported. This does not cover how PSEs would be run, to minimise political interference and attract the best talent.
A drawback of the policy as reported is that it does not include new, emerging sectors among the ones identified as critical: advanced microelectronics, synthetic biology and bioinformatics, new materials, quantum computing and communications, and cybersecurity. PSEs should move into sectors that are vital for the economy’s global competitiveness and beyond the capacity or ambition of the private sector.
If the State were to exit entire sectors and minor PSEs in the critical sectors, that offers scope for not just revenue mobilisation but also new ways to run companies. India has relatively few widely held, professionally managed companies run with entrepreneurial zeal and held to account through shareholder activism and democracy.
While a few managers had been given the freedom to run their PSE businesses as entrepreneurs in the past, and gifted the country such corporate powerhouses as NTPC, Bhel, Maruti and SAIL, this experience rested on exceptional political backing given to exceptional managers. An institutional system of holding managers to account was missing in this history. Managements of widely held companies can be held to account by activist shareholders, a vibrant market for corporate control and enlightened reimbursement programmes for corporate leaders linked to long-term performance. Some PSEs would be sold to strategic buyers, of course. But divestment of majority control via public offers can not only mobilise funds for the exchequer but also create large professionally managed companies, holding whom to account can lead to innovations in corporate governance and shareholder democracy. This is too good to miss.
This piece appeared as an editorial opinion in the print edition of The Economic Times.
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