The Drive to Privatize

There has always been a large hue and cry about how India has always failed to meet its fiscal deficit targets and has failed to keep it in control. This is also attributed to the government invariable failing to meet its divestment targets which are either too ambitious or lack adequate government will. The point is that quite a few government companies and PSUs have become a yawning abyss of money. We go on investing the tax payers’ hard earned money into businesses which have a history of wasting it away without raising any considerable benefit for the general public. Companies like Air India have received government funding for far too long without giving back any considerable benefit.

The governments of recent times have been far too lackadaisical to work on the privatization of Air India. Rarely a day goes by, when we do not here about the troubles of Air India flyers. Pilots on strike, delayed flights, corruption scandals and whatnot, all these have become synonymous with Air India. Its privatization could work wonders for it. One must look at the Singapore Airlines to see how it is owned by the government yet not run as per its whims and fancies. In fact, the government is quite outspoken about how it is not involved in the management of the airlines. This seems to be a viable model for India’s cash-strapped national carrier. While the government may own a majority stake in the airlines, it must disinvest in it to ensure adequate cash flow so that it need not give regular grants to the airlines. Management of the airlines cannot lie with the government as it has been reckless thus far. Appointing professionals at highest levels to promote ethical and operational efficiency is the need of the hour.

While Air India is just one example of how government can benefit from privatization and divestment, the next area is the banking sector. The banking sector has been in need of a fresh flow of funds for far too long. So while its non-performing assets (NPAs) rise, it has been deprived of an opportunity to grow due to the severe fund crunch. The government was never in a position to fund Air India, let alone the numerous state-controlled banks. What it must do is that while it retains majority control, it must give up most of its shareholding to raise greater funds.

drive to privatize

The same goes for other government institutions like Coal India. The government may face a lot of opposition in this endeavor but this government has the political majority to do so. So far it has also shown the will. The real trouble would be to thwart attempts from the trade unions which will surely be up in arms. This requires stringent labor reforms which have been long due. To facilitate privatization, the government must craftily deal with these unions who wish to remain in their comfort zone. For far too long these employees have enjoyed the perks of a government job without exercising even a modicum of responsibility that must come with it. Privatization is the need of the hour. The government has no business in doing business. While it may retain majority shareholding in these companies, it must give up day-to-day management and interference. The organizations must be run like any other company with professionalism that the government has not been able to display.

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