The NMP is hardly the panacea for growth in India

News: Govt. unveiled the National Monetisation Programme (NMP) in August 2021. Under NMP, ₹6 trillion is expected to be raised by leasing core assets of the Central government over the course of four years (FY2022 to FY2025).

But, a more critical area towards which policymakers must pay attention is the investigation of the key reasons and processes behind the transformation of profit-making public sector assets into inefficient and sick businesses.

Otherwise, India may find itself in a vicious cycle of creating new assets and then monetising the same when they become liabilities for the Government at a later stage.

How many CPSUs are there?

Going by the annual report (2020-2021) of the Department of Public Enterprises:

– There are 256 operationally-run central public sector undertakings (CPSUs), employing about one million people.

– Out of these, 96 have been conferred the Ratna status.

What are the reasons behind decline of PSUs?

The primary reasons for the failure of public sector enterprises are:

– Cost overruns: In some cases, project completion time is exceeded, leading to elevated project cost or the project itself becoming unviable by the time of completion.

– Overcapitalisation: Optimum input-output ratio is seldom observed in a majority of government infrastructural projects, leading to their overcapitalisation.

– A reluctance to implement labour reforms

– A lack of inter-ministerial/departmental coordination

– poor decision-making, ineffective governance and excessive government control

What steps has the Govt taken to strengthen the public sector businesses?

Pradhan Mantri Gati Shakti National Master Plan for multi-modal connectivity was launched recently. It aims to achieve seamless planning and coordinated execution of infrastructure projects in a timely manner.

The Department of Public Enterprises has initiated revamping of the performance monitoring system of CPSEs to make them more transparent, objective and forward-looking, based on sectoral indices/benchmarks.

The Economic Survey highlights the Govt’s initiatives as part of the Atmanirbhar Abhiyaan in order to boost domestic production in the steel sector and protecting industry from unfair trade through measures like imposition of anti-dumping duty and countervailing duty on the products.

What is the way forward?

As per the Economic Survey 2020-21, Govt needs to revamp the corporate governance structure of public sector businesses.

This will enhance their operational autonomy with strong governance practices, including listing on the stock exchange for greater transparency and accountability.

Source: This post is based on the article “The NMP is hardly the panacea for growth in India” published in The Hindu on 15^th Dec 2021.