The missing policy

Context: The recent announcement of opening up of the strategic sector and limiting public participation should not be delayed, as the nature of economic recovery depends on it.

Features of the new Public Sector Enterprise (PSE) Policy:

• The private sector would be allowed in strategic areas but at least one enterprise will remain in the public sector.
• In all other sectors, PSEs are to be privatized.

Failure of Public Sector Enterprises (PSEs)in India:

• Loss-Making business: Following shows that PSEs are not run efficiently.

• In 2017-18, there were 184 public sector companies with accumulated losses worth over Rs1.4 trillion. - Comptroller and Auditor General of India report 2019.
• Sharp drop in market capitalization: The combines market cap of top 17 PSEs has declined over 40 %.
• 70% of the PSEs profit came from sectors where private participation is limited like petroleum and coal.

Arguments in favor of Privatisation: It will have a significant positive impact on the economy

• A clear policy on privatisation with a realistic timeline would boost market confidence.
• Privatisation would help raise resources and contain the fiscal deficit and can be used for economic recovery.
• Efficiency gains.
• Will also help relocate resources to key areas such as health and education.

Way Forward: A medium term road map is needed to check the rising debt-to-GDP ratio, which is expected to increase over 10% in current financial year.

• The NITI Aayog has a ready list of PSEs that can be put on the block.