Jaitley wants to sell bleeding PSU ulcers: He should start with Air India, BSNL and MTNL

Finance Minister Arun Jaitley seemed to indicate a willingness to consider privatisation of some public sector units (PSUs) at the World Economic Forum meeting in Delhi yesterday (5 November).

Some pink newspapers have interpreted this as an indication of serious reform intent, but his precise statement does not indicate any such radical rethink on the government’s part.

According to Business Standard, this is what he said: “Certainly, I am open to looking at some PSUs that could do better in private hands. They are being sustained merely on government support. That is not a long-term solution. Taxpayers cannot continue to pay for loss-making businesses.”

The Economic Times added this bit. “There are still a large number of them (PSUs) which are almost on the verge of closure, where people are going to lose employment. So, given a choice between their continuing in the present shape or getting privatised, then the second option would be a preferable option.”

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This is nothing but part of Narendra Modi’s known policy of keeping public sector units in government hands, and selling only the loss-makers. Privatising loss-makers is hardly a sign of aggressive reform intent.

However, even here, selling the big losers will at least signal the government’s intent to prevent more taxpayer money going down the drain. If the NDA can dump three of its biggest no-hopers, it would be a positive.

For example, Air India. The UPA committed a Rs 30,000 crore bailout for Air India in 2012. This is not a burden that should be thrust on taxpayers, for there is no need for government to run a loss-making airline when there are so many other, and often better, options for flyers.

Or take two other perennial bleeding giants. They are Bharat Sanchar Nigam Ltd (BSNL), and Mahanagar Telephone Nigam Ltd (MTNL). The latter’s losses are larger than its revenues, and the former’s losses are a third as much as revenues.

This is what Business Standard reported about the state of their finances. “In FY14 (2013-14), MTNL reported a loss of Rs 3,575 crore (adjusted for exceptional gains) on net sales of Rs 3,391 crore. BSNL reported a loss of Rs 7,933 crore on net sales of Rs 25,655 crore during FY13 (2012-13), the latest year for which its numbers are available. The biggest problem for these companies is high employee cost and the legacy of their local fixed line businesses. BSNL has 25 times more employees than Bharti Airtel, the top telecom operator, with half the revenue. MTNL has three-and-a-half times more employees, with barely a tenth of Bharti’s revenue.”

Are companies whose losses exceed revenues, or those with 25 times the employees they need national assets or liabilities?

There are sure to be many more bleeding ulcers in the public sector system.

So, if Jaitley was serious when he said “taxpayers cannot continue to pay for loss-making businesses”, these are the obvious places to begin.

Mint reports that “India has 79 loss-making public sector undertakings of which 49 are sick enterprises.” Quoting a reply in the Rajya Sabha, the newspaper said the investment made by the government in these PSUs is Rs 1,57,000 crore.

The NDA government may not be keen on the ‘P’ word (privatisation) for banks or profitable public sector companies, but surely it can at least get rid of its white elephants that serve no public purpose any longer?