It has become fashionable to run down the public sector and ignore its contribution to India’s economy and society. Many champion the view that even in today’s difficult times, the government should not expand the public sector as it offers limited benefit in terms of economic growth and leaves little scope for private sector investment. But this argument does not hold in the context of the coronavirus crisis when we are looking for urgent measures to shore up the economy.
Our experience of the private sector shows that they haven’t really stepped forward with large investments, particularly in times of crises. The gross fixed capital formation figures of the National Statistics Organisation show that the public sector has contributed far more than the private sector if we assess their relative share in the Indian economy. In any case, the current situation necessitates a much larger role for the public sector.
A key criticism of the series of revival packages announced by the government of late has been that they focus on increasing liquidity rather than creating demand. The public sector can play a crucial role in demand creation, particularly by supporting the MSME sector. The government has already mandated that at least 25 percent of its requirements have to be procured from MSMEs. The current situation calls for a more concerted effort to increase this percentage as much as possible, keeping in mind the individual needs of different sectors. At a given time, public sector enterprises, the railways and the defence establishment owe large amounts of money to MSMEs. As an immediate relief measure, up to 75 percent of their pending dues must be paid, after granting the required one-time relaxation in procedures. The disputed payments can be deferred and dealt with separately. This will put cash in the hands of entrepreneurs and help them start operations to tide over this difficult period.
In line with the national goal of promoting the MSME sector, large public sector companies have been promoting ancillary units. A good example is the Department of Defence Production, which has created two industrial corridors in the north and the south to promote scores of small ancillary units that supply goods to defence PSUs. The northern corridor includes the cities of Aligarh, Kanpur, Lucknow, and Varanasi, while the southern corridor is based in Tamil Nadu. This not only promotes the MSME sector but also helps the country realise its goal of self-reliance.
Employment generation is another need of the hour. Direct employment generation through the public sector has been steadily falling over the past few years. This is consistent with the government’s policy of disinvestment and downsizing the bloated public sector. However, public sector enterprises can still play a crucial role in indirect employment generation through greater ancillarisation. The Department of Defence Production alone aims to provide employment to 20-30 lakh people by 2022.
Public sector enterprises are also playing a crucial role in promoting skill development. These efforts need to be scaled up in the present situation.
To tackle the migrant labour crisis as well, public sector units, particularly in the power, oil, coal and steel sectors, can play a critical role. These companies have units all over the country, including in the remotest and poorest areas. We need to coordinate their efforts to provide for the basic needs of migrant workers – quarantine and shelter homes, rations, transport or medical facilities. These efforts need to be made in coordination with the railways and state governments. The expenditure can be met from the Corporate Social Responsibility contributions of these companies, thereby sparing the government additional financial burden.
These difficult times are a test of the true mettle of our public sector companies that have always supported the government in crisis situations. The private sector has neither the reach nor the mandate to work in tandem with the government in such trying times, although they have made significant contributions to the PM Cares fund.
Sadly, it seems the tremendous potential of our public sector enterprises to help combat this crisis has been largely ignored, even though many of them, like the Railways and Air India, have been at the forefront of our efforts to tackle it. Perhaps, we need to look at our public sector enterprises through a new prism which acknowledges their positive contributions and devises strategies to restructure them in a way that they can make greater contributions towards nation building.
Seema Bahuguna retired as secretary, Department of Public Enterprises, Government of India.