Babus and public sector executives may have to surrender phones and broadband connections from private operators such as Airtel and Vodafone and shift to the networks of state-owned MTNL and BSNL as part of the government's plan to improve the finances of the two PSUs.
The proposal envisages shifting the entire telephone expenses paid by the central government — mobile phone, landline, broadband and enterprise bills — to the state-run telcos and give exclusive rights to them. A similar model is followed for ailing Air India, which continues to bleed despite government officers, PSU executives and those working for autonomous bodies funded by the Centre flying the national carrier. "They may be making losses, but MTNL and BSNL are public assets. We are working on this proposal as part of measures to support their revival," said a government official, defending the plan.
MTNL, which operates in Delhi and Mumbai, has been accumulating losses since 2008-09. In 2012-13, the company registered a loss of over Rs 5,300 crore on annual revenue of a little under Rs 3,500 crore. The losses for BSNL, as per unaudited results, were close to Rs 8,200 crore in 2012-13, compared to around Rs 8,850 crore in 2011-12. BSNL has been in the red since 2009-10.
For the full report in the ToI, click here
I would say not only MTNL, BSNL, and Air-India should be wound up, but even infrastructure sectors like
a) public bus transport services (stage carriage services, using which differentiation the public sector monopoly has been perpetuated - check here for details),
b) power distribution (where Delhi has evolved a model over the past 9 years - check here for details),
c) water supply (where again Delhi is working on new models - check here for details),
where there is a near monopoly situation currently, should also be opened up to the private sector, and, resulting out of it, if the public sector players can't cope up with the competition, they should also be phased out/ wound up. The public sector players have shown themselves incapable of building capacity, particularly in monopoly situations, leading to these key sectors languishing and becoming stumbling blocks in the growth paths of the rest of the economy too.
The government's role should largely be confined to being the facilitator, and regulator (and controller, where essential). When they become players in addition, their regulatory role gets badly compromised, as we have been seeing repeatedly, and the game gets totally distorted, leading thereof to its ill effects on the economy.
Simultaneously, even the governments need to reduce their size - check this. I fully support NaMo's slogan "less government; more governance" in this regard.
Muralidhar Rao
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best bet for Air-India
http://praja.in/hi/blog/murali772/2013/11/20/grab-opportunity-offload-air-india
ironies and myths
Prime Minister Manmohan Singh on Thursday said greater functional autonomy and independence from bureaucratic control will help public sector enterprises become more competitive. Speaking at the BRICS (Brazil, Russia, India, China and South Africa) Competition Conference here, the Prime Minister said that state owned units have enjoyed captive markets and have been, over the years, shielded from competition. “Going forward, our governments will have to increasingly adopt competition-neutral policies. Competitive neutrality requires that the government not use its legislative and fiscal powers to give undue advantage to its own businesses over the private sector,” he said during the conference themed ‘Competition enforcement in BRICS countries: Issues and Challenges. Emphasising on greater functional autonomy, he reportedly said that such companies should become increasingly competitive and not shy away from competition from other players. He conceded, “unfortunately, government ownership inevitably brings with it a bureaucratic style of decision-making and the end result is that the enterprise cannot compete in a market populated by equals.”
For the full report in the New Indian Express, click here.
This is the statement by the Prime Minister of the very same government, the spokesman of which talked about imposing BSNl/ MTNL on babu's, in addition to Air-India, in just the past week. Can there be a bigger irony?
Apparently, there can be bigger ironies, since even as the above article talked of "greater functional autonomy" for PSU's, the following excerpts from an article in ToI (for the full report, click here), shows how the ministers in-charge are playing favorites, undemining the whole idea of autonomy:
Heavy industries minister Praful Patel and oil minister M Veerappa Moily have sought a year's extension beyond retirement for chief executives of two of India's largest enterprises under their wings — power equipment-maker Bhel and explorer ONGC, respectively. - - -The recommendations come at a time when the top management in Bhel and the public sector oil industry is going through succession process—from CEO to directors. The importance of the two companies can be judged from the fact that they account for procurement of material, services and equipment worth over Rs 55,000 crore a year. The Prime Minister's Office (PMO) has so far been steadfast in opposing the idea of granting extension beyond superannuation, both through UPA-1 and UPA-2. But the pressure from two powerful ministers in the Cabinet may sway the PMO's resolve and create precedence. If that happens, it would open floodgates for similar requests from other ministries and set off lobbying by chiefs of all PSUs.
Very clearly, autonomy for PSU's is a myth - they just can't be insulated from government interference. And consequently, the need for the government to disinvest from them.
unsustainable burdens
Consider the magnitude of decay. Just in one segment—heavy industry—17 of the 32 Central public sector units have wiped out their net worth. The horror story of PSUs of course is in flashback, dated for the financial year 2011-12—the government is yet waiting for 2012-13 financials. In a country where every second subscribers are logging on to mobile networks, in a country where connectivity is yet an opportunity, MTNL and BSNL have between them notched losses of `26,580 crore in the last three years. These are no ordinary public sector units. MTNL is on the Navaratna list and BSNL is on the Miniratna list. And they are by no means the only “ratnas” on the list of lossmaking units. There is Shipping Corporation of India, the undeclared “ratna” called Air India which accounted for 27 per cent of PSU losses for the year 2011-12 and many other members of the 70 ratnas listed by the department of public enterprises.
The issue is not just about losses. Losses are not unknown or unusual in India’s public sector, given the socialist mythology of not-for-profit or not-only-for-profit mantra that they chant. The question is: Is the government true to the covenant of nurturing PSUs? Take drug-maker IDPL. It was declared sick in August 1992 and sent to BIFR (Board for Industrial and Financial Reconstruction). In 2013, it transpires that IDPL has received no package yet—not in the Xth plan, not in the XIth plan nor in the XIIth plan. And IDPL is not the only sick unit trapped in this black hole between life and death.
For the full text of the column by Mr Sankar Ayyar, in the New Indian Express, click here. The party that incorporates privatisation/ closure ( where there are no takers) of these perpetual burdens in its manifesto for the coming Parliamentary elections, surely gets my vote.
high time PSUs' roles are reviewed
an impossible task
Ordnance factories - chinks in our armour
I happened to watch "Buck Stops Here" programme (Chinks in India's Armour - click here to view it) on NDTV past week-end, where Lt Gen Malik (former chief of Army Staff) made a shocking revelation that our ordnance factories still manufacture World War-1 vintage compasses and binoculars, which is what our jawans have to depend on when faced with far better equipped Pakistani soldiers on our borders. And, one of the other panelists (a retired IAS officer) pointed out that there was no way out other than to privatise all of the ordnance factories, including the likes of BEML.
I can't agree more with him. We cannot continue to expose our valiant jawans this way any longer.
Public sector to the fore again?
The National Mineral Development Ltd (NMDC) will set up a three-million tonne per annum steel plant in Karnataka, union Steel and Mines Minister Narendra Singh Tomar said on Tuesday.
The greenfield plant, in the state's mineral-rich northern region, will be a joint venture with the state government at a cost of Rs.18,000 crore, he told reporters here.
Though the Hyderabad-based NMDC's main activity is mining iron ore and selling the raw material to steel plants, it is foraying into rolling out the hot metal to meet the 300 million tonne production target the government seeks to achieve over the next decade.
"The government is setting up four steel plants in Chhattisgarh, Jharkhand, Karnataka and Odisha through state-run SAIL, RINL and NMDC by forming special purpose vehicle (SPV) for each of them with the respective states where the raw material is available in abundance," Tomar said after chairing a parliamentary consultative committee meeting of his ministry.
- - - NMDC will be the second state-run enterprise to have a steel plant in Karnataka after SAIL, which operates a steel mill at Bhadravati in Shivamogga district.
For the full text of the report in the New Indian Express, click here.
On the one hand, the government has been talking of disinvestment, the idea, one had thought of as eventually leading upto privatisation. On the other, there's this talk now of investing anew, and in green-field plants. Also, one had thought that SAIL, RINL etc are not exactly exemplary performers, compared to Jindal, TISCO, etc. Besides, there are the likes of POSCO, whom the farmers of Gadag are now rolling out the red carpet for (check here).
So, is this indicative of a policy shift towards public sector once again commanding the heights of the economy?
Perils of government continuing as a service provider
An aircraft with a landing gear that had malfunctioned repeatedly, a weather radar that conks off mid-air and an airconditioning that does not work properly takes to the skies every day from Chennai. No, this is not a fitness sortie of a vintage plane, but a daily Air India flight (AI 263) that ferries passengers on the Chennai-Bengaluru-Thiruvananthapuram-Male sector.
Although most airlines have discontinued this version of A320s and moved to newer builds, Air India flies this 26-year-old aircraft, which had three tyre bursts in the last one year. The plane causes regular delays resulting out of technical snags. Consequently, patronage of the Air India service along this popular route has also taken a hit.
As per the norms set by Airbus, the plane's manufacturer, an aircraft has to be either grounded or retrofitted after 60,000 flight hours or 25 years. Airlines often do not keep a plane for such a long time because of escalating maintenance cost. The average age of an aircraft used by airlines is less than seven years. Air India pilots say there are nine such A320 aircraft in service, but this could not be verified.
- - - Sources said pilots struggle mid-air as the plane's weather radar, which detects turbulence during monsoon, often malfunctions. The radar is crucial as during the rainy season in Kerala the aircraft has to fly in bad weather conditions on its way to Male.
For the full text of this report in the ToI, click here
And, below are the excerpts from another ToI report, just a few weeks back (for the full text, click here)
Air India's chief of flight safety was removed from his position on Friday for failing to keep flight data of all flights for a period of six months. The directorate general of civil aviation (DGCA), which approves the flight safety chiefs of all airlines, withdrew its approval for the AI official to occupy the position that was given this January.
The DGCA had sought data for all AI flights to Leh between May 23 and June 25 and its Bengaluru-Hyderabad flight (AI 513) of June 28. A passenger had complained about AI 513 having a hard touch down in Hyderabad and then taking off again. The airline reportedly did not give data for these flights due to which the regulator could not probe them.
"We had issued a show cause to AI flight safety chief, A S Soman, for failing to maintain 100% flight data records of all flights for a period of six months, as is required by the regulator. Soman in his reply blamed engineering for not keeping the data. We found his reply not satisfactory," a senior DGCA official said. Soman will, however, continue to remain in AI and has only been removed from the post for chief of flight safety.
- - - Flight data has to be kept for a period of six months so that airlines can analyze them to find how well their pilots are flying aircraft. Also, in case of a mishap the data becomes a critical tool to examine what may have gone wrong and lead to suggestions for safer flying in future.
Mr Soman will go onto the next posting. There's no sacking him ever, whether he performs there or not, too (Isn't that essentially why everyone hankers after a government job? - check here for more on that). The same goes for Mr Soman's successor too as "Chief of Flight Safety". Talk of safety is essentially a joke.
I have from long stopped patronising AI, even the odd times when they offer the cheapest fares.
unaffordable gaffe
Over 2 lakh photographs and thumb impressions on documents of registered property owners, 15,993 registration deeds of firms and societies and over 4,000 certificates, including marriage certificates, are missing from the records of 43 sub-registrar offices here.
The department of stamps and registration department admitted to this lapse during a departmental meeting chaired by the deputy inspector general for stamps and registration on August 11, 2014. In the proceedings of the meeting, of which TOI has a copy, the department has admitted that all these documents are missing or untraceable.
That these are all e-documents is mystifying as even the back-up mechanism, a routine feature for any electronic documentation, has failed. Sources in the department attribute the failure of this back-up to disinterested department officials and vendors tasked with updating and maintaining the e-records.
- - - Earlier last year, based on these grievances, the department set up a fact-finding commission to investigate the issue. Its interim report highlighted the missing records and untraceable documents. The committee held the two vendors - government-owned Electronics Corporation of India Ltd (ECIL) based in Hyderabad and CMS Computers Ltd (founded as Computer Maintenance and Services Company) with a registered office in Mumbai-responsible for the gaffe.
- - - ECIL and CMS have both moved away from the department contract after a decade of servicing the company when the contract expired. HCL Infosystems has replaced them.
For the full text of the report in the ToI, click here.
The mistake committed, by department of stamps and registration department, in the first place, was engaging the two government-owned vendors. The enormous price to be paid for the mistake should be evident to all concerned. To their credit it must be stated that they did not persist with the government-owned vendors, realising their incapacity to undertake the task, even if a bit late in the day, and switched to the professional HCL Infosystems. But, the problem is that as long as such government set-ups continue in operation, there will be compulsions on them to grab orders, and on government departments to patronise them. Therein lies the danger, and the need for winding them up, once and for all.
The Election Commission likewise needs to review its tie-up with NIC (check here), and BBMP with sundry quarter-baked amateurs posing as professionals (check here)
pot and the kettle
Over 30 years after renowned musician Zubin Mehta and his troupe walked out of government-run Ashok Hotel on finding cockroaches in their rooms, Air India's senior most pilots have now revolted against the airline's decision to put them up at the ITDC hotel in Delhi.
The AI Executive Pilot Association (EPA) has complained that "Ashok Hotel has severe noise pollution and hygiene issues which render it unsuitable for cockpit crew use", and that it is "deficient from a fatigue mitigation perspective".
For the full text of the report in the ToI, click here.
The biggest irony here is that it's the Air-India pilots, whose employers themselves have about the worst reputation in all aspects, who are complaining about quality issues pertaining to another government-run operation - talk of "the pot and the kettle". Very plainly, it's time the government got out of both.
let the private sector do the reviving, Mr Minister
The Union government will invest Rs 1,000 crore to revive the Visvesvaraya Iron and Steel Plant (VISP), Union Minister for Steel and Mines Narendra Singh Tomar said in Shimoga on Friday.
However, Tomar said VISP, a unit of the Steel Authority of India Ltd (SAIL), would require support from the state government in terms of mines that provide raw material for the plant.
For the full text of the report in the New Indian Express, click here.
One would have thought the talk should be of how to disinvest from this PSU, which has been ailing from the times one has heard about it. But, strangely, the talk is of revival with the pumping in of more of tax payer's money.
What is even more shocking is the talk of getting NMDC (another PSU) to set up a three-million tonne per annum green-field plant at a cost of Rs.18,000 crore - check my post of 8th July, scrolling above.
Mr Minister, we the tax payers need better accountability for the money we pay, and we don't see your PSU's showing any ability to provide that. In such a scenario, please tell us what your plans are for disinvestment, rather than your trying to revive them. Revival is better done by Tata's or the Jindal's - do faciltate the process.
un-turnaround-able burdens
While prime minister Narendra Modi is said to be keen to revive PSUs, he needs to be careful—Niti Aayog’s reported suggestion that sick PSUs be merged with profitable ones is borne out by, last week, the Cabinet approving National Buildings Construction Company’s takeover of Hindustan Steel Works Construction Ltd. The futility of saving an Air India is cited often—its losses of R27,000 crore over the last 5 years is more than the R22,000-odd crore infused into it—but finding a buyer for it was never going to be easy. Ditto for BSNL which, while making losses of over R35,000 crore over the last five years, has 2.2 lakh employees—but with wages equal to 45% of turnover as opposed to 5% for private telcos, no revival plan makes sense without dramatic surgery. With an 8.5% market share—and higher if you look at rural markets—BSNL may still have a strategic importance, but surely MTNL with a 0.34% market share won’t be missed by anyone? One basic rule for Modi’s plan to revive PSUs, then, has to be whether the PSU has any importance other than retaining jobs for the labour aristocracy—what relevance does a Hindustan Photofilms that made a R2,163 crore loss in FY15 even have today?
A second rule has to be the issue of whether it can ever be revived—MTNL’s employee costs are over 80% of turnover and its EBIT is not enough to cover even the interest costs on borrowings. According to the latest CAG report on central PSUs, 11 of the 34 listed firms also have an interest cover of less than 1; 67 of the 124 unlisted central PSUs have this dubious distinction. Indeed, 64 of the 157 loss-making PSUs—accumulated losses of R110,285 crore in FY15—have a negative net worth of R74,100 crore as against their equity of R21,847 crore. And while the government’s dividend from profitable PSUs was a healthy 12.7% of the amount invested in all PSUs, it is important to note the bulk of profits come from PSUs in areas where there is very little competition—if a Coal India or an ONGC had not got the best acreages or had more private competition, it is not certain their profits would be as high. The rule, therefore, has to be to infuse more competition in areas with PSU monopolies such as piped gas firm IGL. Other special dispensations for PSUs such as preferential sales to govt—27% of central PSU sales in FY15 were to government organisations according to CAG—also have to go. Apart from the fact that cash infusions of the type made in Air India and BSNL seriously distort the competition and mean there is little market discipline for PSUs—Air India can keep discounting and bankrupt the competition—the near-complete absence of any check on PSUs can also be seen from the fact that, according to the latest CAG report, 27 PSUs including the likes of BHEL and NTPC do not have the requisite number of independent directors and 16 including Coal India and GAIL have none at all. It is unlikely Niti Aayog’s blueprint on loss-making PSUs deals with any of these issues.
For the full text (emphasis added by me) of the editorial in the Financial Express, click here.
Very clearly, the only PSU's making profits are the ones who enjoy a monopoly. And, it's not as if these areas where the private sector will not or cannot come in. As such, the why of the Modi govt, one of whose oft-repeated mantra's was "less government, more governance", is persisting with them, is a mystery.
all speed to Niti Ayog's plans - there's not a day to waste
NITI Aayog, which has been tasked with preparing a road map for disinvestment, feels the government should privatise unlisted public sector companies, instead of divesting shares once they are listed.
- - - At the same time, NITI Aayog believes that the PSUs which are unviable should be immediately shut down so that they do not remain a burden on the exchequer.
- - - The government aims to collect Rs 56,500 crore through disinvestment in PSUs this fiscal, as per the Budget for 2016-17. Of the total Budgeted proceeds, Rs 36,000 crore is estimated to come from minority stake sales in PSUs, and the remaining Rs 20,500 crore from strategic sales in both profitand loss-making companies. In 2015-16, the government has been able to meet less than half the Budget estimates at Rs 25,312 crore.
For the full text of the report (emphasis added by me) in the ToI, click here.
All speed to the Niti Ayog's plans - there's not a day more to be wasted. Perhaps, the first of the lot should be the ordnance factories producing the kind of junk, cited in the following excerpts from another ToI report (accessible here).
After 13 years of research and crores of rupees spent, parachutes meant for special forces designed by a Defence Research and Development Organization (DRDO) lab here have not only failed field trials but have also been classed as "seriously life threatening", according to an audit report by the Comptroller and Auditor General (CAG), that slammed the functioning of the lab and the indigenous manufacturer.
DRDO functioning also needs immediate and total review.
Air-India cause of all artificialities in civil aviation sector
AirAsia group chief Tony Fernandes has said it is hard to do business in India due to protectionist policies and "vested interests", but his joint venture carrier AirAsia India was here for a long haul.
- - - "We (AirAsia) would love to go to many more Indian cities but Indian government is not giving us any more route rights at the moment. So, I think that is something the government has to look at.
"They (government) are very worried about Middle East and all it, they are trying to protect Air India, and I think that comes at a cost, at the cost tourism and jobs. So we will wait and see whether India (government) give us more rights. Right now, we have fully exploited all traffic rights and we cannot do any more," he added.
For the full text (emphasis added by me) of the report in the ToI, click here.
Fully government-owned Air-India's continuation as a player in the sector is plainly the cause of all the artificialities that prevail in the sector. This is precisely what I had meant when I stated "When they (government) become players in addition, their regulatory role gets badly compromised, as we have been seeing repeatedly, and the game gets totally distorted, leading thereof to its ill effects on the economy", in my opening post. And, we the tax payers and users of the services are paying for it in very many ways. Their continuation is becoming more and more unjustifiable.
ordnance factories more lethal than Burhan Wani's
In one of its biggest procurements in recent times, Central Reserve Police Force (CRPF), engaged in security and counter-terrorism operations in Jammu & Kashmir, is purchasing 183 light bulletproof vehicles and 27,500 bullet-resistant jackets to ensure more protection for its jawans while fighting terrorists and stone-pelters.
Officials said the government wants to provide an "absolute" shield to the security personnel, who have been dealing with violence for over four months since Hizbul Mujahideen commander Burhan Wani was killed.
CRPF, Border Security Force and J&K Police convoys are attacked by Pakistan-based terror outfits and more than 150 jawans/officers have been killed and several thousand injured in these attacks in the Valley in past few years. It has been seen that most deaths are because of lack of adequate bullet-proof jackets, which can withstand fire from small arms and rifles.
For the full text of the report in the ToI, click here.
Now, even as we are poised to import such huge quantities of arms and ammunition, below are the excerpts from another ToI report that appeared just a few days ago (for the full text, click here), showing the dismal performance of our own ordnance factories.
While soldiers are on high alert in battling terrorists along the borders, ordnance factories which supply their arms and equipment remain lax, churning out below - quality products which could result in failure and fatalities.
Documents with TOI show that from missing safety sleeves in artillery ammunition at the Central Ammunition Depot, Pulgaon, Maharashtra, to 500 defective rifles supplied by Rifle Factory, Ishapore, West Bengal, there are serious quality concerns. In three years, 429 types of defence equipment worth Rs 449.4 crore, including 52 types of ammunition and 162 types of weapons, were sent back by the Directorate General of Quality Assurance (DGQA) due to quality issues.
Now, it's getting to be almost 3 years since the NaMo sarcar took office at the Centre. If it had acted fast enough to privatise these ordnance factories, not only could we have met all of our own requirements, but also met the requirements of the peace-keeping forces across the world, where we too play a major part. More importantly, it could possibly have saved quite a few of the more than 150 jawans/officers killed.
All in all, the continuance of the ordnance factories is as much an anti-national activity as those perpetrated by any Burhan Wani - high time they are either privatised or just closed. There's not a day to lose.
In this connection, Lt Gen Malik's comments (check my post of 19th May, 2015, scrolling above) too are noteworthy.
More on the more lethal than Burhan Wani ordnance factories
Documents show that there are serious quality concerns at ordnance factories from the case of missing safety sleeves in artillery ammunition at the Central Ammunition Depot, Pulgaon, to 500 defective rifles being supplied from Rifle Factory , Ishapore. In three years, 429 types of defence equipment worth Rs 449.40 crore, including 52 types of ammunition and 162 kinds of weapons, were sent back over quality concerns.
For the full text of the report un the ToI, click here.
Enough has been said in my post of 7th Nov (scroll avove to read) quoting none less than Lt Gen Ved Malik. Haven't heard of any move from the concerned ministries in this regard since then. Are the concerned ministries concerned?
How can we have any "AtmaNirbharta" depending on these?