Slowdown, Social Uplift, U’khand: How govt looks forward to CPSEs in crises

IN YET another instance of the government banking on Central Public Sector Enterprises during crises, the department of public enterprises (DPE) has relaxed norms to state that relief and rehabilitation projects undertaken in flood-hit Uttarakhand during 2013-14 by the CPSEs would be treated as projects in the backward region, thereby qualifying those for the purpose of MoU evaluation. Further, the limit of 5-10% of annual budget…
for Corporate Social Responsibility and Sustainability activities earmarked for natural calamities will be relaxed for this purpose. That means the CPSEs, popularly called PSUs, can now spend more funds under this head for rehabilitation work in Uttarakhand.
The MoU, or Memorandum of Understanding, is an agreement of targets for CPSEs which once achieved lead to an increased remuneration for its employees up to 200% of the basic pay.
In a separate communication, minister of heavy Industries and public enterprises minister Praful Patel on Monday urged the administrative ministries to issue necessary directions to the CPSEs to undertake relief and rehabilitation activities in flood-devastated areas of Uttarakhand under their CSR and Sustainability Activities fund.
The massive flood in the Himalayan state of Uttarakhand has caused damages to the tune of about Rs 3,000 crore.
It’s however not the first time that the government has looked up to the profit-making public companies to tackle the nation’s crises. When there is a slowdown in the economy, every attempt is made to ensure that CPSEs spend more and infuse enough capital to the system. In other words, the spending acts as a stimulus for the economy. And when there is a shortage in government’s revenue target, the disinvestment route is adopted. Also, funds lying with CPSEs are often used the development of the backward areas. And finally, there is a conscious attempt to recruit enough number of ST, SC and OBC candidates in these government entities.
Let’s now note what Prime Minister Manmohan Singh told CMDs of 25 major Maharatna and Navaratna CPSEs last October. “We cannot be satisfied with the status quo. Our growth should be maintained at the level of 8 to 8.5 per cent regardless of what happens in the world economy. We must learn to swim and swim fast enough whatever be the circumstances,” Singh said.
So, what does that “fast swimming” actually mean? The fact is that PM wanted the CPSEs to increase their investments and raise domestic demands in a slow global economy when India’s exports are shrinking. After all, CPSEs have all the money for that purpose. The net profit of the profit-making CPSEs for the year 2011-12 stood at whopping Rs 1,25,115 crore, contributing about 6% of India’s GDP.
The contribution is actually more. According to Public Enterprises Survey of 2011-12, which was also tabled in Parliament, the CPSEs contributed to the Central exchequer through dividend payments, interest on government loans and payment of taxes and duties. In fact, the total contribution increased from Rs 1,56,751 crore in 2010-11 to Rs 1,60,801 crore in 2011-12, according to data available with DPE. This rise was attributed to the increase in contribution towards corporate tax and excise duty which increased from Rs 40,324 crore to Rs 44,358 and Rs 57,755 crore to Rs 61,165 crore respectively between 2010-11 and 2011-12.
Yet, poor performances of some of the CPSEs particularly in the services sector have damaged the brand equity of Indian public sector as a whole. Let’s take a look at the Public Enterprises Survey 2011-12 once more. In FY12, the mining sector companies achieved the best results with 29.45% growth in profit in comparison to the previous year. This was followed by the electricity sector which registered a growth of 13.42%. But the services sector companies suffered a loss of Rs 9,057 crore in 2011-12, which was in fact higher than the loss of Rs 4,903 crore in 2010-11. And the companies like Air India, Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd. (MTNL) majorly contributed to the downfall.
Quite naturally, the middle class Indians who are hit by the services of such companies, don’t bother to look around and see the brighter side of Indian public sector --- the ONGCs, NTPCs and Oils of the world.