Complete information on the Problems of Public Enterprises

A large number of public enterprises and their size and variety have given complex problem. Some of them are on account of procedural defects and too much rigidity in their operation, but many problems are inherent due to the basic tenets of the public enterprises.

They lack flexibility, effectiveness and efficiency of private enterprises. Over the last decades, the experiences of public enterprises particularly of departmental undertakings have been very discouraging.

The controls over performance and routine operations have been too rigid or too timid to yield higher productivity.

The functioning of government companies has been better than those of other forms of public enterprises but they could not excel the private enterprises. It was considered that the public corporations could perform better than, other public enterprises but many corporations did not comply the expectations.

The political parties and government hindered routine functioning of many public enterprises. Frequent changes of top management and alterations of policies and procedures have adversely affected their operations.

The sense of belongingness which is the soul and spirit of success of any business is absent at top, middle and lower level of management in public enterprises.

The workers of public enterprises are more reckless than those of private enterprises. The sense of belongingness is not common in many of the socialist countries, whereas the Japanese organisations have excelled on this pattern as the result of range (family) system of employment.

The work-culture of Japan is being imitated by the U.S.A. The public enterprises are least suitable in the political upheavals. Many organisations are facing interferences by the Government. Overlapping and absence of power and authority are served at several levels.

The Government has modified the appointment policy recently. Instead of appointing politically supported bureaucrats, business experts are appointed at the top. The productivity improved consequently.

Many committees have recommended that the Board of Directors should consist technical skill, representatives of labor and personnel management, financial talent and management experts.

But, the Government has not paid full attention towards such suggestions. The appointment of Members of Parliament and civil servants are considered unhealthy and full of political backing which creates groupies in the organisation.

It is also suggested that full time managing director should be appointed to manage that concern effectively and efficiently.

Decentralisation of power should be implemented to avoid the problems of overlapping and fraud. Recently, postal saving accounts have experienced a large number of fraud, corruption and red tapism because of too much centralisation and dual functioning of the operation. The branch as well as head post offices are maintaining account-books without entrusting responsibility to anyone.

On the other hand, banking operation because of decentralisation of power, authority and responsibility are functioning properly. The postal saving accounts should be transferred to banking systems to avoid the problems of public and retain the goodwill of post offices.

The suggestions of Administrative Reform Commissions have not been fully complied to regulate and manage the public enterprises.

During the last three decades many public enterprises are running at loss and wasting public money in several forms. These organisations should be handed over to the private houses. The Government can exercise control on them.

The regulatory and administrative functions of the Government should be strengthened to control the business activities. The Government should not take up entrepreneurial operations where it cannot function profitably and economically.

Giving the picture of inefficiency and inactiveness, it cannot control the business to improve efficiency and effectiveness. The inefficiency and failure at business-front reflects the efficiency of the Government at large.

It is in the interest of the nation and the public individually to denationalise sick government organisations.

The appointment policies of many public enterprises are defective. Redundant staff and scarcity are observed in many cases. Proper planning and recruitment is absent in these organisations. Labour relations in several public enterprises are not congenial in spite of maximum amenities and facilities to the labour.

The productivity of labour in public enterprises is lower than their counterpart in private enterprise, whereas the salaries and amenities are higher in the former case than that in the latter case. The public enterprises in the name of socialistic approach adopting no profit no loss have resorted the practices of concealing low productivity.

Many organisations fix their prices arbitrarily and at the instructions of the Government. It is observed that their pricing policies are no cheaper than those of private enterprises.

The depending on competition and pricing systems help promote rational allocation of scarce resources, optimal utilisation of resources and accelerate the growth of economy.

The retained earnings should be encouraged to strengthen the enterprise but in absence of adequate profit, these organisations are depending on Government for financial strain and expansion.

In any case the productivity cannot be at the altar of the socialistic pattern of the society. If any concern has not reached even the level of break even after 10 years of establishment, it should be handed over to competent business houses.

The cost of production in several public enterprises is very high because of improper use of resources and absence of competition.

The enterprises are left free at the cost- front. They are not personally liable for the higher cost of production. The Parliamentarians can be satisfied on this or that pretext if the performances of the public enterprises are below the standard.

Comparing the performances of public enterprises with those of private enterprises is considered traditional approach as well as pre-capitalism.

But this is the only criteria whereby the public enterprises performance can be judged to reveal their efficiencies and inefficiencies. Monopolistic protection either to public enterprises or private enterprises will lead only towards wastage of public money and exploitation of their dire needs.

Therefore, the private enterprises should be left free to utilise their full capacity and public enterprises should be accountable if they do not come up to the standard. The techniques of financial control should be exercised by the public enterprises.

The financial manager should be given the power of using the funds on business-exigencies rather than on the bureaucratic system. The problems of too much unnecessary reporting and auditing have obstructed the proper functioning of public enterprises.

The government should realise that public enterprises should not be allowed to function for the sake of political motto. The national funds should be used economically and effectively. These enterprises should be given the autonomy of using the business principles to prove them worthy of continuation in the society.

If a public enterprise after 5-10 years has not achieved the break-even-level, it should be handed over to some private organisation with the condition that they will bring them at profitable stage within specified time.

Insurance industry along with other financial institutions has been constantly under pressure of privatisation without going into the grass-root of the problems and its potential consequences.

Many committees and government agencies have been arguing for privatisation, denationalisation and permitting foreign institutions to conduct insurance business in India.

Insurance industry was nationalised at the behest and considerate thoughts of devoted and honest leaders. They have observed the increasing ills of private insurers and scope of socio-economic development with the help of insurance institutions.

In 1956, the then Finance Minister, Mr. Deshmukh had stated, “the misuse of power, position and privilege that we have reason to believe occurs under existing conditions in one of the most compelling reasons that have influenced us in deciding to nationalise life insurance”.

Thus, they have foreseen the misuse of power by the private insurers. The motives of private insurers have not changed today and will not change in future too because they work for self interest and maximisation of wealth. While putting arguments for privatisation at present, one should see whether the objectives of nationalisation have been fulfilled.

If it is not fulfilled, arguments for privatisation may be accepted with the assumption that the privatisation would remedy all the problems and help succeed the nation to achieve its socio-economic development.

One should not forget that insurance is not purely commercial industry; it is social institution, too. Government should provide social security, safety and welfare to people of India.

It is not possible for a government to achieve all these objectives at a time while carrying the responsibility of governance; it should entrust these responsibilities to an institution of national character. Basic duty of a Government is to protect its people from any sort of disturbances and invasion.

If the social security and welfare is left to a national institution which can survive and grow on its own while providing social security and welfare to people; it would be an appropriate proposition for the government rather than leaving it to private hands who care for profits and appropriation of funds.

The government while having a nationalised insurance institution serves both the purposes at a time, i.e., governance and social welfare and security to people.

The arguments for privatisation can be judged on the basis of achievements of nationalised insurance institutions, critical analysis of the reports given for liberalisation and privatisation of insurance industry and past practices of private insurers.