PSUs: Modern industrial temples of India

In 1954, while inaugurating the Bhakra Nangal dam, the then Prime Minister Jawaharlal Nehru christened it as the 'temple of modern India'. And so were born Nehru's 'temples' - public sector undertakings (PSUs) - that took the onus of making India self-sufficient.

Today, India Inc. proudly boasts of over 2 crore people employed in PSUs, which are largely owned and managed by the Central Government. Once criticised for their laissez-faire approach, PSUs have since shed that image and emerged as partners of progress in India's economic march.

It was in 1948 that India got its first PSU in the form of ITI (Indian Telephone Industries Ltd). Over the years, the number and significance of PSUs grew enormously. In the first Five-Year Plan, there were just five central PSUs. By 1980, the number had grown to 163. Just before India embarked on the privatisation or disinvestment drive in 1991-92, the number was 244.

As on March 2006, according to CAG, there were 404 central PSUs, including six corporations and 94 deemed government companies, operating across a wide spectrum of businesses that included sectors such as banking, coal, engineering, power, oil, steel, textiles, etc.

During the same period, there were 1062 State Government companies.PSUs were set up to play a pivotal role as envisaged in the economic model adopted by the country in the post-Independence era. This was essentially a socialist model, inspired by the Soviet model. A large number of PSUs were set up across sectors and they played a significant role in terms of job creation, social welfare, and overall economic growth of the nation.

This is because the policy of the public sector was guided not purely by profits but also by efforts to spur growth in remote and backward areas of the country and to provide employment. It has succeeded in both. In fact, if the public sector had not ventured into extremely backward and tribal areas like Jharkhand, Orissa, and Chhattisgarh, among others, the fruits of development that people of these regions enjoy would have eluded them.

Cities and towns like Ranchi in Jharkhand, Bhilai in Chhattisgarh, Durgapur in West Bengal and Rourkela in Orissa would not have seen the prosperity and progress that they have become symbols of.

Even though the public sector has had its share in the Indian success story and transformed the economy from being agro-based to industry-led, it has attracted criticism and adverse opinion. The critics charge that the PSUs are in the black only because they have the financial backing of the Centre. However, much has changed since the economy opened up.

Today, most - if not all - PSUs have transformed themselves from being 'babu-driven' companies to professionally run organisations. Today, the Steel Authority of India Ltd. (SAIL) is India's largest steel manufacturing unit, ONGC is touted as India's highest profit making organisation, and the Indian Oil Corporation Ltd. (IOCL) is reckoned as India's largest commercial enterprise.

In today's changing times, our PSUs have realised that for them to become successful businesses, they must shed their lackadaisical approach and transform not only their approach to their business objectives, but also their people management practices. In fact, according to a survey conducted by Hewitt Associates, NTPC was the third 'Best
Employer' in 2003 as well as 2004. Similarly, Power Finance Corporation Ltd. (PFC) posted healthy net income figures for the year-ended March 2009, with little over 300 employees on its payroll.

In order to foster growth in organisations, inspiring a sense of ownership in them is a key condition, and our PSUs seem to have taken active steps in this direction. This is evident from the low attrition rate that the PSUs witness. For example, Bharat Heavy Electricals Ltd boasts of an attrition rate as low as 2 per cent.

This is mainly because most PSUs offer a comprehensive range of products and services and as a result, each employee goes through various skill nurturing processes and practices, which add tremendously to their knowledge base.

The changed strategy that the PSUs have embarked upon is evident from their strong performance as compared to private sector counterparts even during an economic downturn.

According to the prestigious Fortune 500 list released in 2008, while only two companies from the private sector made it to the list, as many as four PSUs found their place. They included the IOC, BPCL, HPCL, ONGC and State Bank of India.

Consider what happened towards the latter half of 2008, when the world began facing the pains of recession. It was the PSUs and the nationalised banks that continued to contribute to India's emerging status as a growing economic power.

While it is true that India did face some economic pain as the world economies plunged into a recessionary wave, the deep roots of the PSUs in the Indian economic system ensured that the pain was only temporary and the nation came out even stronger. The global financial meltdown affected Indian PSUs as much as their private counterparts.

Take, for instance, the steel industry. While private players were reeling under the tremendous cost pressures due to increase in raw material prices, SAIL acted wisely by using alternate resources and streamlining its employee strength. It was something it would not have been able to do if it had not changed its management practices.

Clearly, with the competition increasing in the liberalised economy, the public sector has shaken off its lethargy and started functioning in a way that today there is healthy competition between it and the private sector.