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Learning from the Public Sector

Jagdish Rattanani

Author: Jagdish Rattanani

Date: Sun, 2016-09-04 19:29

The question on how and why the public sector does a better job of retaining women managers compared to the private sector is a thorny one, particularly when posed to a panel that comprises mostly private sector leaders.  But the question got asked at the podium as SPJIMR launched the Management Programme for Women, the MPW, on Sep.01.

For many of us in management institutes, it is easy to underestimate all that goes on in public enterprises and overestimate the supposed performance and efficiencies of the private sector. This is not to pit one against the other. But it is instructive every once in a while to look around and study from a sector that many in a modern-day business school environment are prone not to dig into, given that most B-School participants take up work in the private sector. This willy-nilly tilts the balance, which can get even more skewed given that more cases, lectures, examples and stories flow from private sector experiences in many a conversation on most campuses.

India’s public sector accounts for no less than an overall net profit of over one lakh crore rupees (2014-15 figures) for all 235 CPSEs, the acronym for Central Public Sector Enterprises. Total investments in the sector are of the order of 11 lakh crore rupees. True, about one third of the 235 are loss making; also that return on capital is low. But conversely, two-thirds are profitable and surely there are deep lessons to be learned here and surely they will be different lessons, given that these businesses operate in a space and a framework very different from the private sector.

The thought takes me back to the time I spent years ago in an enjoyable interview with Arup Roy Choudhury, the then Chairman & Managing Director of NTPC (2015-16 revenues Rs.70,506.80 crores), India’s biggest power producer.  At the time, Choudhury was also the Chairman of the Standing Conference of Public Enterprises (SCOPE), so he could speak for the universe of CPSEs, and he took the occasion to speak about how and why the public sector continued to be relevant in a liberalised economy. Choudhury now is the Chief Commissioner, Right to Public Service Commission, West Bengal.

Some his observations were powerful, like this one: “Our private sector is running on public money,” or that “the simplest thing is that the private sector should open up to CAG (the Comptroller and Auditor General)…Let CAG at least audit their books.”  Sitting in his large office in New Delhi’s SCOPE complex, Choudhury fired away at the idea that the private sector was doing CSR or that they were in any way better at their work. “Private entrepreneurship is good,” he said, “but not at the expense of taxpayers’ money.”

Choudhury was of course being provocative but the remarks resonated with many who read the interview.  He insisted that CPSEs were leaders in CSR and “we have touched the people in the core of their hearts and we stand by people in their hour of need.” That remark provides some good material for a real debate in a management school – is that a philosophy that we could or should live by in a modern-day corporate?

The argument can run on and logically take us to revisit the age-old question: What is the central purpose of business?

Of course, this is not meant to be an apology for the public sector; there is a lot that needs attention and fixing. But equally, there is a lot going on here that needs careful reading and understanding and the modern day management student can pick up rich lessons that go well beyond the narrow markers of quarterly numbers.

Understanding the public sector, particularly public services like health care, also opens up a host of new vistas and provides new ideas on managing systems in a country as vast and diverse as India. For an example, the KEM Hospital (run by the municipal corporation of Greater Mumbai) in Mumbai deals with 1.7 million patients every year, most of them from the poorer sections of society. We may have bigger names, slicker lobbies and lesser wait times elsewhere but the KEMs will always be the biggest hospitals in terms of service to the people who really need it at the time they need it and at the price they can afford.




<p>First of all a great article sir.</p> <p>Now, I would like to state some points from my three and a half years of experience working in one of the biggest profit making PSUs of India.</p> <ol> <li>Money is not everything, life is needed. As the generation “Y” thinks that spending is more of a status than keeping the money in the bank.</li> <li>Postings will never be in a city, so the lifestyle will not be as happening as his/ her friends who work in a less safe job in a city in any private sector.</li> <li>Working under the people who are less competent than them cannot be adjusted for a longer period.</li> <li>Exploring the world. A PSU job will never take you outside India, sometimes not even outside a single state for the first 20 years for sure.</li> <li>No recognition of good work, as promotion is only dependent on a seniority basis.</li> <li>Risk taking mentality. People are prone to take more risk than the previous generation.</li> </ol> <p>Other than the above-mentioned arguments, I would like to suggest the women managers who are willing to join a PSU that they will always be treated as the most pampered one. They will always be posted in the headquarters and corporate offices. Therefore for a woman graduate, a PSU job should be a dream as the pay package is very high compared to other entry level jobs as a graduate.</p> <p>Adding to that I would definitely like to mention what graduates learn from working in a public sector, i.e. managing people. As managing people are more difficult than controlling any machine, so it is an added advantage for the people who join as MBA candidates after working in a public sector. No private sector in India is dominated by trade unions, whereas all the public sectors are. So working as a junior level executive will give one immense amount of experience to handle a team and other organizational behaviour related issues efficiently.</p> <p>Despite having this ample amount of opportunity for an MBA graduate to grow as a manager in a PSU, people don’t like to join there. The main reason for this is the pay package. As one engineering graduate joins a PSU in the pay band of E-2/E-3 (PSU terminology) and that is exactly same for an MBA graduate as well; therefore no recognition of his/ her masters’ degree.</p> <p>&nbsp;</p>

<p><br /> &nbsp;</p> Interesting observations, Abhishek. Thank you.

<p>Indeed the amount of opportunities provided by the Public sector is far more than many private sector companies, especially for women. Adding to the view of Prof. Rattanani, and concurring with the views of fellow classmate Mr. Mukherjee, I feel that almost all the Public sector enterprises give you a change for overall development. Been brought up in the townships of NTPC and having done my education in a defence establishment, I can say without doubt that PSU provides the most secure and complete life. You have the opportunity to live alongside people of different cultures, share and celebrate the festivals, learn their culture and have a wide network of friends throughout the nation.</p> <p>Perhaps the best experiences of a public sector enterprise is the feeling of unity among diversity. The neighbour to you left is from Assam and the neighbour to your right is from Andhra Pradesh and perhaps all of them would be equally participating in a “Garba” festival or an Onam celebration. This is something that women cherish, the nudgy fact that women like to socialise a lot.</p> <p>Well apart from these lighter moments in life, the pay is great, as correctly put forth by Mr. Mukherjee. The added services that a PSU gives you is the best part of the employment contract. For instance to avail the facility of a guest house in any part of the nation, is one cherry that helps the company retain employees. Health cover for you and family, residence and utilities and subsidies on commodities, Holidays and paid leave are other paraphernalia given to employees.</p> <p>In my five years of professional life with a private firm, I wasn’t given even 5% of what was given to my batch mates in PSU in terms of amenities and quality of life. Life in private enterprises is strenuous, like a rat race, where the importance is on profit than on employee satisfaction. Nothing against Private firms, but yes for a complete life experience I would still choose a public sector enterprise.</p>

The major consideration for the setting up of PSUs was to accelerate the growth of core sectors of the economy; to serve the equipment needs of strategically important sectors, and to generate employment and Income. PSUs not only contribute for the betterment of Economy but also safe guard Nation’s interest from Foreign Players. Due to the vast spread of PSU in different segments Government could able to control the prices and generate employment. Government can setup PSU establishments at certain areas where development is required/ economically backward areas across the country. Private players never do this and they give priority for their profits only. Even after 6 decades of Independence the major investments at backward areas are being done by PSUs. So, PSUs are definite requirement of India to control the monopoly of Private/Foreign Players. I do agree with the view expressed as women are given priority in PSUs when compared to Private. PSUs also gives overall development of Employees and their family. Though there may not be excellent Growth for the highly talented segment as compared to Private, overall there is a balance being maintained. In India Political leaders interfere too much on Government /PSU day to day activities. This factor in my view is one of the hindrance for efficient leaders to enter into PSUs than Private. Also Hierarchy being maintained in PSUs discourages the talented stuff to retain for log time. Job Security, giving posting priority for working couples & taking care of women workforce in PSUs cannot be matched by Private sectors. Most of the PSU jobs are transferable, employees and their families will experience different places and cultures. Especially children grownup in different cities tend to gather more self confidence. Not any but majority of the private sectors does not bother about employee satisfaction rather the profit per Employee. Facilities like Housing, Medical, Scholarships to Employee children, Holiday Homes across the country, etc., are the major ones which makes PSUs differentiate from Private. Having spent almost 2 decades in PSU, I experienced excellent growth in my personal & Professional life. Even I noticed that my children have shown a great change in their confidence levels after every transfer of mine to different places in INDIA. I personally feel that working in PSU will give complete life experience.

They are the 'Temples of modern India' said our first Prime Minister of independent India while inaugurating the Bhakra Nangal Dam. He stated this in the context of Public Sector Undertakings (PSUs) or Central Public Centre Enterprises (CPSEs), as we may call it, of free India. There was a potent vision behind this diffidence. A vision to see India as a self-reliant, sustainable nation typifying rapid economic as well as social growth in the region. The idea was to ramp up employment generation, expand the infrastructure and mobilize resources manifold. This was the basic premise on which the CPSEs started their journey. From a humble 5 in the early 1950s, the number of CPSEs increased to a whopping 160 by early 1980s. Post economic liberalization, this figure rose in excess of 240. Out of 235 operating CPSEs, the number of profit making CPSEs increased steadily from 160 CPSEs in 2007-08 to 157 CPEs in 2014-15 with a total profit of Rs. 1,30,363 crore as on 31st March 2015 (Public Enterprise Survey 2014-15). The number of employees recorded across all CPSEs in India is more than 16 lakhs as on 2006-07 and the numbers might have only marginally changed in the past decade. The 45 CPSEs listed on the Bombay Stock Exchange as on 31st March 2015, exhibited a healthy market capitalization of Rs. 13,27,127 crore with a 20.35% rise over previous year (Press Information Bureau). The crux of the matter is that the CPSEs have come a long way since their inception in achieving their objectives on the economic development front. During the times when the private organizations are the favourites for the younger workforce to start off their buddying careers, the CPSEs have not done too bad just to grow steadily, if not exponentially. Of late, we have seen able leaderships in the CPSEs who have transformed these public enterprises into profitable businesses. The bureaucracy and red-tapism are tales of the past now. The focus has been shifted to “Corporate Governance”. The ‘sarkari babus’ will now have to undergo annual appraisal processes, under the new Performance Management System, where they are answerable for their actions and inactions to their respective superiors. This is a paradigm shift. The CPSE operations are now transforming themselves much like their private sector counter-parts. The competition is such, it has gotten both sectors up and running. Be it agriculture, oil & gas, education, medicine & healthcare, or defence, CPSEs are allocating more towards R&D and innovation in technology and processes. They have thoroughly envisaged the need of the hour which allows them to hold their ground today and prepares them for a safe future tomorrow. The numbers only indicate short term achievements, but it is these ideological changes which epitomizes their hunger for sustenance and growth in the long run. Having said this, we must not forget where the roots of the CPSEs are. They shall still remain ever so dedicated towards the socio-economic upliftment of the nation, that some of the policies might not be in-line with the business objectives of profit making and market capitalization and that is perfectly fine. It is this very linchpin of the CPSEs which has sailed them through the difficult times of recent economic crisis. CSR activities are not considered as duties, but a way of life at CPSEs. ONGC spent more than Rs. 500 crore towards CSR activities during FY 13. The internal policies are employee driven rather than profit driven. A human resource manager in a CPSE has a vastly different task in hand as compared to one in a private organization. They have to respect the laws of the land while working towards upliftment of the local communities in the remotest of the villages where the CPSEs are present. It is these CPSEs which is leading the rural India, which stills constitutes a formidable proportion of population, towards a brighter tomorrow. Therefore, the money spent in such initiatives are not costs, but investments for the greater good. These are the values that need to be passed on to the other sectors and this is what we must learn from the public sector.

Great insights observed by you, Sir. I have been working in PSU since last 10 years. Majority of PSUs are working for meeting the basic needs of society and country rather than aiming at high profitability. Though profitability is a factor to sustain and give the salary / bonus to its employees. I can share my experience and hope that similar practices are at other PSUs too. I was having offer of one private sector company and one PSU. I intend to join private sector company as most of the people prefer. However one of my close relative (professional) suggested to join PSU as he was already passing through the life of private sector. I could not really understand the reason but respecting his experience I decided to join PSU. I tell you that I am not repenting on my decision. Pay package was same for both the companies that point in time and may be little lesser now as compared to current package with a experience of 10 years. But money is not the only factor which a person should consider while joining an organization. Living the LIFE is important for long term, spending time with the family & friends is also equally important. The caring of employee type mindset is across all PSUs from the inception and getting carried from generation on generation. Currently I have also started thinking in that direction for the people who joined. Basically it provides a culture of creating a habit of empathy. This is one of the reason why a women prefer to continue with PSU. Indian culture of caring a women at different phases of her life exists in PSUs. Women feel themselves at safe zone where liberty is available to manage professional and personal life. A men would be placed at different cities over a period of time but women will be placed in such a way that their life remains synced with their husband work place. People feel from the outside world that PSUs means typical BABUGIRI type culture and they would be reporting to lesser competent person. This is a myth. Most of PSUs are professionally driven and professional and smarter people climb the ladder. PSUs are very transparent as compared to private sector. Various kind of audits like CAG, OISD, Safety, ISO etc. keeps on happening which improves the efficiency of PSUs. However, there would be few old people and less professionally managed people. But you learn when to respect, whom to respect, how to deal, how to manage etc. and these attributes are very helpful in long term whether you stay in PSU or not. PSU concentrate on people development and encourage work life balance. Liberty is given to employees for taking decisions. I am not saying that PSUs are not having any issue but those issues are common in private and PSUs like promotions, politics etc. Most of the PSUs are not having any inherent issue as such so that person should think not to join PSU. To summarize, PSU is always better in short term and best in long term. PSU "EK KHULI KITAAB - पीएसयू - एक खुली किताब"

There is no doubt that PSUs are needed in the priority sectors of economy, especially if the objectives include generating employment and serving the society. The article does not clearly tell us why PSUs are more successful in retaining women. The fact of the matter is overall manpower retention (irrespective of Men or Women) is higher in PSUs as compared to Private sector purely because of the relatively higher job security. While I agree that PSUs do offer a safer and stable terms of employment, do they really work towards capability development of employees ? In an environment where promotions are basis seniority, do the most competent people get the more important senior roles ? Do they evaluate people based on performance? These are some of the questions which if answered, may throw some light on why one third of these PSUs are making losses and how their overall productivity can be improved. When it comes to the institutions like government run hospitals and educational institutes, railways and defense, they have significant impact on the society and security of the country. Therefore they must continue to be controlled by government irrespective of profit or loss. To my mind they should anyway be non-profit organizations. However, when it comes to commodity business, my personal view is to leave them with corporate who will be more effective in running them profitably. Finally whether it is a PSU of Private sector, every organization runs with common man's money, directly or indirectly. Whether it's government or corporate, whether your are a tax payer or an investor, it's a fair expectation from any business to add economic value through profit. The debate therefore is whether you want to do a business or a social activity?

The debate over public vs private sector (Pros vs Cons) is always viewed narrowly from a specific perspective ranging from performance, contribution to GDP, Job creation, Job safety, Employee satisfaction and recent new entrants women safety/opportunity and CSR. CSR concept is not new to India as various corporate houses were already involved in multiple activities at various levels. The amendment in companies act provided a definite framework and guidelines to perform the same and whether or not it is being employed and scrutinized well can be an objective measure which does not need CAG’s seal of approval as the same is already scrutinized at various statutory level, it’s an effort to bring in all together and enable all together in order to maintain sustainable society. A simple Pros vs Cons analysis may not a true representation just like a judgmental remark to prove one’s role and contribution. The real impact is much deeper and one need to see the bigger picture (macro aspect) so it does not matter which arm of nation is working towards sustainable and progressive efforts to keep it’s the attitude in which the same is being achieved and does it stays or continues or be merely a marketing gimmick / statutory obligation with no long term benefit for an economy/nation.

Working with a PSU for last 7 years, I felt related to this blog. Whenever comparing PSU’s with private sector, people divide it as black & white, but I think it’s more than that. Some of the additional statistics regarding PSUs are: CPSEs accounts for more than 22% of our G.D.P. CPSEs are paying 20% of total taxes (Direct & Indirect). Currently CPSEs are in majorly capital intensive & basic infrastructure businesses like energy, mining & natural resources. For any government seeking the welfare of its citizens, having control over these basic infrastructural facilities is of utmost importance. Keeping the same view in mind, nationalization drive was started during 1970-1980, under which oil companies & banks were nationalized. But after 1991 liberalization of economy Indian industrial sector saw the boom of private sector and naturally started comparing the public sector with private sector. Thus once the heroes of Indian industrial sectors started seeming to be villains. I will agree that some of the PSUs have performed very poorly & needs reforms or restructuring for better performance. But we cannot do the injustice by evaluating the high performing CPSEs like IOCL, BPCL, and ONGC on the same lines of loss making CPSEs. As an Insider in one of these CPSEs I can definitely say that we are changing & changing very fast. Since my joining at BPCL seven years ago, I have seen four new plants coming up at BPCL Mumbai Refinery within six years and getting commissioned successfully. Our management practices are also getting recognized across the industry. At CPSEs we are striving hard to perform within the constraints. In addition to this we cannot ignore the contribution of CPSEs in nation building. Presence of CPSEs gives government the leverage to intervene in the economy for desired socio-economical changes. CPSEs are the one who tries to maintain the regional balance of development by investing into underdeveloped regions. So we can say that, reforms are certainly needed in Indian CPSEs giving more autonomy to the businesses, but privatization is not an option

Since India's independence, PSUs have contributed significantly towards the growth of the Indian economy. As former RBI Governor Dr. Bimal Jalan writes in his book ‘India's Economic Policy: Preparing for the Twenty-First Century’, “In line with our socialistic traditions, a commitment to the expansion of the public sector was being viewed as synonymous with a commitment to the welfare of the poor...As a means of distancing itself from the colonial powers, these views had some merit at the time of independence in 1947. Today, these are not only arcane but also damaging to the national interest”. PSUs in India were established with an objective of building enabling infrastructure (e.g. power, railways), mobilising capital for capital intensive industries (e.g. power, iron & steel, mining), provide public goods (e.g. national defense), providing public services at lower cost and encourage development. Post liberalization of the economy in 1991, the lack of market competitiveness and efficiency of PSUs compared to private sector has been exposed. As per CAG report for year ended March 2015, 205 of the 365 Central Government Public Sector Enterprises (CPSEs) covered by the report, earned profit during 2014-15. The total profit earned by 205 government companies and corporations was Rs. 1,37,338 crore of which, 66 per cent (Rs. 90,901 crore) was contributed by 48 government companies and corporations under three sectors viz., Petroleum, Coal & Lignite and Power. Eight CPSEs contributed 51 per cent (Rs. 69,406 crore) of the total profit earned by 205 CPSEs. 135 CPSEs suffered losses during the year 2014-15. The loss incurred by these CPSEs increased significantly to Rs. 30,341 crore in 2014-15 from Rs. 22,783 crore during 2013-14. These figures show the glaring inefficiencies by many of the PSUs and justify the exit from some of the PSU by GoI. Hence, in my opinion PSUs should remain in key sectors only e.g. Strategic Sectors like Defence, Petroleum, Power etc. where the motive is not profit maximization alone.

I fully support the argument presented by Rattanani sir. PSU’s have played a stellar role in country initial development after the independence. It was later on that due to political interference, PSU’s bosses were forced to take wrong decisions. This article will dwell on various social issues like women empowerment, social equity and other areas where PSU have contributed a lot. The PSU of today are not as that of 80’s and 90’s era but are fast emerging as better managed and more efficient. There are 4.5% women in all PSU together as per government survey done in the year 2011. And, majority of them are from non-English speaking women from small towns and villages. PSU provides suitable nature of work, including reasonably good annual income with job security and convenient working hours, besides healthy work environment. Women executives are also fast breaking the corporate glass ceiling and reaching the corner offices. In fact, currently, five large banks are being headed by women. Second, the scale in which PSU’s work and the impact it makes on the life of common man is incomparable. A steel plant somewhere in the deep hinterland of Jharkhand can propel the economy of whole district. Moreover, we see large consultants from McKinsey, KPMG etc working with these PSU to guide them in improving efficiencies and performance. On another hand, private sector companies are capitalist whose main motive is to generate profits. They don’t care about country’s resources or even about their own surrounding environment. If we check pollution levels of any large industrial city ( Ankleshwar, Faridabad, Kanpur etc), they are very high majorly because of non-compliance of rules by private companies. Large corporate like Reliance, Adani have taken lakhs of crore rupees as loan and are not paying back. Their profit is ultimately is being derived from taxpayer’s money. In financial reporting frauds and corruption indexes also, private sector companies are not far behind. A large IT corporate called Satyam computer has befooled public by fudging the financial figures. Arup Roy Choudhury, NTPC chairman has rightly propagated the need of CAG auditing of financial data of private companies also. Even in a developed country like USA, there is a huge debate of large private corporate creating environmental pollutions, violating human rights by ignoring the poor working conditions in their outsourced partner’s factories and evading taxes by using tax haven countries.

Great insights and a wonderfully crafted blog Sir!! Public Sector companies surely hold a major importance in country’s overall development especially when these companies account for no less than 1 lakh crore in net profit. While the article touches the subject of woman employment, corporate social responsibility of companies and how public sector companies have been able to achieve it more successfully than private companies, unfortunately it fails to display the dark side of the public sector companies. Retention of women employees may be more in public sector companies, but the reason behind the same is still unknown. Career development in public sector is a major issue which most of the individuals face. The question is why the PSU’s or CPSE’s still follow career acceleration on grounds of seniority and not performance. Secondly while the profitability number of 1 lakh may look fascinating, there is hard truth about Public Sector debt as well. One of the example I would like to cite is that of MTNL & BSNL. With an extraordinary set up infrastructure, both the companies could have been leading the telecom industry by miles, but unfortunately due to corruption, laid back attitude of employees, unclear vision etc. these companies are reeling under heavy loses. Giving value to the society can be achieved by various means and not only through CSR activities as mentioned in the article. High wages, good opportunities, state of the art technology are also to be considered as parameters when it comes to giving back to the society, and private companies have been able to do that significantly better than public sector. Also I fell every company’s existence is primarily on the grounds of revenue generation irrespective of whichever sector it is, so if public sector companies are projecting their primary focus to be betterment of society by incurring loses, then there is a fundamental flaw in business strategy of these companies. So while public sector companies have been a fire power to Indian society, there is lot more to be done and a huge scope of improvement for the PSU’s and CPSE’s.

Thank you sir for sharing your thoughts on Public Sector Undertakings (PSUs). I agree with the fact that there are pocket of efficiencies in PSUs and some obvious lessons can be learned, but real question according to me is, how PSUs in a particular sector performed when it was opened up to private players and once private players achieved critical mass. Largely PSUs have done well in monopolistic situations. BSNL and MTNL in telecom sector is an example of how they are losing market share with every passing day after the sector was opened up. Air India also presents same sorry picture. Banks are another case in the point which are saddled with massive nonperforming assets worth 6.97 lakh crores and vast majority of this is with PSU banks and there is still lot of pain left in the system and PSU banks having lion’s share of this mess. Ultimately its taxpayer’s money which will go into drain. I started my career with a PSU and worked there for 2 years before moving on to private sector. I had witnessed firsthand, fundamental inefficiency of the PSUs in terms of establishing meritocratic system, timely decision making and completing projects in a cost effective and timely manner. With this backdrop I am firm believer in the principle that the government has no business to be in business. In fact, I believe that PSUs has done more harm than good to the country’s economy. Imagine what would have happened to telecom sector if only BSNL and MTNL was operating or take example of aviation sector where if only Air India was operating, the aviation sector would never have grown to this extent. Another critical issue with the functioning of PSUs is that by their very nature, they have become power plays for political establishment and one of the main sources of corruption and favoritism done by political class. So I believe it’s high time that government come out of business of PSUs in a systematic manner except for few strategic sectors which are vital for country’s security and let entrepreneurship of people flourish.

Prof Jagdish has brilliantly brought out some of the dimension of CPSEs to reveal its importance. At the same time the author has clearly mentioned that the arguments are not meant to be apology for the public sector. After working in a newly formed PSU for almost 4 years, I got a picture about the PSU culture in India. PSUs are generally mandated to do commercial business and at the same time providing the service to the general public at large. After liberalization, PSUs have been facing severe competition from private players. Except few cash rich PSUs who had already established well during their monopoly in the market, others are not at par with private sector in terms of performance and efficiency. In turn some of them have become loss making /sick PSUs over the time. One of the reason for inefficiency can also be attributed to the constant interference by politicians and the bureaucracy in company affairs. Accountability and audits are most important factor in any PSU and at times, these also pose a challenge or create significant delays in taking business decisions. GoI has categorized the high performing PSUs as Maharatna, Navaratna and Miniratna to motivate them perform better. Apart from these, there are also reviews by Standing committee and MoUs with respective Ministries to measure performance of the PSUs. All profit making PSUs help in adding significant amount to Government exchequer in form of dividend. Last but not the least, it is a PSU which has reached to the last mile either to open a bank account for unbanked, or to install transmission tower on the hills to provide electricity or to rescue the people from abroad during crisis. Though PSUs are inefficient compared to their private counterpart, their contribution to the development of the country are also significant. Companies like NTPC, SBI etc. have proved over the time that PSUs can also be the market leaders.

Sir, this is a really interesting topic that you have placed here. I believe that there is always an opportunity to learn from one and all. We must not restrict ourselves from gaining some sort of knowledge from avenues that might seem repelling or unattractive. Even as individuals we often learn valuable lessons in life from the most unexpected persons/scenarios. Coming back to the idea of private companies learning a thing or two from the public sector, I believe there is certainly some scope there. Some public sector companies are doing reasonably well and hence we can safely assume that there would be some practices being followed by these companies that is enabling them to do so. The following points come to my mind when I think of this: 1. Public sector companies are generally characterized by their huge size, both in terms of number of employees working with them as well as the geographical expanse. Many private sector companies face difficulty in managing their daily operations as they grow beyond a certain limit. Manpower management, resource allocation, managing hierarchical order are some of the common issue. They can definitely learn of how to tackle these issues from the Public sector companies. 2. The other point is the one which you have highlighted in your blog regarding handling the women employees. They have some great rules and practices in place that have enabled them to keep a decent number of women employees in their rolls. This is even more remarkable considering that fact that most PSUs operate in semi-urban parts of the country. Then again, I will encourage the private companies to do prior analysis before adopting any practices of PSUs as PSUs generally enjoy a lot of benefits that enable them to successfully implement these practices.

Thanks to our beloved Prof Rattatani for this insightful article over the age-old debate of public-vs-private. We, being B-School students, often seek out for the glamorous corporate life. Hence, we get prejudiced towards the private sector without considering the finer aspects of PSUs. Rather than going to into argument of which one is good or which one is bad, this blog tries to find out the positive business lessons and values that we can learn from PSUs. I worked in a profit-making PSU bank for some time and so might be able to give some inputs regarding this. If we look at the top PSUs such as ONGC, Coal India, SBI, NTPC, MTNL etc, we find all of them to be profitable. Their business models are already rugged, tested and also evolving. In the technology adoption life cycle, they do not try to be the early adopters for the sake of sustainability. Also, the low return or low efficiency is mainly for their inclination to follow thorough regulations and paper works as the public money is at stake. Failures of some PSUs can not be generalized as failure of public sector. Even corporate giants like Kingfisher, Lehman Brothers, Dunlop Tyres etc has seen failures, companies like Enron and Satyam were victim of frauds. The strength of the PSUs lies in the trust of the people, which they have earned through service and ethos. Beyond the pinstriped ties and shiny boots, the PSUs have worked towards the core value propositions of the society while striving for business and growth at the same time. This trust of people is evident from the KEM hospital example cited by the author. As rightly pointed out by the Professor, there is no doubt that PSUs need a lot of attention from experts. But at the same time, as management students, we have many rich lessons to pick up from the PSUs.

The article talks about positives of public sector as a whole. Many times people complain about lack of professionalism and efficiency in public sector and advocate its abolishment. But, it was the public sector which has striven hard to ensure uniform growth of the country after independence. Our planning commissions have wisely used public sector to keep the country running in the sectors where private sector is not remotely interested due to lack of profit. In sectors such as Transport, Health care major section of population still relies upon public sector. The uniform growth and ample job opportunities in remote areas is ensured only by public sectors. If given free hand public sectors are fiercely competitive in the market driven economy also which is exemplified by NTPC, ISRO. Sections of society complains about somewhat wasting of public money on public sector but we should remember that private sector has also thrived on the cheap land, electricity, labor, finance provided by government only. In the time for crisis industry is dependent only upon government stimulus which is evident from recent example of bad debts of Public sector banks. The other major benefit of public sector is giving humanitarian face to the development. In the PSUs uniform participation from all the sectors of society is ensured which helps to percolate the development through all stratas of society. As a result of this holistic approach Public sector is topping the charts in parameters such as employee satisfaction, retention and also gender diversification. For the setup of the new companies, Public sector companies are welcomed by society due to their humanitarian face, whereas private companies are treated as alien companies due to their stress on profit maximization. So we can say that though public sector has some negatives it is required to ensure upliftment of all sections of the society.

Appreciation for writing such an insightful article. The article talks about what is the central purpose of business. The comparison of public and private companies clearly shows that purpose of the business is beyond achieving mere numbers, bottom line or topline. On the one hand, though one third of them are unprofitable given the environment they operate, CPSEs are touching the heart of the people, they are improving life of people in real. On the other hand, private companies are all about numbers. Most of them has already forgotten the real purpose of the business. Part of this can be attributed to MBA institutes where most of the concepts are taught for improving topline and bottom line. Most of the students don’t get the chance to learn about the CPSEs which are doing reasonably well because they are taught through examples of private companies. I entirely agree with article. Success of ISRO defies all the preconceived notion about govt. company and a great example for all. Although a govt. company, ISRO through its successful projects has proven that when the purpose is rightly set for the business, Sky is the limit. What business knowledge area cannot be learned from ISRO. Whole world is stunned that how such success can be achieved through a company of so called developing nation.

It cannot be denied that Public sectors are doing a better job in retaining women employees as compared to private sectors. Major reasons being caring attitude of the managers towards female employees, “paid maternity and Child care leaves” or unlimited medical benefits for self and dependents. I have experience of about seven and half years with NTPC Limited, and I sometimes feel sad that B -schools have formed their opinion that PSUs have the culture of “2 Punch and 1 Lunch”, without knowing the story of other side. I agree to that people have had bad experience dealing with Govt officers, but it is important to mention that each process which runs in the background has to pass through multiple stages and approvals. Further the decisions also have to be taken within certain guidelines. Further PSU s have been involved in CSR activities without anything in return. Since inception of NTPC, it has been involved in well documented CSR activities, which includes education to needy children, skill development & training programs for women, free health camps & check-up, construction of connecting roads in villages, provision of safe drinking water etc. Even when it was not mandatory to spend around 2% profits towards CSR activities as per DPE guidelines, Public sector organizations have always been on front foot to resolve social issues comprising of energy, power, education, health, national emergency etc, as compared to private sectors. Lastly, PSUs have been improvising its laid-back system/attitude by aligning themselves with emerging trends such as implementation of E Procurement portal for more transparent & competitive bidding, Central warehousing and procurement to reduce over cost & lead time, more transparent policies for employees, reduction in overheads, reducing cost of raw materials by adopting latest technologies and hence preparing for sustainable business.

Dear Sir, A big thanks to you, your insights on the public sector brought in a sense of pride in me. I have been serving in a public sector company for the last 15 years and I could fully relate to your views on the subject. Your article is highly significant at this time when the government is planning for disinvestment and mergers. How could these changes impact the PSU performance is yet be seen. We can notice that each of the PSUs work differently and the work culture in each of these companies is different from each other. According to me, the major differentiator in each company is - how the birth of each company has happened & what has been the core vision of each company. Some of them have been after nationalization and some of them have been a public sector from inception. Many PSUs still carry forward the same work culture before nationalization and many mix it with the so called ‘SARKARI’ culture. What that matters is the performance and that too in a market where they face private players also. If you take the Kerala example, most of the state PSUs have failed in making profits and this was not entirely because of the labour issues. But in other states like Gujarat, State PSUs have worked very well. How they are different from each other is a big question? In Kerala, may be the Government went too far, even manufacturing of televisions. Even though, this move was criticized, KELTRON TVs were far superior to other TV sets at that point of time. Opening up of sectors to private players need to be done in a cautious manner. Take the example of private players entering oil retail marketing -when Reliance and Essar came into the market, they garnered the market share of PSUs in a short period of time. As the efficiency level of these players are very high, the PSUs had to change their marketing styles. But it is to be noted here that both are not apples to be compared with each other. While the PSU operates a refinery giving employment opportunities to many, the private players operates using a few hundred people. While the PSUs need to face the CVC and the CAG audits, private players get away with shortcuts. It does not happen that in the haste of improving the services, the public sector companies becomes sick due to competition with private players. Another thing to be noted that the Public Sector operates in a very different governance level, which sometime makes them not friendly with the market. But here the ethics and the guidelines rules above all the other factors. There is an inherent fear of taking decisions in these companies and if this fear factor continues, it may lead to the failure of public sector companies.

It is true that the Public Sector is significantly neglected by modern day management institutes when it comes to imbibing lessons from industry. It is well illustrated by this fact pointed out in the article – most cases, lectures, examples and stories discussed on campus are indeed primarily from the private sector, as we have all seen in the course of our management education. Even faculties who bring in industry experience are mostly from the private sector. This surely leads to skew or even a bias when it comes to learning from industry in management institutes. The potential pitfalls of this are well quantified by the eye opening statistics shared in the article – the revenues brought in by public sector enterprises are massive, and the profitability is no less than most of the private sector enterprises. We simply cannot afford to neglect the learnings this sector has to offer. The article proposes a thought-provoking question: are the differences between the public and private sector so intrinsic that they can be traced back to a difference in philosophy itself? This difference in philosophy pertains to what these sectors view as the core purpose of business. There is a school of thought which propagates the view that private enterprise exists purely for the purpose of profit, whereas public sector enterprises are driven by the motivation to serve society and contribute to the greater good. This may well be true, but I would like to offer a differing view from the perspective of my experience with the Tata group. The Tata culture of giving back flows from the tradition of nation and community building sowed more than a century back by Jamsetji Tata, the Founder of the group. Tata companies are still involved in a wide variety of community development and environment preservation projects, even in a fast-changing business environment where old rules do not apply and higher competitiveness is taking hold. The CSR approach adopted by us envisages that the group evolves and executes strategies to support communities in partnership with governments, civil society and relevant stakeholders. And what is interesting is that while we are committed to improving the quality of life of the communities we serve, we do this by striving for leadership and global competitiveness in the business sectors in which we operate. This drives the companies towards making profits, which in turn generates the funds which enables them to give back to the communities, both through the individual CSR efforts of the companies, as well as the massive community development through the Tata Trusts. I feel this approach is an excellent example of how private sector profit making and a motivation to serve society can go hand in hand, and how a community building philosophy need not be a monopoly for the public sector. This makes me think there is indeed a lot to learn from the public sector, but these learnings may as well be found in private sector enterprises who strive to be exceptions to the rule.

The Government of India has provided its own equity to many Public Sector Undertaking for catering to sectors / industry having strategic & basic requirement with a larger view to provide inclusive growth opportunity to all sections of the society. PSU plays an important role in laying the foundation of modern India & have been a major growth engine for Indian Economy. I would like to first comment on Women empowerment in PSU’s. I feel PSU provides the best environment for the women entrepreneurs / professional to achieve their carrier aspiration by taking due care of their personal requirements. Getting the maternity leaves is something which is prevalent in private sector , however in PSU when the women lady resumes after fulfilling the family commitment , it provides them adequate opportunity to bounce back & start from where they left after the sabbaticals. The SBI chairperson has shown that they are at par if not better than their male counterparts in running the business successfully. One more aspect in Indian society is that the male counterpart place of posting derives his spouse to work . The Place does not comes as choice to the women & instead they have to look for cities where their husbands are working , many a times it has been seen women shuttling between the jobs due to their husband relocation. This is where PSU comes very handy for women staff & are very considerate in moving them to various places on their request . The staff does not have to compromise on carrier opportunity & excel in their next place of posting. PSU are also creating job opportunities & contributing significantly to the GDP . The role played by PSU in Corporate social responsibility is commendable. Though some of the PSU’s are not profit making . One has to see that though they are commercial organization but carries the burden of meeting the expectation & schemes of the federal government. Can you imagine a private sector player selling LPG cylinder lower than its cost price when the Crude Price were hoovering at $100 mark or for that matter which private bank will go & open a branch in rural part which is not even a taluka centre of the district. So for me there are many success stories for PSU lying beneath which never comes to public foray & it is only the darker side which is presented in the media. My compliments to the author for bringing out a topic which does attract much eye balls.

Professor Jagdish Rattanani has beautifully unstated the role played by the public sector in retaining women managers compared to the private sector in a very eloquent way. It was nicely explicated how easily people in B-Schools underestimate the brighter side of public enterprises and overestimate the supposed performance and efficiencies of the private sector. I would just like to add few lines of a very recent incident. It was drizzling on 4th November in the year 2015, when Mr Baruah was travelling in his vehicle through the narrow, potholed and slippery road of Gandhigaon village. Despite struggling, the driver politely acquainted, “Sir, it is not safe to drive any further as the vehicle may plunge into the ditch.” Mr Baruah got out of the car and continued on his foot through potholed lanes. The villagers were beguiled to receive him and express gratitude that at least someone from Govt. has come to listen to their tale of woe. Though the village, Gandhigaon, was named on the father of the nation, ‘Gandhiji' in around 1970, it was never visited by any Govt. official, has no electricity, no drinking water facility, no road connectivity and no medical facility. The village was situated near Khumtai in Golaghat district of Assam and was inhabited by people below poverty line. As part of CSR activities, Numaligarh Refinery Limited has worked extensively to turn the backward village into a smart model one. NRL has constructed roads for the basic needs, set up a Reverse Osmosis (RO) plant for drinking water, constructed 77 toilets solving problems of the women and reducing sanitation-related illness, installed Solar Electrification System in the homes of villagers and two solar Street Lighting Systems at strategic location in the village. The performance of public sectors enterprises like the private sector enterprises are generally judged on the profitability criterion. There were 320 Central Public Sector Enterprises in 2015-16, out of which 244 were in operation. Rest 76 of the CPSEs were under construction. Overall net profit of all 244 CPSEs during 2015-16 stood at Rs 1,15,767 crore compared to Rs 1,02,866 crore during 2014-15 showing a growth in overall profit of 12.54%. With changes in business environment and government regulations, many public sector companies have become increasingly competitive, always stressed on optimization, taken up many innovative processes and upgraded its technology from time to time for improving its technical efficiency, logistics and dynamic efficiency in order to compete with Private Sectors and survive in the business market. In addition to these, public enterprises have made significant contributions to increase in investment or gross domestic capital formation (GDCF) and for achieving broad-based industrial growth. The Indian Oil Corporation Limited, in collaboration in the Archaeological Survey of India (ASI) and the National Culture Fund of the Ministry of Culture, Government of India has created a non-profit trust, the Indian Oil Foundation with the objective of protecting, preserving and promoting this glorious past. Monuments were identified in the first phase in Delhi, Orissa, Madhya Pradesh, Maharashtra, Karnataka, and Andhra Pradesh. Indian Oil, through NCF and ASI, will fund archaeological works while IOF will develop world-class facilities and conveniences for the visitors. There have been numerous contributions of Public Sectors in uplifting our society and preserving its values along with conservation of flora and fauna of the country performing under stringent government regulations. Many Public Sectors have started taking up extensive tree plantations, exploring and commercializing various options in alternative fuels such as ethanol-blended petrol, biodiesel, and Hydrogen and Hydrogen-CNG mixture as part of environment-protection initiatives. Apart from above many Public Sector companies have been continuously working on empowerment of women, help victims of natural calamities, contributing to relief and rehabilitation measures in cash and kind. As we keep on comparing the industrial sectors there will be lot many things coming up and opening new dimensions to re-visit our thinking about growth, profitability, learning and contributions to society and mankind.

As once referred to “Temples of Modern India” by Pandit Jawaharlal Nehru way back in 1954, the Public Sector Enterprises (PSE’s) have undergone a complete changeover in terms of both objectives and policies. I completely agree to you Prof. Rattanani on the roles played by our PSE’s over a period of time and the way these PSE’s have evolved into fundamentally strong and sustainable entities in today’s competitive market. It has become a common notion in people’s mind that the staffs of PSE don’t work and are not bothered about the growth and performance in their respective sectors. To them I would like to quote the example of my company BPCL where on one side my colleagues go to Brazil for competing with various global companies to acquire oil fields while on other hand some of them travel to the most remote villages in the country to contribute in “Swacch Bharat Mission” for making public toilets. As pointed out by you regarding women managers’ retention in public sector, the reason what I feel is the conducive environment offered by the public sector companies which helps them to maintain proper work life balance. Even our honorable President Shri Pranab Mukherjee speaking at an award function at SCOPE (Standing Conference of Public Enterprises) acknowledged the various programs that are being organized for the growth and development of women employees in CPSEs including the special citation award for Outstanding Woman Manager in CPSEs. Post independence lot of PSE’s came into existence with the main objective of generating employment and ensuring availability of necessary goods to public. Later upon seeing the slow return on investments, the government pronounced that the core objective function of PSEs, which are engaged in commercial activities, is to ‘create shareholder value’ or in simple terms to ‘make money’, without taking recourse to unfair means. Yes it is true that even today a significant number of PSE’s are making losses but then a lot of PSE’s are performing excellent and competing with global private players. The best Indian company to make it to the 2016 Fortune 500 list is also a public sector company. In spite of this radical change in the objective of PSEs, they are often used as instruments to implement public policies. For example, the government, sometimes, prompt the investment and lending policies/decisions by public financial institutions, it often subtly guide the dividend policy to match its financial requirements, and it administers pricing of some petroleum products being marketed by PSEs on socio-economic considerations. The DPE (Department of Public Enterprises) has included CSR and sustainability in the parameters being used to evaluate the performance of PSEs. In the Memorandum of Understanding (MOU) it has assigned 5 per cent weight to CSR and 5 per cent weight to sustainable development initiatives. So I think the private sectors should work in tandem with these “Temples of Modern India” and accelerate the socio-economic growth.

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