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.


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<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.

First of all great article and Prof. Jagdish has rightly touched the point of Women’s Empowerment, which is still a debatable issue in India. No doubt, over the period of time our women’s has shown their importance in various field and their respective domain. Being a part of the PSU family (as my worked in one of them), I spent my schooling time in campus and did my study from Kendriya Vidyalaya only. Their system, approach, facilities to their employee and family is unmatched till time. PSU’s were the requirement of time when they formed, because government knew that private firms can’t fulfill nation’s overall requirement. Also, monopoly should not be there. Investments for development is required or areas which are backward in terms of development. PSU’s learning as an employee is also great, whether it’s a process, people management, cultural unity, medical facilities etc, all are very good and systematic. Yes, the pay package is low, as compared to private organization, but life balance is there. For women graduates, PSU’s always be the best option as they can enjoy life with their corporate learning. Respect they will get more than any other private organization. Less stressful life. Salary + perks can be plus only over the period of time, job stability / sense of job security is very high. From my own experience, I can say that PSU’s are way ahead in terms of providing job opportunities, especially for women’s. Overall development of employee and their family, equal growth opportunity over the period of time, higher / specific education support, leaves, organizing various events for employee are truly great in PSU’s. Only few private corporate house are there in India, who follow the same culture. Other’s need to learn. Thanks Pramod Kumar Mishra

I’m glad to have found a blog on this topic. I found it very intriguing when you started off with the question “why public sector does a better job of retaining women managers compared to the private sector”. I was hoping to get some insights about the question raised, on reading the blog. But the blog gives us a broader perspective of the difference in culture between a public and a private sector company rather than getting into specifics of questions like the above. I pushed myself to think a little deeper on why public sector are in fact better at retaining women employees, and these are some of the thoughts I could put together. The most prominent reason could be that the public sectors give more job security. They also come with several other benefits like extended maternity leave, more realistic targets and deadlines (unlike the private players), etc. Unlike private companies, where your promotion and a raise in pay solely depends on how much you are able to please your boss, the public sector gives women a more secure and stress-free environment. Since promotions and hike in pay comes with seniority and not solely based on performance, women are able to work at their own pace while also balancing their family life. Though I wouldn’t say that this is the best environment for a competent woman to grow, public sectors do give a lot of women the opportunity to take up jobs along with parenting. These are woman who probably would have chosen to stay back at home, had they not been given a job suiting to their needs. On an ending note, I would like to add that the public sector making extra efforts to accommodate women employees is an excellent way to overcome the social and institutional barriers that women have been facing historically.

There was a time when PSUs were merely a loss making entities which ate into tax payers money. But, in the twenty-first century, the way PSUs function has changed drastically, this can be due to the competition associated with private players entering the market or with the introduction of automation to the industry. PSUs are no more a place where employees come, have a cup of tea and go home, many enterprises have restructured the administrations and now are more or less on par with the private players in terms of productivity. Having worked for Inda's largest PSU Indian oil corporation for four years I can definitely say that IOCL is on par with the global competitors with high operating efficiencies and huge profits and revenues (revenue of 4.5 Lack crore for the year 16-17 and profit of over 30 thousand crores). As you mentioned, Sir, there is a lot to learn from the public sector be it, women empowerment, retaining employees, employee conveyance, social values and most importantly the immense responsibilities taken up by the companies. But yes as you also mentioned in the article there is still a lot where PSUs can improve, like the human resource policies where PSUs are still behind, improving working conditions for women, corruption and increasing transparency. All of these improvements can be achieved with efforts from the management of public enterprise and government. As you mentioned Sir, there is a need to understand how the public enterprises function in India and not just put the blame on the enterprise for not performing up to the mark, these understandings and studies can bring upon improvements both in private as well as public enterprises. The central Government also should be concentrating on this aspect and should try to get a good understanding of the public enterprises before blatantly going for dissolution of the enterprises. Because public enterprises are the ones which will have the back of government at the critical hour.

Sir, I would like to thank you for sharing such insightful information with young B-school students who are yet to choose their career in life. With most of the B-school students opting for lucrative private sector jobs, there is no doubt that private sector offers myriad opportunities in terms of professional growth, challenging job roles and attractive pay hikes. While the private sector plays a major role in strengthening the Indian economy, one cannot ignore the growth trajectory of public sector enterprises in recent times. Dating back to the time of independence, India has transformed from an agricultural led country to a strong industrial base with the establishment of basic and heavy industries which has led to the modernization of Indian economy. The major question raised in the article regarding the central aim of a business clearly draws a demarcation line between public and private enterprises. While most of these organizations aim for profit maximization and improved productivity, there is a stark difference in their core values and the way they function to meet the needs of its employees or customers. On a personal front, I can closely relate to this article, given my prior experience of working in UnitedHealth Group (a Fortune 500 company) and having seen the public-sector life due to my father’s association with Vizag Steel (a Navratna company) since last 35 years. Today, public sector jobs not only provide job-security and various allowances but have also introduced new areas of research and development for talented young minds. With improved Sixth Pay Commission salaries and selection of best minds across country through competitive examinations, PSUs have now become a platform for personal as well as professional growth for young graduates. The recent news regarding 20% of PGDM students from IIM Visakhapatnam taking up jobs with Andhra Pradesh government shows the changing preferences of business school graduates. Due to initiation of major rebuilding processes in industries, students now have more opportunities to implement and experiment with their ideas, experience the functioning and streamlining of government operations and contribute through social welfare practices of these companies. Further, adding to the point made in the article, facilities like job flexibility, women-friendly transfer policies and extended maternity period make the public enterprises an ‘ideal employer’ for today’s women in India. Companies such as IOCL, NTPC and PSU banks like SBI have not only made a mark for their respective organizations but have also laid a platform for the growth of other sectors and industries. Though public-sector enterprises generate more employment opportunities, reduce income gap and promote economic development, there is still a long way for this sector to attract young minds from taking up jobs with private investment banks, FMCGs, or top consultancy firms. I believe the major reasons for disinterest in public sector units is mainly because ineffective management, political interference and slow individual growth in these sectors. The rising issues of poor management-labour relations, ill-defined responsibilities and corruption can be resolved by collaborating with young graduates who can use their knowledge gained from cases, lectures and examples to make a quantifiable difference in the growth and development of PSUs in India. On an ending note, I feel we still need to explore more and utilize the opportunities provided by these strong pillars of growth of our country.

Thank you sir for walking us through a different perspective of PSUs. You have very rightly said that the lens through which we weigh the private and public sectors is biased- owing to the disproportionately larger data set of private vis-à-vis public sector. This makes me pause and think about the possible explanation of this behavior of our B-school grads-why don’t they want to join the public sector? Having worked with a public sector undertaking for close to 3 years, I would attempt to give my insights on this. One reason is regressive HR policies and promotion rules. The world is evolving at an ever increasing rate, and this coaxes any company to update their policies in tune with the current times. As it goes without mentioning, the public sector has miserably failed in this. The promotion rules still don’t feature sufficient performance related incentives. This has an averaging out effect- where a star performer and an average performer both get similar rewards, similar promotions. This decimates their motivation to work, especially in the young, energetic, hardworking lot who is ready to go that extra mile- a typical graduate from a premier B-school. All this promotes the “Chalta hai” attitude already plaguing the public sector. Compare this with the private sector where spikes in performance have commensurate returns. The fact that public sector are better at retaining women managers is interesting, and I cannot help myself delve deeper into it. At this juncture, I would like to throw some light on some caveats which might affect the way we analyze this situation. Owing to a stable career and heavy perks, the attrition rates in PSUs in general is way lower than the private sector. I hope that the study which concluded that women managers are better retained in the public sector considered the overall attrition rates also. We might wish to have a look at the difference between male and female attrition rates of the individual sectors to get a clearer picture. And let’s not forget that 15 of our PSUs, including some top performing ones, had failed to comply with SEBI’s norms of having at least one women director in their boards. On other end of the spectrum we have companies like SBI which is chaired by Arundhati Bhattacharya, a women. So while retention of women managers is better, one needs to look into the overall career trajectory offered to women by PSUs. What is the central purpose of business? I guess no management student can skimp through this statement without mulling over it! As mentioned in the post, it is very rightly said by Mr. Choudhury that PSUs tend to be more empathetic, and stand with people when the need arises. Earlier when diesel was regulated, it was only the public sector oil companies which were selling diesel in India, and the private players were comfortably exporting petroleum products out of India to maximize profits. In fact, a lot of PSUs were born because India had to achieve security in strategic areas like energy and power- and this cannot be left completely in the hands of the private sector.

I would like to thank Prof. Jagdish Rattanani for sharing his valuable insights on Public Sector Units. I have served in a PSU for almost 3 years and I could relate to his views. PSUs have played a very important role in India’s economic development. But over the time the image of PSUs has deteriorated radically from being temples of modern India to corrupt and inefficient enterprises. The voice to privatize PSUs got strong and a lot of people support it by arguing that why government let loss making PSUs operate. The recent situation of Air India serves as a perfect example. PSUs were created to generate employment and to provide services to every citizen without any discrimination and at an affordable price. Majority of PSUs have monopolistic powers in their respective sectors. If their motive was to make profits they could have made fortunes. Let us take an example of utilities, India is among those few countries that have access to cheapest electricity; it is because NTPC (a PSU) provide electricity at an affordable rate which is supported by cheap raw coal supply from Coal India Ltd. (another PSU). Another example of cellular network, you go to any remote location in our country you will find cell network because of BSNL (PSU) who have installed a cell tower in every corner of this country without thinking about profits. Another positive impact of PSUs is that they played an important role in the upliftment of backward sections of our society through reservation system, whereas private companies are not obligated to do this. If PSUs were to be privatized, the job opportunities would reduce for many who cannot compete in open competition due to various social and economic reasons. In my opinion government can reduce the inequalities of income and wealth through PSUs. While privatization improves the quality of service but their main focus is to earn profits be it cutting of jobs due to automation or probable jobs cuts due to artificial intelligence in the IT industry. In PSUs Workers/laborers interests are well protected through job security and there is no risk of exploitation. Everyone has a different opinion and point of view regarding privatization of PSUs. I agree that private organizations are fast decision makers, more efficient and less susceptible to corruption. But I am of the belief that some sectors like utilities, public transportation, basic education and basic health sectors should not be completely privatized; government should keep some form of control so that these companies cannot start charging higher prices which would make these services unaffordable for many. In my opinion private companies face a trade-off between profitability and service levels, many private companies have downsized to keep making profits. However PSUs work on a long term vision and thus are less likely to cut back to stem short term losses. Government could however disinvest from PSUs but maintaining 51% share or some other form of regularization is necessary to prevent the concentration of power in a few hands.

A very insightful and thought-provoking article sir. Thanks for sharing your views. I would like to mention few points on why we have been ignorant to the Public Sector. Over the years there has been a row of comments from all categories of people (corporate and non-corporate) over the downsides of working in Public Sector Units (PSU). It has been made to believe that PSUs are highly inefficient with old age “sarkari babu” working style. This has somehow given a distorted picture to the youngsters who ends up taking a low paying and a low-profile job at a private company over a PSU job offer. These allegations (which up-to certain extent are true) have kept the young talent running away from PSU jobs. Sometimes I wonder why people wants to leave a fixed hour PSU job with lots of perquisites and take up a hectic long day and low paying private jobs. Probably the notion is that though, private companies makes you work for long, it exposes you to more knowledge and learnings whereas PSUs on the other hand doesn’t provide you the exposure and the Private sector has been exploiting its employees a lot on this notion. Here when I mention about exposure, I would like to make a point that PSUs have most far reaching effects on the society giving maximum exposure. There was a time when well-known consulting and advisory firms were not taking up Government projects believing that they would bring inefficiency to the firm and deteriorate firm’s performance. However, things have changed today and firms are fighting hard to get government companies on their clientele. The PSUs now have undergone a huge transformation in terms of efficiency and accountability to compete with the private sector. Yet there is still an ongoing debate on whether corruption still prevails in Public sector companies? I haven’t had an experience of working in a PSU but just a few days back I was discussing the issue with bunch of friends at hostel, who have their family members working at PSUs, and I was surprised to how they reacted. They said that corruption, especially after the Modi Government taking over the reign in 2014, have reduced, and corruption is equally and probably even more prevalent in private sector. So ultimately it is the individual integrity that counts and not where they are working. I really appreciate the point on Corporate Social Responsibility activity and I believe the PSUs have been most compliant with the CSR provisions. The private sector companies have really not taken up CSR initiative as their moral responsibility and taken appropriate steps. There are few companies who does CSR but then it seems they do more of branding in name of CSR activities. As you rightly mentioned that it is time to revisit the question “what is the central purpose of business?”. The Public-Sector companies have been contributing well to the GDP and the society as a whole. These have been a great support at the times of deficits and have helped the government achieve its policy goals. Obviously, there is a lot of scope for improvement and in next 20 years Public Sectors Units would be amongst the most desired workplaces in India.

India is a mixed economy country; where there is co-existence of both the private and public sectors. Both the sectors have their own approach to success and play significant role in the Indian economy and its development. Before diving deep into the debate which sector is good and how, we need to understand finer aspects of both, such as its motto, culture, and other various dynamics. The motto and role of PSU in a country are significant noteworthy, as economist John Maynard Keynes said, the importance of public sector is not only to arrange the proper environment for the smooth functioning of the state and give proper financial help to the private sector to achieve a balanced economic growth. Some of the key mottos of PSUs are: 1. To increase job opportunities for reducing the problems of unemployment and poverty; 2. To accelerate the economic growth through industrialization and commercialization of agriculture. 3. To reduce regional imbalances and the problem of inequality in the distribution of income and wealth. However, key mottos of private sector are different, and are as follows, 1. Profit maximization 2. To increase capital formation within the country 3. To creates more job and employment opportunities, and ensure better work at higher pace. Once, economist Henry Stuart Hazlitt said, “The 'private sector' of the economy is, in fact, the voluntary sector; and the 'public sector' is, in fact, the coercive sector.” So, will it be fair to consider private as voluntary or PSUs as coercive? I guess ‘No.’ To understand more I evaluated my career in a private firm and my sister in public sector, which shows some interesting similarity and difference between both. The chances for personal growth and personnel development is more in the corporate/private sector, as one can get promotion on work was done, rather than on seniority basis. While overall development, humbleness, or right attitude towards fellow employees are more evident in PSUs. However social development initiatives are given priority by both sectors, for instance, social financing and CSR. But, it is commonly observed that most of the PSUs are loss making while most private companies are profit making. In India, private sector contributes 60% of Gross Domestic Product to the country. Now, going back to the issue of retention of women manager is more in PSUs compared to that of privates. I too feel and know, the percentage retention of women managers in PSUs are high, due to following reasons, 1. Government regulation in favour of women workers 2. Warmness among fellow employees 3. Equal payment, irrespective of gender classification. However, the private corporation is investing in research to increase women manager retention. “Corporations wield enormous power in society. In order to see lasting social change, leaders in the private sector must begin to think of their own business plans as plans for good as well as profit. That's not such a big leap,” said by Darren Walker, president of the Ford Foundation. Thus, the private sector should, formulate women centric regulation, increase bonding among employees, and develop a culture to encourage women to stay with the company.

Sir, I like the way you took a participant’s question in a meeting, to challenge the fundamental way in which we look at things. This act led to a refined observation giving readers a new way of looking at the public sector companies. This made me ponder over the difference in the roles public and private sector industries play in our society. Most management institutes, professionals and even leading magazines only talk about the financials of companies and NPA’s while comparing public and private sector companies. To understand the fundamental difference between these two types of entities one should go beyond “the narrow markers of quarterly numbers” and understand why these enterprises were setup in the very first place and what were their objectives. If not, we shall be closing our mind from picking up “deep lessons” from the ones doing well. Unlike private enterprises, public sectors companies are established not just to make profits but more importantly to meet some strategic objectives and needs of the of government (read people) and hence their performance should be gauged on these parameters not just profits and asset turnover. My thoughts resonate with Mr. Arup Roy Choudhury when he said “Our private sector is running on public money”. To put this into perspective, imagine if there wasn’t any government hospital treating poor laborers for free, how much extra expenses would a private company would have to pay to ensure a steady employee turnover rate and well being. Think of the increase in power, oil and telecom expenses, and hence the losses, for private companies if not for public sector companies operating despite incurring losses. Or think of all those public funded schools, colleges or skill training institutes which produce industry ready individuals for the private companies to readily hire reducing their training costs. I am not suggesting that public sector companies are good the way they are, obviously a lot needs to be improved, but the point is you shouldn’t compare apples with oranges as they they serve different functions and operate in completely different frameworks. If we look at the public enterprises, most of them were erected/ commissioned/ nationalized within the first two decades of our independence which is 50 years ago. Businesses started around them and cities developed. Public owned mega-factories such as these occupied large real-estate space, couldn’t be easily expanded and got outdated technology wise with time. So, no doubt, they have very low asset utilisation and are inefficient. Private players, most of them sprung up after 1991 economic independence, on the other hand, are the forerunners of technology, and have build advanced manufacturing facilities in remote low cost lands using tax benefits. And unlike public sector companies, they would aggressively scout for new opportunities and exit any loss making vertical at will. So PSUs must be studied for the learnings they have in store for us and acknowledged for the way they are operating in a completely different framework with different set of constraints and challenges.

It can be firmly established that India owes its industrial development to the Public Sector. The 235 odd PSU’s mentioned above were systematically set up by the Government over the course of first three decades after independence, to kick start the engines of industrial growth of a primarily agrarian economy. Their rise had been slow yet steady. But the government of the day was right in signing MoU’s with reluctant foreign technology partners to set up refineries, plants and factories, rather than signing purchase agreements to simply buy their products. The result has been adoption and indigenisation of several industrial and engineering practices. This has ultimately led to self-reliance and sustenance in important parameters of fields like energy, infrastructure development, transport and logistics, steel and power. Take the example of SAIL. Having worked in the Maharatna PSU myself, I have seen at close quarters the significance and enormity of the work handled by the workforce of such a company. Even after 60 years of having been set up, it is still the largest company in the crucial steel sector in India. One can say the same for several enterprises like ONGC, NTPC, Coal India, ISRO, DRDO, Indian Railways etc. Such organisations are behemoths of industrial sustenance in their spheres, and currently irreplaceable by any cluster of private entities. Some have gained immensely through association with visionaries like Sarabhai, Kalam and Sreedharan. Then there are PSU’s that have had their day, and now face stiff competition from private players in their sectors, like BSNL, Air India, SAIL etc. Though immense in their scope of work and market capitalisation, the private sector has caught on to these, and sooner than later we can see further government disinvestment in such companies. Then there are smaller PSU’s, the Miniratnas, State govt. enterprises, electricity discoms etc., some of which may operate with inefficiency and losses, but nevertheless perform necessary functions for local economy and society. Lastly, there are the perpetual loss makers, those that have far outlived their utility, and profitability, and are ripe for divestment and liquidation. One crucial point the blog makes is with regard to CSR work that PSU’s, especially large ones, undertake. The impact created by them is indeed immense for the social demographic that they cover. At Bhilai Steel Plant where I have worked, I have been part of CSR competitions. And the scope of work ranges from school education, mid-day meals, farmer welfare, health-centres, vocational training, women empowerment, cultural activities, to various others. The natural ability of PSU’s to possess a wider range of activities and deeper reach than their private counterparts makes them quite integral to lives of lakhs of people living in their spheres of influence. In my experience, two aspects that the public sector can learn greatly from the private one, are a more meritocratic work policy and frequent technology upgradation.

I fully Agree with the point of View that we can learn lot from the public sector enterprises. As my Father is retired from a public sector bank and i work for a private sector enterprise, I can very well understand both sides of the coin. I have seen when you talk about Public Sector Banks , The most toughest and dirtiest task which involves lots of manhours with zero earnings are done by them. Also due to too much political intervention the management can never take a decision based on complete merits. Again when we talk about Govt Hospitals, the daily huge turnaround of patients who belong to poorest families , is managed only by Govt Hospitals and Pvt hospitals leave these patients to their utter destiny. When we talk about Airlines, We should remember that whenever govt was required to do some evacuation operations like Kuwait and Nepal, Its this Airline which has helped masses. I think it does not matter which sector we choose, The private players serve to only selective class and that too according to its own parameters linked to only "Profit". However in their terms , the dirtiest and toughest job is done by Public Sector Enterprises.

I’m in widespread agreement with professor Rattanani’s learnings from public sector as they are the richest and wealthiest experts on compassion and giving it back to public. So rich that not only private sector but handful of nations can also learn. The so called “CSR” in private sector was just an eye wash few years ago when few multinational companies were doing it for the sake of media publicity and use of emotions on stock market. Since healthcare is one such subject which touches every life “you may want it on not” and I been associated with it, let me bring in one of the contrasts where one of the NGOs serving to the thalassemia children in India has minted money over the years in the name of CSR. Without disclosing the name of this NGO and people behind it, I can tell you with my own experience that they not only have misused the taxpayer’s money but also cheated several drug and consumable manufacture companies by reselling the subsidized supplies at a higher price in the same markets. Such a heinous crime of not showing any mercy towards small thalassemia children who might not live for long, these people had gone to the lowest levels of humanity and compassion. On the other hand, I happen to know a person who is a small scale civil and electrical contractor and works for Power Grid, one of the biggest public sector company in the business of power generation and distribution. I had an opportunity of helping him with one of the CSR project by participating at various meetings and completing this Power Grid project in 201-12. The scope was to build roads, drains and toilets to uplift the hygiene level in one of the village close to their Gurgaon offices. The General Manager had powers to approve the project without any long sanction times. Worth remembering here, these were the times when no one talked about “Swatch Bharat”. What a true depiction of social responsibility which was both thought thru and fulfilled with best of the moral values and no other private company can come closer by even planting trees in return of using the underground waters.

Dear Sir, Your article has enlightened us on the noble facets of CPSEs which have been in oblivion due to the negative image perceived by general public. Low attrition rate of women in public sector can be attributed to the better work life balance provided by public sector when compared to private sector. This is of prime importance to women employees as they have to play different roles in their lives daily. Job security and favorable job location remove the need or thought of company change. Shri. Arup Roy Choudhury’s (Ex. CMD of NTPC) observation that our private sector is running on public money is spot-on. Most of the private firms raise debt from PSU Banks, whose major source of funds is the savings of Public. Private sector has regulations and hence can afford to take high risks. This ability to take high risks has increased the exposure of the business and history has shown us time and again that high risk taking will always prepone the businesses doom’s day. Recently, we have seen in news that Private sector is the major contributor for the NPA, (the acronym for Non-Performing Assets) issue faced by the banks. When a business goes bust, the balance sheets of the PSU banks are stressed and government has to come up with a package to save the banks, which is again done using public money. So I completely agree with Shri Arup Roy Choudhury that even private sector should be open to audit by CAG as public money is at stake. Coming to the CSR activities, most of the public sector investments are made in remote locations so as to improve the infrastructure facilities in the locality. It may not be an overstatement to say that many of the towns in India came into existence because of the CPSE investments. Most of the CSR spends of public sector have long term direct and indirect impact on the society, which would be difficult to quantify during the expenditure stage. Finally, I would like to conclude that the CPSEs do have some interesting business stories to tell and offer valuable management lessons.

The very word PSU, for some, would Immediately, throw a picture of a Government behemoth doing some business most inefficiently, run in a bureaucratic style so typical of Government working and always incurring loses and banking on tax payers’ money for survival. You are reminded of some behemoths who are struggling for survival (Indian Airlines) or others who have closed down (HMT). While there is some truth in it, this is not the full picture. However, one is, generally, not reminded of many PSUs who have successfully transitioned and have established themselves in the existing economic environment successfully. While some of their successes can be attributed to their sheer size and volume of operations, many others have engineered their turn around, despite the bureaucratic frame work, by their efficiency, transformational leadership and willingness to succeed. The Maharatna and Navratna PSUs are jewels in the crown of Indian Industry Since independence, among all sectors which have helped the Country to be in the position the country is presently in, the PSU sector has been the most prominent. This sector has not only hugely contributed to the GDP growth and development, it has assured self-reliance to people of India. This sector has also laid the foundation stone for many other sectors to prosper. In fact the very premise of providing foundation to each of these dependent sectors has been the reason behind the sustenance and longevity of the PSUs. The PSUs have played a very vital role in providing employment to more than a million people, in every nook and corner of the country. Thus the PSUs have been largely responsible for developments in different parts of the country including the tier III towns, villages and remote areas. PSU organisations have been guided by the larger motive of working and providing service and not profit alone. Whenever the country has faced crisis, during wars, famines, natural disasters, man-made calamities and terrorist attacks to name a few, the PSUs have stood up shown solidarity in extending all possible support, beyond call of their normal duties, by improvising and ensuring continued support to the nation. The quantifiable numbers cannot, therefore, be the sole criteria for gauging the contribution of PSUs in Nation’s development. PSUs’ worth to Indian Economy needs to be comprehended from its contribution to society. Contribution to national security, self-reliance, employment generation, crisis handling and exports promotion by PSUs need to be fairly assessed to arrive at the prowess and invaluable contribution of the PSUs in Nation building.

Could we have ever imagined to discuss the subject sometime in the period immediately after the country’s independence and until the next 40-45 years! Yes, indeed but not with the same intensity and relevance that one finds now with the market today becoming one as global with capitalism structure is fast prevailing everywhere and anywhere. Didn’t our great leaders and visionaries of past curve out the idea of these public institutions when we as nation was struggling to find the necessary resources, skilled manpower, investment etc. when the process of economic growth, industrialisation, employment generation, resource utilisation, self-reliance, equitable regional growth, enhancement of skilled manpower, income parity, protecting consumer welfare etc.etc. were the need of the hour also at a time when the private players did not show interest in areas of longer gestation period, areas requiring heavy investment, areas of lower ROI etc.! Could we have afforded to dole out our future in the hands of the capitalist at that point in time when so much was at stake! Now that we did not and instead created these public institutions with socio-economic policy in mind, we achieved, if not in toto, what we had intended. Now, around 2/3 out of around 320 CPSUs are making profit with total investment of around Rs.11.7 to 12 lacks crore making profit around Rs.1.5 lacks crore/annum showing a growth in profit of around 10% albeit not being in a level playing field with the private counterparts. Are they not our assets with main objective to serve the society at large when we can encash them at the time of distress! Could we have afforded to think of allowing our economy to open to global community inviting global power house to invest without us being competent and self-resilient had these institutions not produced competent leaders, technocrats, managers, skilled labor force! But, the question is whether it is out of context to stick with these PSUs at a time of open global economy introspecting emotionally at what these PSUs had already offered us and what they have in store to offer! Shall be best answered when present efficiency is evaluated, introspect as to what if the government or red tapism would have done differently to them, what if they were provided the same level playing field as the private counterpart, what if the private players are to go the same policy requirement of PSUs. I completely endorse the quote of Prof. J. Rattanani as saying it is easy to build and operate at the cost of tax payer’s money when you need not to go through the rigor of CAG audit year after year without being answerable to the hon’ble parliament. The time is not ripe as yet for to toe the model of the American economy when our other corporate are yet to be as manured and philanthropist as they should be. The government should reiterate its commitment to a mixed economy like in many European countries assuring level playing field to public enterprises.

We shall not forget the post freedom era when India was in dire need of industrial revolution & big investment. Government took a giant step & set up a public sector undertakings (PSU) in all core sectors. We cannot leave it into the hands of few capitalists (who only looks at profit) at that time when nation interest & growth was on stake. The main reason was to accelerate economic & social growth, generate employment & be self-reliant. They set up big industry in interior/backward region of India & provide basic necessity for every Indian like roads, electricity generation, water conservation (Bijli, sadak, pani). PSU also set up school, colleges & hospital to provide education & health care facility not only to their employee but local residents also. Example given by you of BMC run hospitals to provide health care facility at affordable price & mass level is the testimony of PSU success. PSU helps in building infrastructure like road, port & railway network, oil & gas filed in India. In post liberation era of post nineties, where private sector role is to generate profit with optimum investment; PSU is torch bearer example of doing social service along with running business as most of them are profit making. They have very good human resources policy where everyone has given an opportunity to grow & express their thoughts, Labour union & officer union are example of this. So there is very little doubt about women role in PSU leaders. Some PSUs are not doing better but same is the case with private sector. PSUs are playing a pivotal role in nation building exercise.

Many a times we may have come across the statement “Government has no business to do business”. Naturally the role of Government is to be a facilitator enabling businesses to thrive. After independence the vision of the newly formed Indian Government was to develop the field of basic and key industries of strategic importance to the country. The aim was to develop the infrastructure of the country, make the country absorb technology and innovate, provide employment and achieve social objectives of the Government. Private sector funding was inadequate and hesitant to venture in high investment sectors due to risks involved. Hence was the birth of public sectors in India as instruments to bring socio economic development of the country. According to the first Prime Minister of the country Pandit Jawaharlal Nehru the public sectors were “the temples of modern India”. Since then Indian public sectors performed the role of backbone of Indian manufacturing sector, continuously contributing to the GDP of the country and providing employment opportunities. Due to the contributions of the public sector India is self-reliant in most of the fields of economic activity. These enterprises acted like catalyst of economic and social development in areas where development was absent. Private sector also developed under the shadow of these public sectors to ultimately become world class industries. As rightly stated by Sh. Arup Roy Choudhury ,ex-Chairman & Managing Director of NTPC that public sectors “have touched the people in the core of their hearts and stood by people in their hour of need” which have been evident in times of natural calamities ,external aggression and other vagaries of time. In recent times it has been observed that there has been a lot of negative publicity stating that public sectors are epitome of mismanagement and drain of public money. But facts do not support the statement. Out of 256 Public sectors enterprises, 174 made profit and 82 made losses. Total profit of these industries were Rs.1,52,647 crore for FY 2016-17 .There were also proceeds from disinvestment of these enterprises which Government could utilize for social welfare schemes. CSR activities are carried out by these enterprises in areas without any publicity which really helped the local populace to be part of the Indian growth story. It is because of these public sector enterprises Government could stabilize the economy in difficult times like historic high crude oil prices in 2008 which had the potential to derail the Indian economy .Public Sector can teach a lot about managing people as most of the industries are labour intensive. Working within a bureaucratic system and then produce the best of results is what the best of the managers can only do. Women employees gets the best of working environment. PSU employees although may get lesser paid than their private counterparts but get the quality and dignity of life. Although these enterprises have issues like poor policy and implementation, higher operating cost, over staff and under utilization of capacities but these can be solved with better management and necessary policy changes to remain relevant in present conditions. If resources of the country are left to be controlled by private sector, there is an underlying danger of it being leveraged for betterment of their profits. Public sector has silently and obediently carried out the role as nation builder and as perceived by the Government for the day for welfare of the country. This states the central purpose of the business of the public sector which in today’s times still has significance and proud to stand with the people of the country in their need .

Appreciate the facts brought to light in this blog on PSUs. India is large and diverse in terms of geography and demography, PSUs were set up with intent to keep the controls of the drivers of the economy in the hands of the government so that entire nation gets adequate resources as necessary. PSUs have strong foundation in terms of culture and value like it is mentioned in the blog, but it lacked delivery of performance and results at the desired pace. Bringing here example of telecom sector, today, it has reached the smallest of the village, which is only after the telecom sector opened up. Primary reason in my opinion, why PSUs didn’t stand out in the race in the past are; absence of autonomy at work & its conservative and defensive approach. Time has changed, the transformation has begun, PSUs have adopted culture of Horses for courses and is overwriting the purpose of its existence to “Result yielding corporations of state”. Results should not be measured as Profitability but in terms of comprehensive and inclusive outcome. To connect to this better, I would specifically bring forward two examples here, ‘Pahal’ this entered the Guinness world record after covering 12 Cr. Customers within 7 months from its implementation & ‘PMUY’, wherein 4 Cr. LPG connections has been released in 24 months and marching further. Non-Performing PSUs doesn’t have long life, but performing PSUs will stand out in the times ahead and shall definitely be strength and pride of nation.

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