Bedtime tales

And they all lived happily ever after. In this version of everyone’s favourite bedtime story, the foolish/wicked government realises the error of its ways and gives state-owned enterprises (SOEs) managerial autonomy.

While the freedom to set up subsidiaries and joint ventures was at a cut-off limit of Rs 200 crore in Navratna-I, this has been hiked to Rs 1,000 crore in the second fairytale version.

Similar generosity has been shown in terms of the amount of net worth that can be invested without checking with Big Brother; the boards of state enterprises are now going to be empowered to delegate powers to sub-committees of the board on transfers, appointments and postings, and so on.

In other words, short of the vastly higher salaries that their private sector counterparts get, SOEs will not be found wanting in anything. While it would be unfair to dismiss the new autonomy package as just so much make-believe, it remains true that the famed navratna policy of the mid-90s hasn’t helped change the operating environment for SOEs one whit.

The problem comes when you compare stated policy with everyday practice. Talking of SOE autonomy sounds hypocritical when viewed against just what is being done to SOEs. Even if you leave aside the issue of not allowing government-owned oil companies to decide on the pricing of their own products, the ministry of petroleum has in the last one year refused to allow these very enterprises to take investment decisions on their own when it felt they were competing with one another.

In the case of Gail, the ministry even issued a Presidential Directive specifying that the company should buy a certain type of pipe for a proposed pipeline, though technical experts were of the opposite view.

The state-owned airlines, desperately short of aircraft, have seen their plans to buy more planes opened up all over again and subjected to yet another round of scrutiny when it is obvious that whatever costs savings can be make, if any, will be more than made up by the increased profits which will result from them being able to fly more.

The fact is that Indian Airlines has not been able to buy a single aircraft from the time private airlines were allowed to start flying on domestic routes more than a decade ago; the last IA acquisition was made in Rajiv Gandhi’s time, in the 1980s! And it is no use arguing that the airline has been leasing aircraft, because the fact is that constraints on appropriate capacity have cost both IA and Air-India valuable marketshare. Till date, the domestic carrier does not even have a regular chief executive since the selection process is incomplete.

This list can go on. What is noteworthy about the new autonomy package is that there is nothing that automatically ensures the government keeps a hands-off policy when it comes to SOEs. As of now, the critical levers, including all board-level appointments, remain with the administrative ministry. Until that changes, no matter what kind of autonomy packages are announced, they will make little difference.

In a tell-tale coincidence, the autonomy package came the same day that a newspaper carried a report on how the ministry of petroleum had turned down the ONGC chief’s request for permission to travel to New York for three days.