Public sector reforms

Presented by
Rayees Ahmad Ittoo
Outline
 Definition of public sector

 Scope of public sector

 Pressure on public sector

 Public sector reforms (different aspects)

 Suggestion of improvements
Public sector
Public sector in India includes all activities or
institutions funded out of the government’s
budget whether at centre or in state
Scope of public sector
 Government departments & government
companies both in central & state sector.
 Irrigation & power projects.
 Railways, post & telegraphs
 Banking, insurance, financial & other
services.
Growing pressure against public
sector
 Conflict between the financial & social objectives
 Problem of losses
 Lack of professionalism in management
 Time & cost overruns in new projects
 Underutilization of capacity
 Bureaucracy
 Lack of sensitivity to needs & problems of
consumers
Public sector reforms
 PSU refocusing- focus on priority areas.
“The policy, in its strategic refocus,
discourages PSU’s from entering areas with
small scale operations, low-technology base,
non-strategic, inefficient or unproductive
product lines, little social relevance or where
private enterprise was adequate & strong.”
 Contd..
 Focus only on reserved industry
atomic energy
defense industry
minerals industry .
Public sector reforms..
 Memorandum – of – understanding (MOU)
system of public enterprise management:
The system provides for an arm’s length
relationship between public sector
enterprises & their respective administrative
ministries.
Public sector reforms..
 Financial & operational autonomy:
Increasing the power of BOD so that the
enterprises could run more independently &
professionally to gain competitiveness in the
domestic & foreign market.
 Contd..
 In 1997, 11 PSUs as Navratnas and given
the power to run more independently .
 Two more new type of new ratnas were
created
miniratna -1
miniratna -2
Public sector reforms..
 Restructuring & revival of sick units:
Measures taken to revive the sick PSU’s to
improve their performance, productivity &
profitability.
 Under provision of Sick industrial companies
(special provision ) act ,1985 Bureau of
industrial and financial reconstruction (BIFR)
were reffered.
Public sector reforms..
 Privatization through disinvestment:
Privatization as an important tool of improving
efficiency & productivity of PSU’s
Public sector reforms..
Basic issues concerning disinvestment:
 Valuation of PSU’s
 Method of disinvestment
 The extent of disinvestment
 Utilization of disinvestment proceeds
 Issues concerning labor
Trends of disinvestment
Year Target amount to Actual amount
be realised (Cr) realised (Cr)
2000-01 10,000 1,871

2001-02 12,000 5,632

2002-03 12,000 3,342

2003-04 14,500 15,547

2004-05 4,000 2,765

18,000
16,000
14,000
12,000
10,000 Target amount to be realised (Cr)
8,000 Actual amount realised (Cr)

6,000
4,000
2,000
0
2000-01 2001-02 2002-03 2003-04 2004-05
Public sector reforms..
 Protection of PSU workers’ interest:
No retrenchment of employees can take
place at least for a period of one year after
privatization. After that also retrenchment is
possible only under Voluntary retirement
scheme (VRS).
Suggestions for improvement in
efficiency of PSU’s
 Signing memorandum of understanding
 To overcome problem of over-staffing
 Reorganization & mergers of PSU’s
 Improvement in marketing
 Improvement in technology
 Professional management
 Competitive environment
Thanks