Introduction of PSUs & National Growth
Central Public Sector Undertakings (PSUs) have laid a strong foundation for the industrial development of the country. The public sector is a commercial enterprise concerned with National development objectives along with making profits. They play a key role in nation-building activities plus provide leverage to the Government (their controlling shareholder) to intervene in the economy directly or indirectly to achieve socio-economic objectives and maximize the long-term goals. If PSUsgrow around new Smart Cities,it will lead to stimulated production and in turn increase employment opportunity.
Greenfield Smart Cities need to have planned growth. Having PSUs established alongside their commercial and management staff will give the PSUs the advantage of all the related infrastructure; connectivity, power, and water and with it land at extremely low rates. This can be utilized by them not only to set up the establishment but also plan growth over the next 30 years, adding units even as the land value appreciates. The same units can over a period help decongest other cities, consolidating their operation in new areas, and utilizing the land optimally for better gains.
Promoting PSUs in conjunction with New Smart Cities would be in tune with the concept of secured governance which compliments the present PPP developmental model by ensuring balanced participation of the private and public sector taking advantage of value and valuation of infrastructure thereby yielding higher returns. This valuation of infrastructure, which grows many folds needs to be shared by the society and by the Government to support infrastructure development, ensuring balanced growth. State Governments who are the implementing agencies for the Smart Cities should provide the PSUs with full support and large land banks for sustained growth which the PSUs should be allowed to utilize the valuation goes up. This will be a perpetual growth model for at least 30years for both the PSU and the City generating employment with it. It will also gradually decongest other cities which have grown around PSUs and are looking for more breathing space.
Smart Cities in India
Smart Cities have become part of the strategy for growth. The social process whereby cities grow, and societies become more urban in India is occurring at a breakneck pace. Its cities are expected to grow from 483 million people in 2020 to 607 million by 2030. The urban population in India is presently around 35% of the whole population. It provides more than 60% of India’s GDP. Its contribution will grow to almost 75% within the subsequent 15 years.
Typically, Government has been an initiator of infrastructure projects and has been implementing, operations, and maintenance of those projects which require largescale funding, long incubation, and high capital investment. Considering India’s size and requirements funding these to maintain Global standards requires enormous funds, which will always be short.
“Secured Governance” offers a strategy for the government to get all the infrastructure development with a negligible investment by the Government. It attempts to work towards a close-knit growth in all sectors of the economy, without the usual financial constraints that hamper ongoing efforts. It will help enable all that the common man needs to feel secure ─ a safe home and hearth with progress around him, which is what one expects from good governance. If investments for Smart city development could come from the Private sector with the government and its agencies acting as facilitators, it will have a spiraling effect on Indian Economy with well-defined regions being developed as Smart Cities linked with Industry which can be termed“Smart City HUBs” and multiple such HUBs connecting each other creating a Techno-Economic Corridor. The Mini HUBs and Nano HUBs will be spread over Semi-Urban and remote rural regions promoting Industrial development and adoption of modern amenities and technologies to generate additional employment in those areas with minimal rural-urban migration and this will pay a rich dividend to elite and rich investors. These Smart Cities should be complemented by the judicious development of Industrial units to form HUBs that will help the cities grow, generating employment and creating a demand for ancillaries, together making an echo system for more jobs and prosperity.
Overview of Public Sector Undertaking Enterprises
A state-owned enterprise in India is called a public sector undertaking – PSU or a public sector enterprise. In a PSU company, 51% or more of the shares are owned by the Central or State government. Central public sector enterprises are administered by the ministry of heavy industries and public enterprises.As of now, there are 10Maha-ratnas, 14Nav-ratnas, and 73 Mini-ratnas. There were 339 CPSEs (excluding insurance companies). Of these, 82 enterprises were yet to commence commercial operations. Remaining 257 were operating enterprises (including 179 scheduled CPSEs).
The total number of permanent employees employed in PSUswasaround 15.20 lakh(approx.) of which Managerial/Executives are 2.65 lakh(approx.). The total number of contract workers engaged by CPSE stood at around 3.39 lakh(approx.).
PSUs at a Glance
A macro view of performance of operating PSUs is as under;-
- Total paid up capital in 339 CPSEs as on 31.3.2018 stood at 2,49,988 crore as compared to INR. 2,32,161 crore as on 31.3. 2017 (331 CPSEs), showing a growth of 7.68%.
- Total Investment in all CPSEs stood at 13, 73, 412 crore as on 31.3.2018 compared to INR. 12, 45, 819 crore as on 31.3.2017, recording a growth of 10.24%.
- Capital Employed in all CPSEs stood at 23, 15, 707 crore as on 31.3.2018 compared to INR. 21, 66, 801 crore as on 31.3.2017 showing a growth of 6.87 %.
- Total gross revenue from operation of all CPSEs during 2017-18 stood at 21, 55,948 crore compared to INR. 19, 55,675 crore in the previous year showing a growth of 10.24 %.
- Total income of all CPSEs during 2017-18 stood at 20, 33,732 crore compared to INR. 18, 22,184 crore in 2016-17, showing a growth of 11.61%.
- Profit of Profit making CPSEs (184 CPSEs) stood at 1,59,635 crore during 2017-18 compared to INR. 1,52,978 crore in 2016-17 showing a growth in Profit by 4.35%.
- Loss of loss incurring CPSEs (i.e. 71 CPSEs) stood at 31,261 crore in 2017-18 compared to INR. 27,480 crore in 2016-17 showing increase in loss by 13.76%.
- Overall net profit of all 257 operating CPSEs during 2017-18 stood at 1,28,374 crore compared to INR. 1,25,498 crore during 2016-17 showing a growth in overall profit of 2.29%.
- Reserves & Surplus of CPSEs stood at 9,42,295 crore as on 31.03.2018 to INR. 9,20,981 crores as on 31.03.2017 showing an increase by 2.31%.
- Dividend declared/paid by CPSEs in the year 2017-18 stood at 76,578 crore against INR.78,121 crore in the year 2016-17 showing a decrease by 1.99%
- Contribution of CPSEs to Central Exchequer by way of excise duty, customs duty, GST, corporate tax, interest on Central Government loans, dividend & other duties and taxes stood at 3,50,052 crore in 2017-18 decreased from INR. 3,60,815 crore in 2016-17, showing a decrease of 2.98%.
- Foreign exchange earnings through exports of goods and services stood at 86,980 crores in 2017-18 against INR. 87,768 crores in 2016-17, showing decrease of 0.90%.
- Foreign exchange expenditure on imports and royalty, know-how, consultancy, interest and other expenditure stood at 4,96,581 crores in 2017-18 against INR. 4,38,996 crore in 2016-17 showing an increase of 13.12%.
- CSR Expenditure of CPSEs stood at 3442.42 crore in the year 2017-18 against INR. 3338.21 crore in 2016-17 showing an increase of 3.12%.
- Total Market Capitalization (M-Cap) of 52 CPSEs traded on stock exchanges of India is 15,22,041 crore as on 31.03.2018 as compared to INR. 15,18,920 crore as on 31.03.2017 showing an increase of 0.21%.
- Market Capitalization of CPSEs as per cent of BSE Market Capitalization decreased from 50% as on 31.3.2017 to 10.70% as on 31.3.2018.
Opportunities for PSUs Participation
As per various estimates investment requirements for urban infrastructure opportunity in India amounts to INR. 49.06 lakh crore (US$640 billion, 1US$=INR. 76.66) and the funding gap forinfrastructure in India will beINR. 7.667 lakh crore(US$100 billion) upto 2030.
The proposed methodology of combining PSU growth with the Smart Cities will enable the PSU to be established with minimum investment at locations where new infrastructure is beginning created. It will also helpsupport the Government in infrastructure development and its sustainability there by supporting the population with jobs and value-added services and adding overall value in the region.
The project implementation model will require synergy amongst different entities.Many ULBs in India do not have adequate financial resources andskills to provide infrastructure and service delivery. They areincreasingly seeking support from the private sector to closethe gap. Meanwhile, institutional investors hold substantialassets under management, for which they are seekingattractive investment opportunities. In such an environment, PSUs can accelerateinfrastructure development by using appropriate private sector’sskills in delivering infrastructure and services and leveragingfinancial resources. Their status as State owned PSUs and the preference in clearance for land and construction will make them attractive investments.
The World Economic Forum’s Global Survey on UrbanServices revealed that private- and PSUscollaboration is required in all areas of the urban valuechain, including in policy-making, planning, design,implementation, operation and maintenance, andmonitoring, as well as in the financing of urban developmentprojects. The survey identified the strategic collaboration as beingbetter positive result-oriented agencies to drive thetransformation, and respondents suggested greaterprivatesector participation in design, implementation, operation andmaintenance, and financing. The recently announced urbanrejuvenation programs present an opportunity for privatesector to contribute across various urban domains,more so in the physical infrastructure sector in cities.
Sector Infrastructure Investment Needs (in INR. lakh crores)The Strategic location of PSUs in New Smart Cities for National growth
The suggested scheme of extendingunits of cash rich PSUs to upcoming SMARTCITIESrequires these units to be offered land for immediate development and sufficient extra land for long term needs of expansion.This will immediately raise the valuation of the smart city project and with it,substantial local employmentopportunities will stand generated.It would lead to large-scale Entrepreneurship with localskill development to get trained employee;individuals will get an opportunitybased on his / her competence and capability and they will needto continuouslydeliver to survive in the job. Thus, the scheme will create sustainable,productive and accountable job opportunities leading to concrete andmeasurable productivity.
The suggested solution aims at plugging all the experienced ills of thecurrent interventions and at the same time reducing the pollution and trafficcongestion in Metros by restricting further influx of population, diverting this to the new centers of economy making the investments in smart cities viable and sustainable. This is achieved by using the idling cash surplus with the cash richprofitable PSUs as seed capital along with Private Investment. The other schemes of Govt. of India maycontinue as of now but can be dovetailed to meet the big picture.
The shifting of the purse string controllers i.e. the decision-makers (the CMD and the Board of Directors) of cash rich PSUs to new SMART CITY, will act as amagnet for that city, attracting their vendor partners to follow them for their own pure business reasons.Out of sight – out of business. Hence the vendor partners must be where the decision-makers are. This will help the new smart city to get seeded with a population that can generate demand for all the elements of a thriving city.
Consumption never grows to keep the stock on hand as a driving force but by sentiment.Thus, the investments by PSUs innew SMART CITIES will lead to growing demands for schools, hospitals, colleges, malls, clubs, retail chains, service outlets etc. Increased consumption will lead to increased production and in turn increased employment, setting a positive cycle.
The PSUs located here will also see close to 30% improvement in bottom-line due to reduced cost of operations; cheaper real estate; reduced rates of HRA, CCA , Medical bills; and improvement in productivity with more energetic and positively oriented employees with reduced time of travel and reduced exhaustion.A more motivated top management now consisting of only those who are really interested in professionally running the company rather than the ones who came onboard for the metro location and short term gains, will show better performance Employees too will see improved PerformanceRelated Pay / bonus / perks and privileges and motivating performance.
The increased employment opportunities nationally, reduced pollution and traffic congestion in Metros and improved quality of life with reduction in crimes with increased employment opportunities triggered by this initiative is expected to be a distinct political benefit to the Govt. of the day, implementing this initiative.
Selecting the places for shifting the PSU and its Management to co-locate with a Green Field Smart City:
The location proposed for shifting must have some synergy with the core business of that PSU; helps build the business funnel;aids the growth at the new location or its vertical expertise and so on.The action should result in a win-win game for all.Guidelines on this need to be issued by the Govt. to both the PSUs and the Smart City Managers.
.The fundamental objective of bringing sustainability to the investments new SMART CITIES will be achieved essential with the PSUs and the Managementshifting to the NEW SMARTCITY location. The vendor partner eco system of thesePSUs will shift to the new SMARTCITIES only when the purse string controllersof these PSUs shift to them. It is only after the new SMARTCITY has citizenswith buying capacity that the anticipated economic development will kick in, leading to the bigger objective of a Happy and Healthy India.
It is good fortune that in India we have a renewed interest and massive governmental support for developing Greenfield smart cities and upgrade of Brownfield smart cities. Several ministries like the Ministry of Urban Development, Ministry of Transportation, Telecommunications, Power, Education, Healthcare etc., have come to realize the potential of modern technology elements that will make smart cities a future prospect.
These would need massive funds which can come through the Doctrine of Secured Governance The presence of PSUswith the provision ofreserve land bank offered to them would ensure their long term sustenance even as their presence would enhance the valuation all round them. Periodic utilization of the land bank will ensure growth and higher value and with it their continued success.
The need of the hour is to make these siloed departments to start work together in sharing data that will make each other smart and in creating a coordinating cell across all ministries that will oversee this coordinated effort. Also, the need of the hour is to understand the value of linked information and finding patterns within these links to make our cities smart. Sustainable smartness is possible only when we create physical and logical links between things that were not previously linked. New telecommunications technologies, sensor technologies, and ubiquitous availability of internet mobile applications will transform the way we consume all the information from our ecosystem.
All CPSUs need to be investing in 249 smart city developments.This, in turn, will generate huge employment opportunities for the population of local catchment area.
These concepts are not limited to cities alone. They have the potential to reinvigorate rural economies and make them more habitable and economically viable. Apart from impacting the economy, this will bring in transparency in government and will also improve the velocity of businesses; improve the quality of life for ordinary citizens—even if they are not in the digital environment.The imperative of rapid scaling up of the infrastructure capacity – in the Government and private sector (developers, contractors, consultants, financial intermediaries and investors) – entails developing and implementing projects of the required scale and within the tight time frames envisaged.
Lastly, to implement an ambitious roadmap for this project, improved standards of secured governance and concerted action would be required to take these targets and goals from inspirational statements to actual development. We need a system to integrate economic interdependence in today’s modern societies which not only decreases uncertainty regarding where risks begin and end, but also help in judicious planning and development of new empowered, transparent and interdependent Governance systems with higher degree of society participation in nation building Process. Secured Governance is an ideal strategy which equips to create adequate and coordinated measures to ensure the provision of financial, human, technical, information and other capacity building resources.
The Policy Times brings another path breaking article on National growth in these troubled Covid 19 times with impeccable strategy of the successful Public Sector Undertakings (CPSUs) becoming Anchor companies in the Upcoming green field Smart Cities. The eminent Authors are Lt.Gen.(retd) Ravi Shankar PVSM, VSM a highly decorated officer with his last posting as Director General Border Roads Organisation with Dr.P.Sekhar, Chairman Global Smart City Panel who is advising a number of upcoming large initiatives who are using his over 80books as reference manual . The strategy for this is to use the Doctrine of Secured Governance for a Self Sustained planning and implementation of this National re building task.
By Lt Gen. (Retd.) Ravi Shankar, PVSM, VSM
President, Intercontinental Consultants and Technocrats PVT. LTD
By Dr. P. Sekhar
Chairman of Global Smart Cities Panel, Micro Tech Global Foundation