Overview of COVID 19 & associated problems
India is now locked down and loaded in its fight against the coronavirus. In this serious situation there are good and effective roles for Central Public Sector Undertakings CPSUs. Even though they have a mandate to run on commercial sustenance they can play a great catalytic role to get the country back with proper care given to the public at large. Nationwide shutdown is an effort to break the chain of transmission.As the nation of 1.38 billion people shut down, India has a tremendous capacity to deal with the pandemic as it has experience of eradicating smallpox and polio. Clampdowns have been imposed much earlier than in many countries, including China, which failed to contain the spread of the virus. But the real test for India, curbing community transmission, has just begun.
The world is appreciating India’s bold stand in declaring a country wide lock down much ahead of the Corona numbers reaching devastating proportions. Once again the Hon. Prime Minister of India has shown real leadership and the countrymen are honoring and respecting hisdirections. The cost of this lockdown is HUGE and the slowdown is economy is going to be a challenge to deal with for long time to come.Government has to use CPSUs to route its various policies including the funds transferred to poor and needy. The only difference being these should be done by integration with some ongoing projects so the beneficiary is also given a job for long term sustenance.
Overview of CPSUs
Public sector occupied a worthy place for achieving systematic and planned development in a developing country like India. In a country like India suffering from multi-dimensional problems, private sector is not in a position to make necessary effort for the development of its various sectors simultaneously.
Thus, in order to provide the necessary support to the development strategy of the country, the public sector offers the necessary minimum push for bringing the economy to a path of self-sustained growth.Government of India has leveraged the public sector enterprises to achieve desiredsocio-economic objectives. Profits made by public enterprises are utilized towards financingthe economic development of the country. Thus the purpose for which an industry in publicsector is set up is primarily for the welfare of both the workers and the society. Hence, based on the critical role playedby these enterprises, time and again there is a need to understand the status of the publicsector enterprises in the country.Thus it is now well recognised that public sector plays a positive role in the industrial development of the country by laying down a sound foundation of industrial structure in the initial stage of its development.
Crucial objectives of public sectors in a mixed economy
- Transformation of the Economy.
- Redistribution of Income and Wealth.
- Source of Capital Formation.
- Development of Socio-Economic Infrastructure.
- Achievement of Balanced Regional Development.
- To help in the rapid economic growth and industrialisation of the country and create the necessary infrastructure for economic development;
- To earn return on investment and thus generate resources for development;
- To create employment opportunities;
- To assist in the development of small-scale and ancillary industries; and
- To promote import substitutions, save and earn foreign exchange for the economy
- Macro View of Performance of CPSEs (INR. in crore) 2018-19
Particulars Status No. of Operating CPSEs 249 Capital Employed(Rs. in Cr. 25,69,668 Total Gross Turnover (Rs. in Cr.) 25,43,370 Total Net Income/Revenue (Rs. in Cr.) 24,40,570 Net worth (Rs. in Cr.) 11,80,287
A Silver Lining
CPSUs have always been coming to the rescue of the country in all such situations. There are 57 profitable CPSUs of the 178 on date donated INR. 2,460 crores to the PM CARES fund from the unspent amounts from their FY 19-20 CSR budgets. The amount has crossed multiple times this figure after the CSR amounts of FY 20-21 and voluntary contributions from profitable CPSUs have been made to the PM CARES fund now.
The above stated problem of migration of crores of poor unemployed citizens from villages and small towns to Metros and Mini Metros in search of livelihood and their life of filth and squalor as spent in slums there, along with the associated problems of terrible traffic congestion in all Metros and mini Metros, unbearable and rising pollution levels there, affecting health, efficiency and productivity, can all be solved SUSTAINABLY, using the CPSU strength, by a simple focused decision.
Apart from the Defence and Offence mechanisms viz. physical, psychological, electronic, diplomatic, cyber security measures as developed by any country, so essential to safeguard a Nation’s integrity and existence, a Happy and Content population is equally crucial if not more, to not let chinks develop in the nation’s armour.
The implementation of dynamic systems.
India today has 350 plus CPSUs of which approximately 178 are consistently profitable. Most CPSUs have their Head Quarters in Metros and Mini Metros which are highly dispursed in their operations and can support all National programs throughout the country. The profitable CPSUs together hold a cash surplus of approximately Rs.3 lac Crores. Globalisation and India’s robust economic growth have opened up several latent business opportunities in key sectors. CPSUshave played an important role in the development of India in termsof the employment generation.
The government enterprises such as CPSUs in most of theeconomies and are credited with generating high rates of employmentand account for a major share of industrial production and exports. InIndia too, CPSUs play a pivotal role in the overall industrial economyof the country. With its agility and dynamism, the sector has shownadmirable innovativeness and adaptability to survive the recenteconomic downturn and recession. .
With source of employment close to catchment area, this will solve the problems of stretched infrastructure in Metros , reduce rising crime rates due to such under employed, frustrated youth in metros, reduce pollution , congestion and linked loss of productivity in Metros and move forward towards creation of a HAPPY & HEALTHY INDIA.
The CPSUs should be the eyes ears legs and arms for the government and they should interact with other private companies who should be ultimately be outsourced the work of such distribution coupled with high degree of positive long term employment which is the need of the hour
Proof of Concept using Smart Cities
- As Proof of Concept, CPSUs should be fully used in the upcoming Smart Cities as a Green field and ongoing Brown field where existing cities are upgraded. Typically, authorities have been the sole financier of infrastructure projects and have been liable for implementation, operations and maintenance of those projects as they need big scale funding, long incubation duration, and high introductory capital. Still, the authorities solely will no longer be capable of satisfying the rising funding requirements. “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 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. Much of the investments for infrastructure development will come from Private sector wherein government and its agencies will act as facilitators. This will have a spiraling effect on Global Economy with a defined regions being developed as “HUBs” and multiple 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 pay rich dividend to elite and rich investors.
Acting as a Devil’s advocate, every possible hole has been dug into this idea with all possible questions. Hereafter we enclosed to appreciate the logic and the necessity for a quick implementation of this idea to ensure a safe, secure, happy, healthy and vibrant India.
- Why is this idea being proposed in the first place when the concern of falling demand, unemployment and slowdown in consumption and GDP is being tackled with additional spending in MGNREGS, PMKISAN Yojana, Mudra Loan and a host of other similar schemes to boost liquidity in the hands of the masses?
Ans: MGNREGS completes 13 years in 2019. Had the scheme been delivering, the reported rural distress should have been absent and most of the rural infrastructure works should have been completed to perfection using the money as being spent on this scheme over all these years.
Mid Oct 2019 newspapers spoke of GoI having ended up spending 80% of allotment of Rs.60,000 Crores in MNREGS till date for current FY. The Rural Development Ministry is expected to demand additional INR. 60,000 Crores to meet the need of full FY, a total of INR. 120,000 Crores PM-KISAN has already disbursed the allotment and so have soft loan schemes.
A classic case, farming for even well to do land owners in UP has become unviable with non-availability of affordable labour due to masses getting used to being paid under MGNREGS for at least 100 days per annum without the expected output as would be called for in case of private employment . This being a dole, even the receiver is at the mercy of the grass root official and thus the cases of short payments / commissions / fudged records/ corruption are on the rise . The cost of administration and monitoring these programs is thus more than the actual impact.
Further , with vested interest groups getting into action with the quantum of funds under disposal and possible avenues for leakages, even the officials with best intentions finally give up to fall in line. In short, none of these schemes are able to generate or deliver the intended objectives.
Contrary to above, through the suggested scheme of shifting of cash rich CPSUs to one new SMARTCITY each, individual, accountable local employment opportunities will stand generated where the employee will get an opportunity based on his / her competence and capability and they need to continuously deliver to survive in his/her job. Thus the scheme will create sustainable, productive and accountable job opportunities leading to concrete and measurable productivity.
Further, the supplementary business opportunities will also trickle down to the catchment area to serve the demand of the stable salaried population coming to these new Smartcities.
This will also plug the unending influx of population to already over stretched Metros in search of jobs, stretching the already bursting infrastructure andcivic amenities to unmanageable levels and the unemployed and under employed entering the crime market, being pushed to the wall for survival.
- Why this proposal is being planned at the cost of the Cash Rich Profitable CPSUs which is expected to cause lot of dissatisfaction and heart burn amongst the shifted Management and employees of the affected CPSUs?
Ans : The shifting of the purse string controllers i.e. the decision makers (the CMD and the Board of Directors) of cash rich CPSUs to new SMARTCITY, will act as a magnet 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 have to be where the decision makers are. This will thus help the new SMARTCITY to get seeded with paying population that can generate sustainable demand for all essential elements of a thriving city. Each of this will generate additional business avenues and jobs.
- Will this not just lead to diversion of employment from Metros to the NEW SMARTCITIES keeping the net check sum unaltered?
Consumption never grows keeping the stock on hand as a driving force but by sentiment. If this was true, a person with a pair of 30 clothes, one for each day of the month, would never have bought the next pair. Instead the person who has 30 pairs is the one who has the intensity to buy more, driven by his raised aspirations to graduate to the next level when the economic environment is conducive. Thus the investments of the cash surplus with the profitable CPSUs in new SMARTCITIES where their decision makers are forced to move, will lead to replication of schools, hospitals, colleges, malls, clubs, retail chains, service outlets etc. as they now have paying population who can afford this. Increased consumption will lead to increased production and in turn increased employment.
- Will this shift not be a costly mistake politically as the shifted employees will resent and vote against the government?
Instead it may be a positive swinger. Recent survey shows, given the opportunity, 40% of the population in Delhi/NCR wants to move to a pollution free and congestion free city.
With close to 30% improvement in bottomline of the shifted companies with reduced cost of operations due to 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 and the top management now consisting of only those who are really interested in professionally running the company than the ones who came on board for the Metro location and short term gains , the employees Performance Related Pay / bonus / perks and privileges will see an assured rise.
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 serious political benefit to the Govt. of the day implementing this initiative.
- Will the CPSUs not get hit with delays in business approvals from their Ministries with relocation away from Delhi/ Metros?
Ans:With almost all profitable CPSUs now being led by a CMD than a MD before, most decision making powers rest with the CMD and the CPSU Board. Thus the day to day coming back to Ministry for decisions is not called for.Further with advent of e-Office, email, fax, whastapp, scanners, mobiles, video conferencing etc, decisions as needed from Ministry can stand steered by these means irrespective of the CPSU’s physical location.
- What is the underlying logic in suggesting the places for shifting the CMD and Board of CPSUs as recommended in the example in the note?
Ans: The location proposed for shifting must have some synergy with the core business of that CPSU so that the environment is conducive, helps build the business funnel , aids the growth of the shifted location or its vertical expertise and so on , so that the action results in a win-win game for all .
Keeping above objectives in mind,
CONCOR CMD and BOD can be shifted to a potent Port location as this will help uplift the port operations with improved container traffic with improved focus of management at the shifted Port location
IRFC, a pure Finance interest rate leveraging company is proposed to be shifted to one of the multiple new SMARTCITIES coming up on Hindu HrudaySamratBalasaheb Thackeray Maharashtra SamruddhiMahamarg. This will create a potential financial capital away from Mumbai and seed the smartcity with banks and construction companies.
- If this proposal is of so high a benefit to the CPSUs why should they not opt for this shift on their own? Why should this need a mandate from Govt.?
Ans:This being a sensitive subject CPSUs may not take lead and these have to be taken at the highest level and also take care of the inertia of being where they are. Most leadership being either on deputation or on verge of retirement may find it difficult as the general position would be in staying put where they have been last posted. For the country’s holistic development, the innovative decision with an integrated approach for pan India distributed development has to be enforced from top. This is on the same lines as the necessity of enforcement of GST. Though the simplified tax structure of GST is beneficial to all but the vested interests as well as inertia resisting change needed enforcing the scheme from top with the needed governance structure centralized. On exactly the same lines, for the bigger interests of the country as a whole, a mandate from Govt. needs to be issued for the CMD and Board of Directors of Cash Rich Profitable CPSUs to shift to one new SMARTCITY each as identified, to find the closest possible synergy to the shifted CPSU.
- What happens to the premises/ properties as vacated by these CPSUs in Metros / Delhi/NCR? Will that not be a financial loss to the shifted CPSUs?
Ans:A little deep dive will reveal that this action actually starts immediate saving of CAPEX and OPEX for the CPSU. In most cases, the premises vacated in Delhi/NCR/Metros will help relocate one of the local/ regional offices of the company in the vacated location there by reducing rent outgo.
In most other cases, the property so vacated being in prime business district, will help quick market leasing of the same for significant and recurring returns. Only in certain rare cases, vacated property may have no alternate use for the CPSU. In such cases, the property can be offered as Regional/ local office to other CPSUs/ businesses on rent / lease/ sale improving returns and cash flow for the CPSUThis properly would be a major source of funds for expansion and development in the newly evolving scenario post Covid
- Will the upheaval of shifting not affect the performance of these CPSUs in the FY in which this shift takes place?
With meticulous planning, the ground activities at the proposed place of shifting can start in advance. With migration to e-Office whose India’s largest instance has been rolled by RailTel for Indian Railways and so for CIL, UTITSL and many others and can be so done for all other CPSUs, the needed approvals from CMD and Board can stand taken by the other functionaries in the CPSU even when the decision makers are on the move. With entire office managed from a laptop, shifting, migration and renewed operations should begin from new location within a week of shifting.
- Can this objective not be achieved by shifting one of the major offices of the concerned CPSU in the new SMARTCITY as proposed instead of the CMD and Board of Directors?
Ans: The fundamental objective of bringing sustainability to the investments as already done in new SMARTCITIES cannot stand achieved unless the purse string controllers & the key decision makers (CMD and Board) of these CPSUs do not shift to the NEW SMARTCITY location. The vendor partner eco system of these CPSUs will shift to the new SMARTCITIES only when the purse string controllers of these CPSUs shift to them. It is only after the new SMARTCITY has citizens with buying capacity that the anticipated economic development will kick in. Hence for the bigger objective of a Happy and Healthy India, it is must for the CMD and Board of Directors (purse string controllers and decision makers) of the suggested CPSUs to shift to one NEW SMARTCITY each.
- What if the projected benefits fail to kick in and the situation remains unchanged even after shifting of the CMD and Board of Cash Rich profitable CPSUs to one NEW SMARTCITY each?
Ans:As discussed threadbare above, this is a fail-safe scheme driven by pure economic logic and is bound to produce the intended results.
The CPSUs have a great role to play in present scenario. With their dispersed presence and they themselves being commercial and with experienced Manpower Govt. should route their policies, Healthcare schemes, Monetary and food distribution schemes through them. This will lead to a boom inmultiplication of the outputs and boost the infrastructure, automobile & telecom sector, CPSUs should be encouraged to shift their operations to the upcoming Greenfield Smart Citiesto give trickle down positive movement in all sub sectors of infrastructure industry i.e. cement, steel, sand, bricks, plumbing, furniture, lighting, sanitary, tiles, interior design, engineering, architecture, automobile, tower, power plants, DG sets, air conditioning, ancillary industries and associated services (mason, carpenter, plumber, fitter, welder, scaffolding, labour, mechanic etc.
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 presents a unique article on strategies for Sustainable Rebooting of National Economy from Covid 19 by active lead by Public Sector Enterprises. The Authors Dr.K.Alagesan ex CMD ITI Ltd which is India’s first public sector enterprise and he is reputed for getting this back to growth being a Global Telecom wizard and Dr.P.Sekhar a reputed International author and innovator of Secured Governance for Self Sustained National growth The article gives insight for practical role for PSUs to a good growth and getting India back on Techno Economic development track.
Ex. CMD, ITI Ltd
By Dr. P. Sekhar
Chairman of Global Smart Cities Panel & Micro Tech Global Foundation