Article: PSUs and their role in job creation

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PSUs and their role in job creation

PSUs have had a long history of supporting Indias economic growth. But with a changing future of work, how have they fared?
PSUs and their role in job creation

Public Sector Undertakings (PSUs) have been a critical component of India’s growth story and over the years have had an evolving role to play in the economy. Starting off as the key pillars of independent India, the concept of PSUs within the Indian context was key in providing the necessary industrial and financial backbone for the country to grow. Constituted after the Second Five Year Plan of India mentioned the focus on developing the public sector, PSUs were aimed at bringing India up to pace in terms of its ability to compete and manufacture indigenously. Some of the largest and most successful PSUs—BHEL, State Bank of India, ONGC, Indian Oil Corp, Oil India, Steel Authority of India and Bharat Electronics among others owe their genesis to this period. 

But over the years, many such units have become “sick” and as result of their poor financial performance have fallen in their impact to push the economy ahead. PSUs, by the very nature of their bureaucratic set up and other reasons like the inability to innovate, failure to take quick and timely decisions, and operating in an inefficient manner led to path downhill for many. A path which finally led to their disinvestments and since 1991, many of the underperforming units have been disinvested to bring in private ownership and with it the economic benefits of operating in a private and competitive fashion. Arun Shorie, the finance minister during the 2001 period explained then that 'the main objective of the disinvestment is to put national resources and assets to optimal use and in particular to unleash the productive potential inherent in our public sector enterprises.'

Although initial attempts to bring in more private players into the fray didn’t really kickoff, it was only during the 2001-02 - 2003-04 period when the maximum number of disinvestments with the Government being able to amass Rs. 21,163.68 crore as against the target of Rs. 38,500 crore. Subsequent years have witnessed a tumultuous journey of success and failure of the disinvestment process, mainly due to the political nature of the economic reform. 

There is little doubt that the growth of the public sector has led to the expression of gainful employment opportunities. In addition to the primary effect in creating employment opportunities, public sector investments also have also helped other sectors grow in and around it; having a multiplier effect on other sectors of the economy. This has been greatly beneficial and therefore has had a positive effect on the total employment position of the country over the years. In 1960–1961, the number of people employed in public enterprises was only 1.82 lakh. This figure rose to 7.01 lakh in 1971–1972 (excluding casual workers) involving an increase of 385 %. In 2011–2012, the number of working population in these industries stands at 13.98 lakh.

But the process of disinvestments still remains a deeply contested issue within the Indian economy. Although the benefits of divesting government ownership and bringing in private players to own and run the company bring with it certain advantages, like many modern cures to ailments, a host of problems also seem to follow. The change of ownership might have improved efficiency and brought in a new vigour to cure the chronically ‘sick’ companies, but many have shifted from their traditional goal of creating employment opportunities and ensuring regional development. 

Disinvestment as an economic option was used by Indian government facing tight economic situations during the early 90s. It soon translated into a full-blown economic program and the trend within India followed the global shift in focus towards privatization and profit making. But the world is slowly rising to new economic realities. A reality where an increase in company’s profitability is not necessarily linked to its increase in employment. The fourth industrial revolution, as its often quoted, is bringing in an era where innovation and technological advancements don’t necessarily bring in a growth in employment. 

One of the major reasons towards changing the ownership patterns of PSUs was to also enable private players to bring in newer technologies that boost production and in turn create more jobs as demands would increase. But this has meant that over time public companies have become have resorted to newer technologies to improve efficiency. And although these newer technologies have increased per unit productivity, the number of jobs being created and maintained over the years has significantly gone down. 

An NDTV report notes that many of India's top state-run firms have had to cut tens of thousands of jobs from 2011 to 2017, which are reflected in their annual reports of these companies show.  Jobs in top public sector units such as Coal India, Indian Oil Corporation, NTPC, Steel Authority of India (SAIL) has shrunk over the last five years from 2011-12 to 2016-17. 

“As many as 42,053 jobs were lost during 2014-15 to 2016-17, a drop of 6.12 percent during the NDA regime. The story was no better during the earlier UPA regime. From 2011-12 to 2013-14, the number of jobs lost stood at 42,296, a drop of 5.54 percent, according to the employment data collected from the Annual Reports of eight Maharatna and 14 Navratna public sector units (PSUs)” the report adds. 

 The impact of technologies like automation and robotics is being felt across different sectors albeit in varying degrees. While in some cases like that of sectors like IT the impact seems to be rapid and disastrous, in the case of PSUs, the impact has been slow but significant over the years. The public sector still hols a major share in the overall employment in the organized sector. But for the many Maharatnas and Navtratnas of the country to remain a strong economic backbone while assisting the government in its initiatives to create more jobs in the coming future, a way that balances the need of a company to be financially healthy and its ability to provide jobs is required to be forged.   

Topics: #Jobs, Recruitment

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