ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Revival or Euthanasia

Ailing Public Sector Undertakings

This article takes a critical look at the government's decision to revive two sick public sector undertakings - Hindustan Machine Tools and Hindustan Cables. It argues that the revival measures announced will only help these stricken companies fl icker for a short while as these are not backed by an overhaul of management or production.

In the second week of February 2013, the union government approved and announced a revival scheme for two of the oldest public sector undertakings (PSUs) – Hindustan Machine Tools (HMT) and Hindustan Cables (HCL) – which are virtually gasping for life. As per this revival scheme, these two sick firms would receive a revival package, partly by cash and the balance in non-monetary consideration such as waiver of loans and interests on them. The government has, for some time now, considered entering into a joint venture or collaboration in the cable industry for HCL; but did not think of any alternative other than investing more funds in the case of HMT.

At the time of Independence, there were only five firms in the areas of strategic importance like capital-intensive oil and natural gas, heavy engineering, steel and mining. Then the country began its journey of industrialisation over various five-year plans and established about 250 central PSUs, referred to as the “temples of modern India” by Jawaharlal Nehru. This apart, many other PSUs were set up by different state governments. Rapid infrastructure building and industrialisation was the main reason for the establishment of PSUs in the initial years after Independence. As the decades passed, this changed to political considerations, which now became the main drivers for the establishment of PSUs. Other than this, nationalisation of privately-held industries in areas like textiles, tea, cement, coal, transport, etc, too added to the number of PSUs.

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