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“Indian psus are more efficient”
Dr. V. Krishnamurthy, Chairman, National Manufacturing Competitiveness Council
Issue Date - 13/10/2011
Dr.V. Krishnamurthy, Chairman of National Manufacturing Competitiveness Council and ex-Chairman of leading public sector undertakings Steel Authority of India, Bharat Heavy Electricals Limited and Maruti Udyog, points out in an interaction with k. s. narayanan of B&E how public sector enterprises in India need to hike their investments to increase the scale of operations if they want a larger share of global trade like China. However, Dr.Krishnamurthy also feels that Indian public sector enterprises do not have many of privileges enjoyed by their counterparts in the Middle Kingdom.

B&E: China’s manufacturing prowess has been extremely daunting for their Indian counterparts. How do you compare the public sector enterprises in India and China?
Dr.V. Krishnamurthy (VK): If you are taking about the PSEs in China, they are no more efficient. In fact there is much to be desired. They built large capacities and there are no fund constraints for them. Unlike the Indian organisations, compulsions to work profitably are less evident in their Chinese counterparts. Arising out of this, I would say that the public sector is far more efficient in India and acts more responsibly. More importantly, Indian PSEs are better aware of the market orientation in terms of understanding the consumers’ needs.

In fact, I think the Indian PSUs are far ahead of their Chinese counterparts. That is the reason why when we are talking about competition in goods coming from the PSUs in China, we are not able to decide whether it is a real price or is it goldplated. Indian PSUs cannot afford this kind of pricing. They have to be all the time competitive. Of course their (Chinese) operations are much bigger and their ability to command resources is much more.

B&E: You have headed multiple public sector enterprises in India. Could you tell us how close the relationship between PSUs and the government in India is in general?
How does it compare the situation in China?
VK: State support for PSUs in China is much higher as compared to India. On account of regimentation, the Chinese are able to maintain a certain level of discipline. This does not mean that they work efficiently. Employee commitment in PSUs in China is far better than the Indian worker’s commitment in India.

Personally I had a good relation with the government. Notwithstanding all the successes of PSUs in India under present circumstances, the relationship is built between the Chairman, the Secretary of the particular department, which controls the PSU and the minister.

It will succeed if there is a long tenure for the minister, secretary and the PSU chairman. So between them, they are able to evolve a method by which there is a clear understanding. It is very unfortunate that in India, the same group team has never been in position for more than a few months during the last ten-fifteen years. PSU Chairpersons are shifted out frequently. Similarly, the secretaries are also moved out quite often. Secretaries were appointed for five years when I headed the PSUs. Today, Secretaries in the Government of India are not there for over a year. I had an excellent relationship with secretaries and ministries. Each one was clear about what they have to do. The minister was responsible for policy declaration and my own job as the Chief Executive was to protect the organisation from outside interference.

B&E: Chinese PSUs are quite aggressive in pursuing international expansion and national strategic interests. What drives them in your view?
VK: The Chinese are wanting to cover more and more overseas trade. In this, their PSUs play a large role. The only difficulty is that there is no level playing field. For PSUs in China, there is less of accountability with regard to finances and state resources that they utilise. They don’t follow commercial principles of pricing. Above all, their currency is underpriced. On the account of currency itself, they have around 15% advantage over Indian goods. All this puts them at an advantage. So I do not indicate these things as symbols of efficiency. Furthermore, they get funds at the cost of 3-4%. And they are under no compulsion to return it back. So we are not comparing apples to apples.

B&E: Even though that may be true, China’s success story with respect to its PSUs is acclaimed globally. Aren’t there valuable lessons for Indian PSUs?
VK: China’s strength is on building capacities that has enabled them to conquer global trade. Indian PSUs are investment shy now. If they don’t grow in volumes, they won’t succeed. Indian PSUs have to learn from their Chinese counterparts how to grow in volumes. Apart from this aspect, I am proud of the Indian model.

B&E: What, as per you, is the potential of Indian PSUs in the long run?
VK: I am a greater believer in India’s PSUs. We are economically strong because of them. They are conceived well. They are in industries where longer gestation is involved & have turned out a large number of professionals. But suddenly, it has become fashionable to say that PSUs are not efficient. It is a tragedy that we are not investing as much as we should. There are services, which affect the larger public like minerals, mines & water which should be with the government.

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