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Past Issue • Jan-Mar 2012

Nitish Sengupta: On Reviving Sick Public Sector Units

A team from the Centre for Leadership, Innovation and Change (CLIC) at the ISB, comprising Rajesh Chakrabarti, Assistant Professor of Finance, ISB and M Kanchan, Senior Researcher, CLIC talks to Nitish Sengupta, Chairman of the Board for Reconstruction of Public Sector Enterprises (BRPSE). Sengupta has been instrumental in the revival of sick Public Sector Enterprises (PSUs) and the success stories of 11 of those PSUs have been documented in the report “Metamorphosis.”

The Centre for Leadership, Innovation and Change (CLIC) is working on several research projects with emphasis on public sector units (PSUs) in India. PSUs occupy an important part in the Indian economy but there is some criticism about their performance. What are your views on the current status of PSUs in India vis-à-vis other emerging economies and where do you think Indian PSUs will be ten years from now? What is your vision for PSUs in India?

If I may say so, your assessment of the Indian public sector is a little outdated. If you had said this about five or ten years ago, it would have been alright. But in the last few years, the public sector has recorded a tremendous amount of recovery and transformation. If you see the number of Indian companies in the Fortune 500, there are about eight of them – five from the public sector and only three from the private sector. In the Bombay Stock Exchange, if you consider the entire market capitalisation, there are 47 public sector undertakings that are listed and they (PSUs) account for about one-third of it. And in 2008-2009, during the world economic crisis, the Indian public sector stood its ground and did not retrench people or cut down on their production. On the other hand, the public sector helped the government of India to a large extent to tide over the Indian economy. Two or three years ago, the number of sick enterprises in the public sector was about 50. Today, I think it is around 30. A few enterprises have made a remarkable turnaround. Companies such as Heavy Engineering Corporation (HEC) in Ranchi, which from its inception never made profit, have made profits in the last few years, but how? When the steel industry of India went into a period of depression, no new steel mill was set up for several years and this did not generate any profit. But we persuaded HEC that with their capacity they could meet the requirements of other industrial metals and not just steel. They did the market research and discussed with organisations such as the Nuclear Corporation and now they are supplying Nuclear Corporation’s requirement with their existing machinery. HEC has been profitable the last three years. The HEC was also meant to meet the requirements of the steel industry. But if the steel industry does not have any construction activity, it does not mean that the company should stop. We persuaded them that with their ability and capability they can undertake other construction work. They followed the advice and today, they are also profitable. These companies are now moving around the country, seeking new jobs and opportunities. Today, the public sector does not present a picture of being disabled. They are trying their best to come up in efficiency and performance.

ABOUT THE AUTHORS

  • Sengupta

    Nitish Sengupta

    Chairman of the Board for Reconstruction of Public Sector Enterprises (BRPSE).
  • Rajesh-Chakrabarti

    Rajesh Chakrabarti

    Clinical Associate Professor of Public Policy and Executive Director of the Bharti Institute of Public Policy at the Indian School of Business (ISB).
  • Kanchana

    M Kanchan

    Senior Researcher at the Centre for Leadership, Innovation and Change (CLIC) at the Indian School of Business (ISB).
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