The government is pushing for public sector enterprises/ undertakings (PSUs) to be more adept at doing business in increasingly liberalised markets.

“Favouring PSUs by the government can be anti-competitive, and create an un-level playing field… An important role of the competition commission in the years to come will be to guide us on how the interaction between the government and public sector firms should play out to create the most competitive environment that we can,” union finance minister P Chidambaram said in his speech at the annual day celebrations of the competition commission of India (CCI) in New Delhi on Monday.

Earlier in the speech, the minister had said that public sector enterprises are often “handicapped” by government regulations (on recruitment, procurement, etc). In return, these firms are favoured by the government over competing private players in awarding of government contracts, he said.

Chidambaram said that in an open market, policies such as these create an anti-competitive atmosphere. “A level playing field is in the best interests of the public –consumers whose interests the commission (CCI) is mandated to protect,” he said while pushing for greater scrutiny of PSUs by the commission.

The finance minister reasoned that the lack of competition and incentive, like was common in the pre-liberalisation era, could affect the quality of goods and services offered by PSUs and also stifle innovation. PSUs are increasingly getting profit conscious, a departure from the notion that they function as arms of the government.

While Chidambaram gave a cursory nod to the role of PSUs as envisaged in Nehruvian socialism, he said, “Now, however, there is the mandate of a new competition policy  and we need to take a call on tradeoffs between the equity and rapid industrialisation brought about by public sector enterprises and growing concerns about quality, price and efficiency.” He added that it was time to examine whether the existing PSU monopolies should be broken into competing, smaller public sector enterprises.

Chidambaram also questioned the periodic bailouts being given to sick PSUs, saying that it was necessary to see if these packages were “distorting the competitive arena”.

The minister, however, did acknowledge the need to try and preserve PSUs’ goals of promoting greater social equity and said that while enabling these units to function in freer markets, policymakers need to see whether these visions of equity could also be nurtured.

But as liberalised the Indian market is today, Chidambaram’s exhortations to allow PSUs and private companies level-playing fields seem justified. However, the level-playing field needs to be extended to all areas of business, including social responsibility.

If the burden of social good and equitable resource building falls only on the shoulders of PSUs, then private players will rise at the former’s cost. While corporate social responsibility is gaining ground with private companies, there is no law making it mandatory. So in this scenario trying to erode government support that PSUs get, while expecting that they retain the socialist visions of the pre-liberalisation-privatisation era, will leave PSUs dangerously vulnerable to volatile market forces.

Given the route sick PSUs take (that of disinvestment and privatisation), this would mean a complete exit of the government from goods and service delivery, relegating it to just a regulatory role.

Contain passion for buying gold, Chidambaram tells India

The government is mulling over curbs on gold imports to contain the current account deficit (CAD), finance minister Chidambaram said at the same meet. “Some more steps, if necessary, would have to be taken. But I appeal to the people to contain their passion for gold,” he said.

With gold imports seeing a 138-percent jump last month, Chidambaram said this spurt was understandable given the April-May wedding season in the country. He said that the “passion for gold… is leaving a big hole in the current account deficit”.

Gold imports last year accounted for 72 percent of the CAD, the gap between the outflow and inflow of foreign currency.