Abolish All State-Owned Enterprise - By Constitutional Law

A good definition of a State-owned enterprise (SOE) is:

A firm with an unlimited capacity to make losses.

We discussed Air India the other day, in which I quoted the following from a news report:

The airline, which is burdened by an accumulated loss of Rs 20,320 crore, has outstanding loans and dues of Rs 67,520 crore -- of which Rs 21,200 crore is working capital loan, Rs 22,000 crore is the long-term loan on fleet acquisition and Rs 4,600 crore vendor dues, latest official figures showed.

Today, the bad news is about BSNL - the State-owned telecom firm - which has now accumulated losses of over 6000 crore rupees (1 crore = 10 million). Its revenues have declined - and its biggest cost is salaries for its 2,77,000-strong workforce. BSNL is opting for a voluntary retirement scheme that will cost the company Rs. 2,700 crore while the Department of Telecom (which means us) will have to shell out Rs. 18,000 crore. 


Overstaffing - the bane of the public sector: "Jobs for the Boys."


What I would like to add today on discussions against SOEs is the fact that they are "unfair competition." If a private telecom firm had made such losses as BSNL, and if its employees numbered so much, it would have folded up long ago. Ditto for Air India. New, private owners would have taken over both these firms. But with SOEs, this never happens. And these loss-makers continue to "compete" with efficient private firms, taking business away from them. Note that the news report above on BSNL says:

BSNL, which offers telecom services in all areas of the country, barring Delhi and Mumbai, had 95.14 million mobile subscribers as of July 31. It is making efforts to catch up with its private counterparts.

That is 95.14 million subscribers "unfairly" taken away from private firms. If BSNSL and Air India had been allowed to fold up, their employees would have found jobs with profit-making private firms - and contributed to national wealth.


Why should there be SOEs at all?


In the old days, like when I was in college studying Economics, we were told that Chacha Nehru set up these State-owned firms because, among other reasons, "private capital was not forthcoming." That is clearly not the case today. In telecom as well as civil aviation, in steel, in hotels, in fertilisers - in everything - private capital is doing wonders. And this is particularly true of telecom and civil aviation, two sectors where SOEs are failing dismally, showing clearly that they "work" only where competition is outlawed - like railways and electricity. This itself shows the inherent inefficiency of SOEs. Ministers and baboons are unfit to run enterprises - and they most certainly should not be allowed to do so with money pulled out from the public treasury.


So, when we have a New Constitution, when we have our Second Republic, let us include a clause that debars The State from funding any SOE.