Administrative Problems of PSEs

As a direct consequence of the Directive Principles of State Policy, Industrial policy Resolutions of 1948 and 1956 and the government’s declaration of establishing a socialistic pattern of society, the public sector in India has come to occupy a commanding position. It has been called to play a significant role in accelerating the rate of economic growth, speeding up the process of industrialisation, increasing employment opportunities and improving the living standards of our people. The performance of public sector, therefore, largely determines the speed and the effectiveness with which we can achieve our social and economic goals.Some of the administrative problems being faced by the public sector in India towards the fulfillment of its declared policies and objectives have been discussed here.

THE POLICY ASPECT

As per the Industrial Policy Resolutions, the public enterprises were required to play a dominant and an exclusive role in the strategic as well as core industries. The consumer activities were left to the private sector. It is a matter of concern that the public enterprises have entered into non-priority areas including manufacturing of beverages and marketing of consumer goods, which legitimately could have been given to the private sector. The government should adhere to only those areas of operation, which are strategic, core and basic in nature.

ORGANISATIONAL PROBLEMS

Most of these enterprises are functioning as bureaucratic organisations. Moreover there are a large number of public sector units performing nearly the same functions and there is no co-ordination between these units in matter relating to marketing, research and personnel management. There is a lack of effective and proper linkages between the different units within the public sector on one hand and the government on the other.

Most of the public enterprises do not have adequate delegation of powers. There are frequent instructions and directions, which are given by the government. Also there is no clarity of objectives for these organisations. There is a need for new scientific techniques of accountability, monitoring and evaluation as opposed to routine rule of thumb and strict bureaucratic system. It is hoped that with the memorandum of understanding, which has been introduced in our country, the control and accountability in public sector would become more meaningful.

Another problem relating to the organisational structure has been the composition of the board of directors. Most of the public enterprises have a mixed type of board consisting of a few full time members and a few part-time members. The studies have indicated that many of the part time members do not take adequate interest in the functioning of public enterprises. Therefore, the advantage of having external experts on the board of directors to give adequate representation to different interests like consumers, suppliers, financial institutions and others, is not being served

Planning and Construction of the Projects

There has been lack of proper assessment of the location of the projects and incomplete analysis of commercial profitability as well as socio-economic benefits. At times when the reports have been prepared it takes a long time to get it cleared from the appropriate authority which results in considerable delay

OPERATIONAL PROBLEMS

The operational problems faced by the public sector in India relate mainly to financial management, human resource management, materials management, industrial relations, pricing, marketing etc.

Financial Management

There is a need to introduce ‘performance budgeting’ and ‘zero-base’ budgeting in the public sector enterprises. The improvement in the budgetary system should also be accompanied by greater delegation of authority as well as reduction in the number of cases requiring prior financial approval.

Internal audit is also an important tool of financial management. There is a need to strengthen the internal audit system so that it is able to review the soundness adequacy and application of sound financial principals and operational control. It should play a positive role in suggesting improvements in the financial management rather than acting in an obstructive way. They should also conduct a test check of a certain percentage of transactions with a view to verify inventories and ensure prevention and reduction of fraud, misappropriation and pilferage.

One of the greatest problems of financial management is resource mobilization. Most of the public enterprises have their initial supply of capital out of the budgetary allocation. During the last few years some of the public enterprises are getting loans directly from the public to augment their resources. Recently a decision has been taken by the government that 20% of the finances can also be obtained from the public in the form of equity. This equity participation would increase the financial resources of the public enterprises and would reduce their dependence on the budgetary allocation.

Human Resource Development

For staffing most of the managerial positions, the government and the public enterprises right from the beginning have been depending upon private sector, foreign personnel and civil services. But their continuous dependence on any of these resources has been found to be neither practical nor desirable. Private Sector as a source of staffing is professional and qualitatively weak because the nature of public sector is different from the private sector. Moreover some of public sector units are in competition with the private sector.

The dependence on the civil service, especially in the central public enterprises has reduced to some extent but it still continues at the state level. The dependence on the civil servants has brought a large number of problems relating to the bureaucratic culture, short tenure and lack of commitment to the public enterprises. Ultimately, the public enterprises are required to have its own cadre of management. In this regard the Public Enterprises Selection Board (PSEB) in the Bureau of Public Enterprises has been of some help. Even then most of the top positions are vacant for a long period. There had been a suggestion to create separate management service of the public enterprises and to have separate public service commissions for the public sector undertakings.

Public enterprises have not been able to attract trained and competent managerial personnel because the salary structure is not comparable with the private sector. Pay-scale is considered as one of the important factors which affect motivation and mobility of personnel. It is therefore desirable that the remuneration policies of the public sector should be rationalised and considerable changes in the pay structure should be brought about. It should be uniform throughout the public sector and should be somewhat comparable with the private sector.

Many of the public enterprises have excess manpower that too, at the clerical and unskilled level. Training and development of the employees is another area which can help in providing the undertaking competent employees on a continuous basis. With the increase in the number of public enterprises, the present supply of technical and managerial personnel to man various positions is not sufficient.

Industrial relations

Owing to the political interference and political patronage, greater concept of job security and encouragement from senior managers, many of the trade unions in the public sector are resorting to frequent strikes and thereby creating industrial unrest. The present system of works committees and limited employees participation in management has not improved the industrial relations to a great extent. It is hoped that if the government introduces the modified form of workers participation, whereby the employees can participate at the shop floor level, plant level and the board level it would help in bringing about better industrial relations.

Materials Management

The study team of the Administrative Reforms Commission, based on its own study and the reports of the parliamentary committees and Planning Commission pointed out some of the deficiencies in the area of materials management. These include unjustifiably high amount of inventories, lack of adoption of scientific methods of inventory control. Delay in the delivery of materials which has resulted in under-utilization of the capacity of the undertakings. Also, some of the undertakings do not have proper storage and handling facilities. Even the procedure for purchases is lengthy and involves a large number of references to the finance branch.

There is a need to simplify the procedures and introduce modern techniques of materials management, adequate delegation of powers for the purchase of materials. Inventory preparation should be done in a scientific way and should be kept to the minimum. Better storage facilities would help maintain the material in good shape and quality.

Marketing

The marketing function has not assumed importance in the public enterprises, owing to monopolistic nature of the enterprises in the market and the absence of private competition. This has retarded the growth and development of public enterprises especially when they have to compete in the international market.

It is therefore, essential that the public enterprises should make special efforts to attract and develop marketing strategies for the overall growth and prosperity of public sector in India. .

Pricing

Broadly, the pricing policies can be classified under three major areas namely; (a) promotion oriented pricing (b) surplus- generation-oriented pricing and (c) regulation oriented pricing. For the enterprises adopting promotion oriented pricing, the prices, the prices are fixed low and the external benefits are greater as compared to the surplus created for the organisations. This indirectly implies subsidies to the beneficiaries. For example in case of a public sector unit like the Food Corporation of India, the costs incurred by the unit at the point of sale are higher than the issue price fixed by the government.

LET US SUM UP

In an endeavour to improve the performance of public enterprises various reports-officials and non-official-have stressed upon the importance of efficient functioning of public enterprises. It has been particularly pointed out that the performance and the success of any public sector unit depends, ultimately, on the administrative/managerial capabilities of the organisation.

The administration of public enterprises are confronted with a large number of organisational and operational problems. The most important of these relate to finance, management and human resource management. Some of the recommendations to improve the functioning of the public enterprises have either not found the favor with the government and the public enterprises or there has been considerable delay in accepting such suggestions. Unless the suggested institutional and procedural changes are brought in the administrative set-up of the public sector, it will not be possible to fulfil the declared objectives and improve the performance of public sector in India.

By: Jasmeet Singh