Finance Minister Arun Jaitley Thursday flagged the need to revisit the “legal regime” for public sector companies to ensure that they are able to perform efficiently in a competitive environment. Post the 1991 reforms, private and foreign investors have been given enough freedom to enter in a number of sectors, but public sector companies are still bound by the old rules in a competitive world, Jaitley said at an event organized by the Comptroller and Auditor General of India (CAG).
“We created a legal regime for our PSUs in pre-1991 environment and therefore a large number of them then functioned in a nearly monopoly environment. Airline, petroleum, mining is an example. Post-1991, when we started the delicensing and we opened out sectors to the private sector and large number of cases went beyond private sector and opened up to foreign investors. Now, in sectors where there are public sector players and private sector players the environment for functioning of the two is entirely different,” he said at the accountants general conference of the CAG.
“One’s transactions are audited by you and others are not. One has to give contract purely on tendering, others need not. One can go to the campus to do direct recruitment, others have to hold examination and settle for the next best. Now the legal regime was not fixed by the government, it was also fixed by judicial pronouncement, which said that public sectors are also instrumentalities of the state and therefore, they are all bound by various constitutional provisions,” he said. PSUs functioning as near monopolies in pre-liberalization era were fine, but since they have to now compete with both private and foreign-owned companies, there is a need to provide a level-playing field.
“I think we still have not paid enough attention to this chaining of the public sector to the legal regime that we have done, particularly in sectors where there is competition. And therefore this impacts on their (PSUs) performance, this impacts on the timetable, whereas the private sector is free from this. I think our entire system whether it is the CAG or the Government of India, or judicial pronouncement, time has now come for us to use some mindspace that the pre-1991 regime of them functioning in a monopoly environment is entirely different from their functioning in a competitive environment,” he stressed.
If we want PSUs to exist, survive, and survive with full financial strength then how do we allow them a level playing field, Jaitley asked. While no clear answers are yet available on how to provide freedom to PSUs who spend public money, there is a need to deliberate on kind of reforms that can be pursued in this area, he said, adding that public sector ownership will always remain in critical areas such as oil security and railways.
“Are we now in a position to allow them the freedom to take quick decisions, come to quick settlements because the markets don’t wait for the entire procedural formalities to be completed because if we waited for that, the markets would have collapsed before the decision itself. Therefore these are all situations being thrown up which will require a more radical thinking and I am sure in your future deliberations, this is one area which will occupy your mindspace,” he said.
Jaitley said that government’s efforts will result in doubling of the number of people filing tax returns in a five year period, resulting in 15-20 per cent growth in direct tax collections each year. “Four years ago, when we assumed office the total number of people who filed tax returns in India were 3.80 crore. It’s already 6.86 crore last year… At the end of fifth year, I do hope it will be something close to 7.6 crore or 7.5 crore, which means that in five years we would have doubled the number of people filing tax returns in India,” he said.