Reasons behind the Inefficiency of Public Sector Undertakings in India

 

PSUs or Public Sector Undertakings have an important role to play in the development and growth of the Indian economy. With the liberalization of the Indian economy, the entire environment of public sector undertakings in India has gone through a good amount of change.

 

There are many public sector undertakings that have responded to the changes brought about in the Industrial sector of India by the government. This has also been the reason for the complete dismissal of  PSUs from the Indian market.

 

The privatization and diversification objectives of the Indian government have also been the main reasons behind the sickness of PSUs in India. At present, the government is bent towards improvising the performance and  Public Sector Undertakings in India. Some of the main reasons why PSUs are becoming sick are as follows:

 

 Inefficiency of Public Sector Undertakings

There can be absolutely no doubt in the fact that PSUs have always been the main reason behind the strong foundation of industrial development in India. But it is also important to note at the same time that most PSUs are inefficient. They do not have any profit motive and are completely dependent on the government for their financial requirements and their daily business. This is the main reason why there is an increase in the losses borne by PSUs year after year rather than profits.

 

The public sector undertakings always expect the government to offer financial support for continuing their tasks. The government is not always prepared to fund the PSUs because there is huge financial stress on the government that looks after different sectors. This is one of the main reasons why PSUs are becoming sick throughout the country.

 

Public Sector Undertakings Hire Inefficient and Incompetent People

Another important reason behind the sickness of PSUs in India is the fact that these undertakings take the services of inefficient and incompetent individuals. These undertakings do not practice merit or performance based compensation like the private sector undertakings. They generally take the services of incompetent individuals depending on political and caste recommendations.

 

These individuals do not have the knowledge or the expertise to handle critical activities and therefore they take a toll on the services offered by the public sector undertakings. Once these individuals are hired, performance is not the basic criteria for them to get promotions.

 

Promotions are also based on political and caste recommendations. There are reserved category employees who have the eligibility of entering any government profession without possessing the right skills needed for the job. There is no such employee who is motivated to perform well. Therefore, ultimately the sufferers are the ones who depend on the services of the public sector undertakings.

 

Financial Inability

There are many finance related problems that can also be pointed out as the main reasons behind the inefficiency and the sickening of the public sector undertakings. Poor use of available assets, weak equity base, absence of pricing and costing, inefficient and weak working capital management, inappropriate use and diversification of finances and complete absence of budgeting and planning are some financial reasons behind the sickness of public sector undertakings.

 

Horrible Production Policies

One important reason for the sickness of PSUs is horrible production policies that include wrong site selection in relation to production. Apart from this, inappropriate machinery and plant, improper maintenance of machinery and plant, lack of development and research and no quality control are other reasons resulting in the complete decline of public sector undertakings.

 

Bad Marketing

Bad marketing is yet another important reason behind the sickness of public sector undertakings. Bad marketing is found affecting the health and the well being of all the public sector undertakings. The bad marketing scenario includes factors like wrong selection of product mix, wrong forecast of demand, complete absence of proper product planning, improper sales promotions and the use of wrong market research procedures.

 

Unsuitable Personnel Management

One of the most important and internal reasons behind the sickness of PSUs is unsuitable personnel management programmes or policies including bad salary administration and wages. The absence of proper behavioral approach and unsuitable labour relations have been the reasons behind the dissatisfaction of the workers and the employees of the public sector undertakings.

 

Ineffective Management

Bad or ineffective management is also one of the main reasons behind the complete inefficiency of the public sector undertakings. The ineffective management category includes factors like absence of integrity, lack of control and coordination and inappropriate corporate planning. Apart from these there are other external reasons behind the sickness of the public sector undertakings. Marketing, personnel, financial and production constraints are some of the most important external reasons causing the complete decline of public sector undertakings.

 

To summarize, the government should always try and come up with new policies for strengthening the public sector undertakings. The policies of the government should not be aimed towards causing inefficiencies and delays.