A clueless Opposition is a bane for any democracy. Unfortunately, the government led by Prime Minister Narendra Modi has been saddled with a rudderless Opposition, which often makes baseless accusations. One of the outrageous charges against the decade-long tenure of the Modi government is that it has sold “family silver” of public sector enterprises (PSEs). Nothing can be further from the truth.
Consider the irrefutable facts laid bare by data for the last fiscal (2023-24): Upstream oil company Oil India Ltd posted its highest-ever crude and natural gas production. IOCL capped an excellent year with the historically best refinery throughput, sales volume and net profit. BPCL reported its highest-ever profit for the first nine months of any fiscal (April-December, 2023). Coal India recorded its highest-ever production. NTPC set a new record for the highest-ever electricity generation in a year.
Additionally, the government brought back public sector banks from the brink of the non-performing assets (NPA) crisis, inherited from the corrupt UPA regime. In the financial year 2022-23, these banks reported their highest-ever profits and lowest-ever NPAs.
Many readers would remember the treatment of PSEs as personal fiefdoms of those in power in the UPA era. Whether it was milching the Railways dry through outright corruption in what has come to be known as the “land-for-jobs” scam or arm-twisting PSEs to establish unviable projects for short-term and parochial political gains, the UPA created a vitiated atmosphere that weighed down the public sector.
The contrast between UPA and the last 10 years is unmissable. The PSEs are now competing for global leadership and establishing themselves as recognisable brands. Under PM Modi’s leadership, the government has unleashed the potential of these companies by allowing the right mix of freedom and accountability. The government maintains an arm’s length distance from their business decisions while fully supporting and encouraging ambitious plans that are aligned with the vision of Viksit Bharat, 2047.
Encouraged to discharge their duties as good corporate citizens, the government-owned OMCs kept fuel prices unchanged for months to control inflation while crude prices soared in the international markets. At that time, private fuel retailers had curtailed operations as they could not match the retail rates. The OMCs were instrumental in reining in fuel costs and inflation during that crisis.
The unchanged fuel prices during the crisis affected the OMCs’ bottom lines initially. However, the OMCs specifically and PSEs broadly do not operate in silos anymore, but look at their roles in the context of the entire economy. The change in mindset and outlook is a direct result of the values the Modi government has fostered.
During 2023-24, oil PSUs have posted a cumulative profit of over Rs 1.5 lakh crore, despite the fact that they have kept petrol, diesel and LPG prices amongst the lowest in the world and prices of fuel have only gone down in the last three years despite major turmoil in global energy markets. The higher profits will enable them to pay substantial taxes and dividends to the government and undertake a larger capital expenditure program to meet the future needs of the country.
The performance of OMCs has been driven by a long-term vision and complete professional freedom to carry out business decisions. This is suitably reflected in their market capitalisation. For OMCs and upstream companies, market capitalisation has more than doubled to nearly Rs 10 lakh crore in the last three years. Moreover, most of the oil PSUs have outperformed the Nifty index over the last three years.
With a clear vision for the future, aided by robust financial health, the PSEs have utilised their profits for investment through capital expenditure. This has provided much-needed impetus to the economy. As of February 2024, oil and gas PSEs are implementing 275 projects with a total investment of over Rs 5.67 lakh crore. During the last 10 years, these PSUs have completed projects worth Rs 4.15 lakh crore. The public sector is able to take up projects, which may have longer gestation periods, but are of strategic importance to the nation.
The government under Prime Minister Modi’s leadership has sought to find the optimal path on divestment. We have carefully calibrated each individual PSE on multiple parameters before arriving at a decision, junking the one-size-fits-all policy. As a result, the government went ahead with the divestment of Air India, but held back on selling its stake in Bharat Petroleum Corporation Ltd (BPCL).
As a loss-making entity, Air India was the right candidate for divestment despite its glorious history. To be competitive in a uniquely brutal sector of aviation, Air India needed flexibility to rejig its human resources and nimbleness to cut across old bureaucratic processes, which required it to be privatised. Post its privatisation and rejig, Air India has placed an order for over 500 planes.
On the other hand, the government felt it was crucial to retain full control of BPCL owing to its vast network of fuel retail outlets, important refineries and unmatched expertise in various domains. Moreover, BPCL has been playing a significant role in energy transition through the ethanol blending programme and other measures to reduce carbon emissions.
BPCL has vindicated the government’s decision against divesting its stake. The company’s profit after tax for the nine months of 2023-24 was nearly 75 per cent of the reserve price the government was expected to receive from the divestment. The government can now keep the company and also net a healthy dividend.
At a time when privatisation was thought to be the only solution for state-run electricity boards, as CM of Gujarat, Modi’s inspiring and visionary leadership, combined with effective identification and resolution of performance gaps, corruption-free and professional management at the top achieved the seemingly impossible task of making state electricity companies profitable. A decade later, distribution companies in Gujarat continue to be counted among the best in the country across parameters.
The Modi government’s stewardship of PSEs heralds a new era of governance characterised by professionalism, strategic foresight, and unwavering commitment to national interests. The PSEs have responded spectacularly to the visionary leadership by embodying the reform, perform and transform mantra. The stage is set for PSEs to shoulder India’s development journey into a brighter and more prosperous future for all.
The writer is Union Minister of Petroleum and Natural Gas, and Housing and Urban Affairs
