Wednesday, January 28, 2009

Letter to Financial Express- from Asim Kumar Tiwary, CEC IOOA UPSO-II

Dear Editor,

I write apropos to your Editorial "Monopoly Profits" in FE dated 27/01/2009. Your edit was a great disappointment (which is actually a gross understatement) and has affetced adversely upon your image in my eyes. I am shocked at your uni-dimensional approach in disparaging the sterling performance of PSUs which has been acknowledged by a well known International Consultant from Private Sector in its study on which you have commented. What is more galling that you have ignored important parameters in the study e.g. the fact that effective tax rate for PSUs has grown to 31.4% in 2008 as compared to 22.9% (which has come down) in case of Private sector companies. Moreover, contribution by the way of dividends to their shareholders by PSUs was 33.5% of their profits as compared to 20.6% of Private Sector.

Sadly, you have also completely ignored the contribution of Public Sector in social upliftment e.g. reservations in jobs for social objective category (SC/ST etc) while writing your referred editorial . Oil PSUs have provided Petrol Pumps and Gas agencies to these categories at their own cost even after so called deregulation. Upstream & Down Stream Oil PSUs still bear/ or contribute towards under-recoveries for subsidising petroleum products (merit of such a move is, of course, debateable) under instructions from Government of the day. These costs incurred by Oil PSUs, which are over Rs 50000 Crores for year 2008, are not even accounted for any where in their contribution to the exchequer, which means these contributions are over and above the figures reported by Dun & Bradsheet in their report. Private Sector companies are mortified of reservations and are also horrified when a Narayan Murthy starts talking of giving up tax exemptions.

And as regard Monopoly Profits? The true benefit of the monopoly and license & permit regime and government's largesse has been taken by most of the top Business Houses in India, whose current profits come more by way of saving taxes by lobbying in Power Corridors and vicinity to those who matter than their competitive abilities. Had the competitive ability been the forte of Private Sector then BSNL & MTNL would not have been restrained from growing and Oil Sector would have been fully deregulated rather than pursuing policies which selectively benefit largest business house in the country.

I would once again like to request you to consider other costs on private sector, before considering it as more efficient than public sector, like yearly Tax exemptions totalling around Rs 1 lac Cores a year, NPAs of about 20000 Cores a year of PSBs (if Dear Editor, if I remember correctly India Express reported a cumulative NPA of 11 Lac Crores a couple of year ago and these did not belong to Public Sector.)

I would like to say that Public Sector is more profitable for government as well as public (as shareholder as well as consumer) whereas private sector is more of a burden for public and government. But, yes, Private Sector is profitable for the promoters and politicians.

Asim Tiwari

(Not to be printed : I hope you display the trademark courage of Indian Express group and publish this comment,howver, you are free to edit for more clarity or to correct the figures quoted by me. But if you don't print my opinion in next two days then it would go on to prove my point)

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