THE MYTH OF SUNK COSTS : THE MANAGERS OF PRIVATISATION MUST BE CURED OF THE DISEASE OF "WRONG NOTION OF SUNK COSTS " OTHERWISE THEY WILL RECOMMEND BY THEIR DATA EVEN FOR SALE OF THE WHOLE NATION.....

 

THE MYTH OF SUNK COSTS : THE MANAGERS OF PRIVATISATION MUST BE CURED OF THE DISEASE OF "WRONG NOTION OF SUNK COSTS " OTHERWISE THEY WILL RECOMMEND BY THEIR DATA 
EVEN FOR SALE OF THE WHOLE NATION.....


I am really quite pained to see the way the information and data that are being presented for Privatization of National Assets in India; it is really difficult to digest as a Professional….
The Government Managers who are handling "Privatization", first have to be cured of the Disease of "Wrong Notion of Sunk Costs". Otherwise; they are bent upon doing Disasters for the National Assets and if accepted this way; one day they can even recommend for the sale of the Whole Nation…
The "Sunk Costs" have to be always compared with "Utilities Derived " for the reference period ( may be material, may be non-material, however, if Sunk Costs have to be considered it has to be done after valuating it ( Utilities Derived ) in some way to make appropriate comparison of Sunk Costs with the Value of Utilities Derived). In fact nobody is saying what “Utilities Derived “ out of the “Sunk Costs”.
Please look at the following examples at hypothetical level :
        1. Can the Parents of a Child say, they have spent so much of money from the date of Conception of the Child till the birth (for 9-months) and after that bringing up, education and all that they spent on the Child for 60years are sunk costs, otherwise they would have so much of Opportunity Savings for themselves to enjoy their life in many other ways if they did not have the Child?
        2. Can the Earning Spouse of a House-Spouse ( I mean non-working spouse. Not being Gender Biased for that matter ), say that the Earning Person has spent so much of money in maintaining the House-Spouse (Non-earning Spouse) life time as Sunk Costs and if the House-Spouse would have been divorced and driven out, the Earning Spouse would have had so much of Opportunity Savings to do whatever the Earning Spouse wanted in any other way and else-where?
The situations are happening in the similar manner. You will keep seeing the cases of National Assets which will be brought one after another for Privatization now and lot of sunk costs lecture.
The Government's Privatization Department is appointing advisers who are infecting its Privatization Managers with this kind of Sunk Costs logic that can lead to disasters for the National Assets. While the Air India is being slaughtered also with such Sunk Cost logic, I am looking at the figures of some other National Assets where such Sunk Cost logic is being applied in most unreasonably by the Privatization Department and its in-charge is boasting a lot with such Wrong Notions to slaughter a lot of innocent National Assets very quickly.
If Sunk Costs have to be calculated by anybody, then all the "Utilities Derived " from the asset-source have to be also monetarily valued in some way to make a reasonable comparison. Sunk Costs can not be calculated blindly to send an enterprise (National Asset) to the Slaughter House just like that.
Instead of looking at irrelevant historical costs ( sunk costs ) and wrong notions of sunk costs, a right professional approach is always to look at the present "Balance Sheet " of the Enterprise, the Assets against the Liabilities along with accessories valuations which do not come into the Balance Sheet, such as the "Brand Valuation" and "Good Will" valuation and any other material and non-material valuations and the utility value an enterprise carries along with it inherently.
As I have said in my previous posts, nobody ever showed the Valuation of the 6200-Access Points ( 4400 + 1800 Parking and Landing Slots for Domestic and International Flights respectively ) in Indian Airports and 900-Access Points in Foreign Air Ports Globally, the Brand Value of Air India and the Valuation of the Utilities Derived in terms of Lives of Indians Saved during myriad of calamities, even during Covid-19 period, while Air India has been slaughtered.
In my housing society at Bombay for example, someone is offering Rs. 40 Lacs to buy a Parking Place (Reserved Covered Parking Space) for parking Just one Car... nobody wants to give to him......( It is just for example .. ).
Whether a Service Organization or a Manufacturing Enterprise, the Utilities Derived have to be Valued also for appropriate comparison against the Sunk Costs if it has to be valued. People should not be fooled by showing only Sunk Cost data and not showing any valuation of the Utilities Derived out of the Sunk Costs.
Holding power in the Hands does not mean we have to destroy all Professional methods to sell off National Assets with determined intentions to sell off in throw away manner ?
I may not be able to do anything in such wrong practices being applied, as a helpless citizen, but as I said, as a Conscious Citizen I am quite pained....
I am also surprised, the very celebrated professionals and economists of India get carried away easily, by such wrong display of sunk costs.
Further I have observed, In an article in Money Control on 13-Oct-2021, with the Title " .......Tax Payer's Bill for Air India 2010-21 " the figures of the Privatization Department of the Govt were shown that is placed below as an extract of out it. The Rs. 1,10,000 Crores Rupees Sunk Cost (for the reference period of 11-years from 2010-2021) was shown like "Dirty Picture" without valuating and showing the Valuation of the "Utilities Derived" the National Carrier had contributed to the Nation against the Rs 1.10 lakh crores of sunk cost. Nobody should get away by showing the "Dirty Picture" of Sunk Costs of a National Asset without showing the Valuation of the "Utilities Derived " for the Nation against the Sunk Costs as presented in the below document.



About the Author : Dr. Nimain Charan  Biswal is a B.Sc.(Agri. Science and Technology), M.B.A. and Ph.D.(Management Area ) by qualifications and he has 35+ years of work experience in both  industrial and development sectors in diversified fields of social importance. He has been educated at Orissa University of Agriculture and Technology (OUAT)-Bhubaneswar, Institute of Rural Management Anand (IRMA) and Gujarat University (with Resource Support of IIM-Ahmedabad). Dr.Biswal is further educated at IIM-Calcutta, XLRI-Jamshedpur, Apple Computer Industries and Spar Inc., USA. He has worked for reputed National and International Organisations in Senior/Top Management Capacities at Board level as well as Managing Director and CEO. He is a management expert covering extensive areas from management in agriculture, industrial management, development management to management of public systems. He is a prominent professional of India and known Internationally as well. He lives at Mumbai in India.

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