SITUATIONS UNDER WHICH PUBLIC SECTOR PRIVATIZATION DECISIONS SHOULD BE NO GO

I am writing this article as principle based only and in this case, I am not going for empirical citations in this article, although the principles mentioned by me can be very well related to privatization decisions that have been taken from time to time or do take place from time to time. The Intellectual, Professional and the Communities of Management Expertise will be able to easily comprehend the underlying considerations that the listed principles of this article carry with it.  

There are enough materials available in the public domain for anyone imbibe regarding views in favour of privatization of public sector, and also in favour of continuation of public sector in the interest of the people and the nations around the world.

The Governments keep  trying to do privatization of the public sector, have tried doing privatization in the past, have done privatization of public sector it is not denied and there are continuous attempts to do privatization of public sector. However, privatization cannot be reckless and adventurous, it has to be well considered, as the Privatization of Public Sector would ultimately impact and affect the lives of the masses under all circumstances. 

I keep reading about cases and attempts of privatization in the recent times appearing quite regularly.

In this article I am trying to explain under which situations the Public Sector Privatization Decisions should be "No Go": 

1.  Privatization decisions should not under-value or ignore the value of human life:

The value of human life is priceless, no amount of money or economic considerations can be equated with the life of humans, it is an universally accepted principle. No amount of economic consideration should supersede the consideration of the value of human life that may be ignored or under-valued by a privatization decision. When a privatization decision will under-value or ignore the value of the lives of the Humans or Citizens of a Nation, such privatization decision should be an absolutely no go.

2. Privatization decisions should not be done to settle political ideological scores:

If the establishment of Public Sector National Assets ( Enterprises ) or Nationalization of certain enterprises was done by a specific political ideology in the interest of the Nation at a specific time, Privatization should not be done by another ideology, in order to settle or neutralize the political ideological scores at another time. In such decisions, it is the Nation and its people will suffer, while a specific ideology will do privatization while in power and get away after doing privatization when its term of office is over.

3. Privatization Decisions should not mean selling the Public Sector as National Assets, without proper valuation of every component of it or at throw away prices ( ultimately a Balance Sheet shows Assets = Liabilities ):

Every enterprise has its balance sheet, that shows  Assets = Liabilities. Just because the Assets of a Public Sector Enterprise belong to the Nation and none individually, none of it should be disposed of without proper valuation of each and every asset component. Globally, when enterprises are sold and purchased, the Purchaser takes over the enterprise on totality of assets and liabilities both.  Under the same principle, any purchaser of the Public Sector National assets should be obliged to take all the burden of the Liabilities of a Public Sector Enterprise, while taking over all the assets of it. It should not happen, that the Nation bears a large chunk of the Liabilities and the purchaser takes of the National Assets of the public sector by bearing a paltry or small percentage of the liabilities of the enterprise. When a private enterprise changes hands by ownership globally, normally all the liabilities are taken over by the purchasers as Assets=Liabilities on equality considerations. Proportionate deals also do take place, however, in such a case the Portions of the Assets and Liabilities equate by proper valuations. No asset changes hands in sale and purchase of an enterprise without proper valuation.

4. The postulations some make that the Governments should not be in business, is a one sided and skewed postulation of the proponents of the privatization taking into consideration the other side’s postulation that goes in favour of retaining the Public Sector.

Whether the Governments will be in certain business or not, it would depend on the National Need and the situation of its people and the developmental stage of the Nation. When a Nation needs that in its national interest and in the interest of its people and its contemporary situation demands that the Government has to be in some businesses, the theory that the Governments will not be in business as the proponents of privatization say has to be reviewed appropriately instead of following it blindly and propagating the same theory from highest level of a Nation. Without reviewing the National scenario appropriately, the Public Sector should not be privatized for show off of the privatization decisions done under the force of power to the world as any achievement.   

5. Privatization should not aim at directly or indirectly giving extra favour to a specific private party that aims to take over a Public Sector enterprise.

No emotion or favoritism should be allowed to specific private enterprise that aims to take over a Public Sector Enterprise, even if there are no buyers of a Public Sector Enterprise in the market. The commercial considerations of the Nation while privatizing a Public Sector Enterprise should not be sacrificed under any circumstances to get emotionally inclined in favour a private purchaser for any reason.

6. Privatization of the Public Sector Enterprises should not be done under desperation to meet an artificially built monetization target.

The Public Sector enterprises are not necessarily created as investments of the Nation to derive a return on investment by selling and monetizing the National Assets someday. The monetization that comes with the privatization of the Public Sector enterprises is incidental and consequential to the privatization activity, however, when the Public Sector enterprises are created are not created for return on investments, it is created as a measure of the welfare state and in the interest of the Nation.  When targets are fixed to realize specific amounts by selling the Public Sector, those who get assigned with such targets tend to work blindly to reach such targets even if the National Interests get sacrificed or compromised.

7. Privatization should not be done under the pressure and insistence of multilateral developmental or financial bodies of the world or under the pressure and insistence of any other Nation .  

Sometimes and many times, the multilateral developmental or financial bodies of the world (for example purpose only : such as World Bank, International Monetary Fund or other such world bodies) put pressure on the Nations to privatize public sector. It cannot be taken as a pinch of salt to be followed, if the Nation’s parameters of own situation and parameters of people do not justify any Public Sector to be privatized.

I have written this article as a matter of principles as I have mentioned above, and I have not named or placed any citations, as I said there are plenty in the public domain. Any reader who would be inclined to co-relate, will find instances to co-relate easily and would be able to identity easily when these principles are not followed.

8. A Body Corporate created under special enactments as Institution of National Importance for benefit of people in general, should not be allowed to be diluted by its statutory structure to be played in private hands due to any private sector lobbying.

Different Body Corporates are created from time to time as Institutions of National Importance recognizing the Towering Institutions created and built by great men and women during their life time, as their contribution towards the wellbeing of the people, nation and society. Privatization attempts should not should not distort such institutions by tampering with its statutory structure.  

9. A public sector enterprise should not be deliberately pushed or allowed to be sick and defunct as a target to be sold off ultimately by privatization. 

It is a disaster when a public sector enterprise is deliberately pushed and allowed to be sick or defunct as a target to be sold off ultimately by privatization. It may be decided already to privatize a specific public sector enterprise and in that direction it may be pushed and allowed to be sick or defunct to justify the decision of the privatization.

10. Privatization should be no go where an industry will get converted from free market (competition) to private sector monopoly or duopoly.

The presence of the Public Sector in such an industry will prevent it ( the industry) getting dragged into monopoly or duopoly as the public sector can play the role of the welfare state to balance the monopolistic practices detrimental to the cause of the society.  

Privatization of Public Sector is a big temptation most of the times, for the Government Operators. However, reckless and erroneous privatizations have not been pardoned over the history and such enterprises could get back to Nationalization again, or creation of new Public Sector have resulted in the same fields for compensatory reinstallation of the public sector that got lost in the process of erroneous or obstinate privatization decisions.

A privatization decision would be detrimental for the cause of the people and a Nation when these principles are not followed with prudency and pragmatically or ignored for whatever reasons.  

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 36 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 Organizations 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.