The Opportunity Cost of Running 2 PSUs whose Services No one Uses: Education for 45L Children

The accumulated loss of ₹90,000 crores could have provided world class education to 45 lakh children or nutritious food to 8 crore Indians for a year

In June 2017, the Union Cabinet cleared the privatisation of the country’s largest carrier, Air India. The effort was part of government’s strategy to offload an airline that was struggling in the face of tough competition. Air India is not the only case. Years of untenable debt, consistent losses and plummeting values have characterised public-sector enterprises in India. The Central Public-Sector Enterprises (CPSEs) Survey 2016-17 reveals that one out of every three CPSE is loss-making. The government enterprises have failed in every sector despite having many advantages bestowed on it. The profit-making enterprises are those that are either protected monopolies or near monopolies in their area of operation.

The two biggest government enterprises operating in the telecom sector – BSNL and MTNL – are an epitome of inefficient utilisation and wastage of public resources. Since 2009-10, the two firms have incurred increasing losses. By 2016-17, BSNL made a cumulative loss of around ₹55,000 crore while the figure for MTNL stood at ₹34,000 crore (2016-17 prices). Combined, these losses add up to ₹90,000 crore.

Further, continued operation of loss-making enterprises poses immense opportunity costs to society. The amount of ₹90,000 crore could have been invested in other desirable activities:

  • It could have built 2,250 world class schools catering to 45 lakh children. In a country that faces shortage of quality schools which is reflected in our poor performance on various measures of educational outcomes, this could have been an important milestone in bridging the education gaps.
  • It could have provided nutritious food to 8 crore Indians for a year.
  • If invested in construction of highways, it could have added about 5000 km to the existing network of four-lane highways.
  • It could have built 360 fully equipped tertiary-care hospitals, each having 200 beds.