'Govt shouldn’t do biz; can’t have industrial growth from taxation'
NEW DELHI: The government should not be running businesses as public sector companies are inefficient and do not generate enough resources to fund their own growth, according to Maruti Suzuki India Chairman RC Bhargava.
Public sector companies need support all the time to grow and need funds from the government for capital investments, he said.
“I have no doubt that government should not be in business. No way,” he said when asked if governments should be in the business of running enterprises on the basis of his experience of witnessing the transformation of the then government-owned Maruti Udyog Ltd to Maruti Suzuki India Ltd, majority owned by Japan’s Suzuki Motor Corporation.
He further said, “The fact of the matter is that companies run by the government are not efficient. They don’t have productivity. They don’t generate profit. They don’t generate resources. They don’t grow. They need government support all the time to grow.” There are not many “public sector companies which have grown from internal resources. For most capital investments they need to get funds from the government. You can’t have industrial growth from taxation, period!”, Bhargava asserted.
Industrial growth has to come from internal resource generation, he said, adding a company must create wealth and not be a wealth eroder.
“That’s the point. Public sector companies have not been wealth creators...If the fundamental point of wealth creation is not met, you have a system in place which is going to be a losing system. The country is going to lose because you’re taking away money from the taxpayers to support this inefficient working,” Bhargava said.
A public sector firm is also handicapped by the entire environment, such as the limitation of being an instrument of state under the Constitution, as a result of which all the fundamental rights in the Constitution were enforceable against the company, he said, citing the example of Maruti before privatisation.
“There were so many, what I would say, non-value adding activities which one had to do, which interfered and added costs for what we’re doing and prevented us going forward,” Bhargava said, recollecting how the then Maruti Udyog Ltd had to deal with several parliamentary committees, comply with the Official Languages Act with people having to learn to type on both Hindi and English typewriters.
Bhargava, however, said the failure of public sector is not unique to India and has happened elsewhere such as Russia, the UK, France and Japan, where “everybody is getting out of public sector.”