Union finance minister Arun Jaitley on Thursday called for a level playing field between the private and the public sector, pointing out that the latter runs the risk of becoming non-competitive in the face of excessive regulations and outdated legal framework.
Regulations were needed when state-run enterprises functioned in a monopolistic set-up, but these are now becoming a constraint, Jaitley said at a conference organized by the Comptroller and Auditor General of India (CAG), citing the example of the aviation, petroleum, mining and shipping industry.
Jaitley called for a rethink by the judiciary, the CAG and the government in their mindset to ensure state-run firms do not lose their competitiveness. Attention now needs to be paid to the legal regime governing these firms, he said.
“Post-1991, we started delicensing and opened out sectors to the private sector and a large number of cases went beyond private sector and opened up to foreign investors. Now, in sectors where there are public sector players and private sector players the environment for functioning of the two is entirely different,” Jaitley said.
“One’s transactions are audited by you and others are not. One has to give contract purely on tendering, others need not. One can go to the campus to do direct recruitment, others have to hold and examination and settle for the next best,” he said.
This legal regime was not only fixed by the government but also through judicial pronouncements, which said that the public sector has to be bound by various constitutional provisions.
“It was doing good when they were functioning in monopoly because it added a sense of responsibility. But if a public sector and a private sector airline has to function in two different sets of regulations, and a public sector shipping company and private sector shipping company, if the shipping cycle is high, and the shipping company wants to sell a ship by the time the public sector company sells the ship, the shipping cycle itself will get over,” he said.
He, however, acknowledged that given that these state run enterprises spend public money, level playing fields will come with their own dangers.