Does shutting down PSUs spell bad news for GATE aspirants?

Out of over 8 lakh students who take the GATE exam every year, only close to 10,000 aspirants enroll at Indian Institutes of Technology (IITs) for the M.Tech or PhD courses. The rest, look for opportunities in the Public Sector Undertakings (PSUs) established by the Government. What makes PSUs so alluring for youth is the job security it offers, with the tag of being a ‘white-collared’ job. The IITs are also reportedly having a hard time retaining their MTech students, with many quitting the course after landing jobs in PSUs. It has been told that out of 8,000-odd students, 2,000 left the course after getting jobs at PSUs.

GATE aspirants,while apprehensive of the present trend, are still of the opinion that a job in PSUs is much more lucrative than pursuing higher studies. “Usually, there is a lot of pressure to find a job soon after graduating. Not everyone is going to have an 8 point CGPA with a huge salary package just after graduation. The GATE exam helps with either or a job. A job is definitely a much better option. Though the PSUs are shutting down or getting privatised, they seem to be definitely better than being jobless,” says Ganesh Prashant, an aspirant.

Over the last few decades, especially after the liberalisation, privatisation and globalisation policy in 1991, inefficient PSUs started becoming a drag on the Government’s resources. This ultimately led to decision of either shutting-down or divesting of ‘sick’ PSUs. Most recently, Finance Minister Arun Jaitley in his budget speech of 2016-17, announced a divestment target of Rs 56,500 crore of which Rs 36,000 crore was estimated to come from the sale of minority stakes in PSUs, whereas Rs 20,500 crore was estimated to come through strategic stake sale in PSUs (Strategic stake sale refers to the government reducing its stake in the public sector entity to 40 percent or lower).

Following the FM’s announcement the NITI Aayog, which is the policy think-tank established by Narendra Modi , submitted two lists of state-owned companies in June, one comprised of sick PSUs which have made no profit in the last few decades that may be shut down, while the other was a list of companies which should be privatised. If implemented, this move will result in a slash of job positions in these PSUs. “If the Government does consider the proposal, then that is the eventual consequence. If a company is shut down, the only viable likelihood is that the employees will have to seek different jobs. There is no point for the government to keep bleeding from its pocket where there is zero benefit,” says a high ranking-official from NITI.

For PSUs on NITI’slist for privatisation, this means that the Government will have 40% stakes or less in these companies. Privatisation will give the company a chance to revive itself steer towards profit making. Once a company is taken over by a new management, it usually begins the process of restructuring. While some voluntary retirement applications are accepted, mass lay-offs aren’t an immediate after-effect. “It is a volatile period for the employees. There is a lot of dependence on the performance, unlike in a PSU, and thus as a part of restructuring there may be lay-offs,” says Dr RitikaKher, an economic analyst from Delhi. She adds, “Private sector companies in India also prefer to import technology from foreign economies because it is less expensive to import technology, rather than build infrastructure form point zero and develop technologies in-house from the ground up. The technology developed in labour scarce economies is capital intensive simply because these countries don’t have the kind of work force population we have. This ultimately leads to jobless growth.”

As of March 31, 2015, there are many as 298 PSUs and the number of profit making PSUs as on 2014-15 stands at 157 with a total profit of Rs. 1,30,363 crore. (Source: Public Enterprise Survey 2014-15).Given that the current economic climate in India is more favourable to foreign investments, there is a very high likelihood of PSUs going down in profitability. If this trend continues and existing PSUs do not figure out a way to become profitable, the list of PSUs going ‘sick’ is likely to increase, with the government left with only two options – divest or shut-down.  For GATE 2017 aspirants there will be no effect, as these ‘sick’ PSUs will not recruit with the GATE scores. However, it remains to see how this will pan out in the long term as it may affect the number of jobs available in the PSUs.