Should India be taking Africa route to help central PSUs?

Content from the Brookings Institution India Center is now archived. After seven years of an impactful partnership, as of September 11, 2020, Brookings India is now the Centre for Social and Economic Progress, an independent public policy institution based in India.

The Hindu quoted W. P. S Sidhu, Non-Resident Senior Fellow (Foreign Policy), Brookings India for a story on Central PSUs and how Africa has a role to play in it.

The Centre is considering a plan to help the Central Public Sector Undertakings (CPSUs), including those of them incurring losses, set up subsidiaries or form joint ventures with State-owned enterprises (SOEs) in poor African countries.

The proposal has been moved by the department of public enterprises (DPE) of the heavy industries and public enterprises (HI & PE) ministry, and is currently being considered by the Ministry of External Affairs (MEA), official sources told The Hindu.

The DPE wants the MEA to influence African countries, especially those with hardly any private capital investment currently, to replicate the ‘Nehruvian’ post-independence period industrial policy of India that heavily favoured SOEs. For such a policy, the DPE, as per its proposal, wants these African countries to reserve several sectors for SOEs so that these CPSEs can operate in a near monopolistic environment for about 15-20 years, the sources said.

Once the industrial activity picks up following such huge investments by the public sector, those African governments, like India, can slowly start liberalising such a regime and attract private sector investment, they added. If the plan becomes a reality, many of the CPSUs, currently struggling in India due to competition from far more nimble and efficient private sector companies, can get a new lease of life and turn profitable, they said.

The idea took shape when the Minister of State HI & PE G. M. Siddeshwara visited African countries including Malawi, Zambia, Nigeria and Liberia in September. The minister travelled as the special envoy of Prime Minister Narendra Modi as part of preparations for the recently concluded India-Africa Forum Summit in New Delhi.

W. P. S Sidhu, Non-Resident Senior Fellow (Foreign Policy), Brookings India said: “I would caution against approaching all the 54 African countries in the same manner. Some such as South Africa are inclined towards capitalism, but others like Zimbabwe are strongly socialist. Then there are countries where there is a mix of both.”

Mr. Sidhu said Africa presents a great potential that neither the PSUs nor the private sector firms can take advantage of on their own, and therefore will have to work together. In areas such as railways, oil and gas and heavy industries, the public sector has an edge, he said.

In sectors such as aviation and telecom, the public sector could take the lead, he said.

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