In a significant departure from its earlier policy focus, the Union government is stepping back from aggressive privatisation efforts and is instead investing heavily in reviving ailing state-run enterprises. This shift, marked by a substantial allocation of funds to modernise and sustain public sector companies, raises questions about the long-term implications for economic growth and fiscal health. The government’s decision to inject Rs 2,000-3,000 crore into the helicopter operator Pawan Hans for fleet modernisation reflects the seriousness of this policy pivot.

Similarly, Rs 11,000 crore has been allocated for the revival of Rashtriya Ispat Nigam Ltd, and Rs 6,900 crore has been earmarked for repaying bonds of the struggling telecom company, MTNL. These figures underline the scale of financial support being extended to entities that have struggled for years to remain viable in a competitive market. This policy reversal comes despite the ambitious privatisation drive announced a few years ago, which aimed to reduce the role of the state in non-strategic sectors. However, the results of that drive have been mixed. High-profile sales such as Air India and a few others were successes, but the privatisation of major firms like Bharat Petroleum and Shipping Corporation of India has been delayed or abandoned due to political and logistical challenges. With resistance from employee unions and complications surrounding land transfers, the process has slowed to a crawl.

Advertisement

Adding to the complexity is the political reality after the 2024 Lok Sabha elections, which saw the government depending on regional allies. This has made it harder to push through controversial privatisation plans, especially in sectors with a significant workforce. The decision to keep at least nine state-run companies, including fertilizer and construction firms, under government control reflects these pressures. While the intent to preserve jobs and sustain public sector companies is commendable, it is worth questioning whether this approach will deliver the desired results. Historically, attempts to overhaul loss-making stateowned enterprises have faced significant hurdles. Persistent inefficiencies, bureaucratic delays, and lack of accountability often plague these efforts, leaving taxpayers to foot the bill.

Moreover, the government’s reliance on dividend income from these entities may not justify the massive upfront investments being made. The infusion of thousands of crores into companies like Pawan Hans and MTNL will strain public finances, especially if the revived entities fail to achieve profitability. With the fiscal deficit already projected at 4.9 per cent of GDP, prioritising efficiency over preservation becomes critical. India’s decision to refocus on state-run enterprises is a calculated gamble. While the political logic behind the move is clear, its economic merit will depend on how effectively these companies are restructured and made competitive. Without robust reforms, this strategy risks becoming an expensive exercise that will only delay the inevitable need for privatisation.