Government's Cash Cows

Despite the call for large-scale disinvestment, PSUs continue to bail out the government.

- Dipak Mondal

When reports of Hindustan Aeronautics Ltd, or HAL, using an overdraft of 926 crore to pay salaries to staff came out, all hell broke loose. The financial health of HAL — already under media glare due to the controversy over the alleged Rafale scam — became a new battleground between the government and the Opposition which, along with the employee unions, criticised the government for stripping the strategically important company of resources at a time its capability to make cutting-edge defence equipment was being questioned.

They were not far off the mark. In 2017/18, HAL had paid the government, which holds a 90 per cent stake in the company, a dividend of 1,165 crore and bought back shares worth 1,126 crore. The employee union was particularly critical of the government for making the company pay around 6,400 crore through share buybacks over two years (5,265 crore in 2016/17 and 1,128 crore in 2017/18), apart from the 9,000 crore dividend the company has paid the government since 2003/04. S. Chandrasekhar, the General Secretary of the HAL Employees Association, said while there was nothing wrong with buybacks, it should not have been done when the company’s resources were under strain.

HAL is not an isolated case. The story is, in fact, playing out in almost all big PSUs — the government, far from selling stake as part of its economic reforms agenda, is depending more and more on these companies to meet its revenue targets. The Central Public Sector Enterprises (CPSEs), despite calls for strategic sale and divestment of government stake, have time and again bailed out the government in times of dire need.