The height of commanding

The height of commanding

In 1991, Hindustan Fertilizer Corporation in Haldia, West Bengal, was a model public sector unit (PSU) —at least when it came to generating employment. Every day, 1,200 employees would clock in and earn their wages. The one small problem: For the previous 12 years that it had been up and running, the plant had failed to produce any fertilizer.

That’s the world India vowed to leave behind. No more commanding heights that serve social goals, no more government diktats to firms. But the country now seems to be going back to that world, at least in part.

Last week,Mint reported that, concerned with jobless growth, the United Progressive Alliance (UPA) government would soon unveil an employment policy.This involves, as a start,mandating PSUs to explicitly worry about job growth. Every new investment that, say, Coal India makes will have to be judged against how many new jobs that investment creates (or saves). The government then will be directly or indirectly approving all PSU investments.

At least it’s not replaying the licence-permit raj across the economy. An official told this newspaper that the state would only “urge" the private sector to disclose the employment potential of their investments; it won’t interfere in them. How kind!

But as their biggest shareholder, the government is not going to be as generous with PSUs. There’s too much incentive to interfere. Jobs translate into votes at the end of the day: Given the chance, every politician will lobby to use a PSU to increase or protect jobs in his district.

Twenty years ago, that’s precisely what happened. Heavy Engineering Corporation,National Textile Corporation, Bharat Opthalmic Glasses and others—including, most famously, Hindustan Fertilizer— were politically forced to protect jobs. And they went into the red, needing constant capital infusions from the government for survival.

In fact, this very statist temptation to protect jobs—to dictate who can be hired and fired—is what impedes job creation in the first place. If the UPA is interested in addressing jobless growth, it should start by asking why growth has been jobless. How exactly do Indian firms expand without hiring more people? As long as our labour laws stay draconian, factories will choose to substitute labour with capital.

On top of this existing legal diktat, the UPA wants to add another fiat. At best, it will prove pointless—only a fraction of the labour force works in the organized sector. At worst, it will take India back to the days of workers punching in at PSU plants and doing nothing.

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