Nothing ails Indian industry like conflict of interest

So there are reforms, competition and end of monopoly of PSUs in the Indian industry. Or is it?

A double standard, euphemistically called the conflict of interest still permeates in different forms. Take the case of telecom industry. TRAI, the regulator has been kept out of important decision like the interconnectivity issues in mobile phones with the minister vesting the powers with DoT, the biggest telecom provider. TRAI has been fighting this in Supreme Court for quite sometime now. While there was quite some heartburn in industry quarters over TRAI’s arbitrary handling of WLL issue, an arbitrary regulator is, dare I say it?- better than an arbitrary politician.

In oil, the government tried to inject Director General of Hydrocarbons, the head of upstream regulator into the board of ONGC, the state major. It was only after ONGC supreme Subir Raha threatened to resign did the government dropped the decision.

In banking, the regulator RBI holds a majority stake in SBI, the biggest Indian bank. Is this why foreign banks are prohibited to open more than their allotted number of branches? I don’t know, but it’s a food for thought.

There are innumerable instances like these, but the bottomline is- till there is a conflict of interest in the legislating body (government) also controlling the industry (via PSUs), it will permeate through the system. After all, the government owning a majority stake in PSUs puts the ministries in a fix- while the official position is reforms; they are responsible for the profits of state owned enterprises as well.

While the government has every right to protect the interests as a promoter, the correct approach is appointing more independent directors to manage the companies efficiently- not stifling the growth of industry by arbitrary decisions.