The question of autonomy versus public accountability assumes special significance in context or the public sector enterprises which are owned by the Government and managed either by the Government itself or by any other agency appointed by the Government for their management.
Autonomy means independence to take decisions for timely and quick action. Public accountability implies that these enterprises should be responsible to some public authority be it the Department of the Government or the Parliament of the country; and through them to the scrutiny of the public in general.
The need for autonomy arises on account of the fact that the activities of the public enterprises, whether it is production, sale, purchase, inventories, etc. are essentially the business type activities which require quick decisions, timely action and immense initiative on the part of the management.
If the management of a public enterprise does not have the powers to take quick decisions, i.e. if their decisions are to be approved by the complex bureaucratic machinery, which is inflicted by red-tape and delays, before these could be implemented, these enterprises, are bound to suffer vis-a-vis the private sector competitive enterprises which are more businesslike and autonomous.
Thus, autonomy is the essence of success at the Government department or even the Parliament cannot take quick and timely decisions. It is therefore necessary that the process decision-making and responsibility must be vested in the Board of Management of Public Enterprises.
The need for public accountability of the public enterprises, on the other hand, arises from the peculiar nature of their ownership and management. The profits or losses of public enterprises accrue to the Government who has invested public funds in them.
The management of these enterprises is in the hands of persons who have hardly any stake in them, since they are paid Government or semi-Government servants or bureaucrats, who have nothing much to do with the profits or losses of these enterprises and whose appointment to the Board of Management as well as promotions largely depends upon their seniority or political push and pulls rather than on their efficiency and skill.
Thus, absence of any personal involvement in the business of enterprises may lead to inefficient handling, incompetent management and perpetual losses to the exchequer. It is therefore necessary that the managers of public enterprises should be made accountable to the public authorities who could closely scrutinize their work and policies and take suitable action in the interest of efficient functioning of these enterprises.
Further, public accountability is also necessary so that these enterprises move in line with the planned programme of economic development and fulfil their social obligations. Too much autonomy without accountability may lead to endangering the very objectives for the attainment of which public enterprises have been set up.
Thus, to be efficient, public enterprises must be given autonomy, but too much autonomy without public accountability may lead to many distortions and inefficiencies. On the other hand, complete or too much of public accountability, which may manifest itself in excessive interference by the Government and complete control of decision-making is unhealthy for the growth and efficient working of public enterprises. Hence, a reasonable balance has to be struck between autonomy and public accountability.
This can be best done through a clear division of functions between the Government which is the owner of the public enterprises and the Board of Management which is responsible for the efficient running of these enterprises. The Government should concern itself mainly with laying down the policy guidelines, taking or approving major investment decisions, appointment top level management personnel, appraisal of working of the enterprises and issuing of necessary directions in accordance with the overall policies and programmes that it seeks to implement.
Within these parameters, the management of the enterprises should be given a free hand in carrying the out day-to-day administration and in the matters regarding production, management, purchase and stores policy, marketing and sales and other activities allied to their business.
Lately, there is some move towards privatisation of some public enterprises with a view to improve their efficiency and reducing burden on the exchequer due to their perpetual losses. The New-Industrial Policy of July 1991 gives these enterprises only a promotional role as against the earlier policy wherein public enterprises were regarded as agents of development.
The move towards privatisation of public enterprises has gathered support because in spite of its best efforts the Government has not been able to make these enterprises efficient and viable units of industrial growth.