Corporate governance of state-owned enterprises: the case of BSNL
Abstract
A missing element in the reform process in India is the
restructuring of the incumbent state-controlled
monopoly operator prior to or simultaneously with the
opening up of the sector to competition. This places the
state-owned operator at a serious disadvantage relative
to competitors. This has been the case with Air India/
Indian Airlines with adverse consequences. This paper
argues that Bharat Sanchar Nigam Limited/Mahanagar
Telephone Nigam Limited may be headed in the same
direction. The restructuring of the state-owned
enterprises must begin at the top with a complete
reorientation of the corporate governance mechanism
which establishes the relationship between the
government and the enterprise. With the growth of
private operators in these sectors the state-owned
enterprises are no longer of strategic importance to the
government for sector development or providing
“universal service”. To the extent privatisation is not
feasible or desirable at least in the short run, the
corporate governance mechanism should be designed
around the objective of growth and efficiency as in the
case of private enterprises.
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