If Corporate Governance is supposed to protect the retail shareholder, it has failed COMPLETELY in the PSU. Not that it is great in the private sector, but in the PSU it has completely failed the minority shareholder. That means you and me.

1. Electricity thefts are a political problem but the economic impact of that is felt by the power producers like NTPC.

2. The inefficiencies of the state government’s ability to handle power is borne by NTPC, Bhel, and other PSUs which supply to the state government agencies. The private sector gets it payments by making necessary adjustments in the price of the end product.

3. The gas, petrol, diesel, and Kerosene subsidies hurt the oil manufacturing and distribution companies. Hence you do not see any private sector company wanting to be in the retail distribution game.

4. The way PSU directorships are offered is pretty shocking, and one cannot say too much in the public domain.

5. All PSUs go through 2 audits – statutory (Companies Act) and CAG (government companies) – and the end result is a clean audit report. I was a part of the audit team of a few PSUs long ago and I realise that even now there is not much change in what is happening.

6. Salaries cannot be linked to productivity, pricing is dictated to by the unions! In case of Coal India the Union made sure that the FPO is delayed/ stalled. Obviously this is bound to hurt the company in the short run at least.

7. The way PSU banks have been lending is so shocking, that one cannot believe it. Only when you do audits and realize the quality of NPAs. Many of these loans are NPAs right at the time of the sanction. Really the shareholder? chuckle, chuckle,….

If you think the biggest shareholder a.ka. President of India even knows what kinda resolutions are passed You would be surprised. PSUs are neither monitored nor supervised HONESTLY.

Look at the facts – do you see LIC selling good quality scrips to buy NTPC at 160 and Coal India at Rs. 320. All the prices are now way below..which means the policy holder gets clobbered.

Poor yields from LIC policies, negative returns from bank deposits, capital losses from psu IPOs, seem to be accepted by the middle class investor.

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  1. Hi Subra,

    Only 1% stocks make money for people, 99% loose. This is irrespective of Public sector or private sector. Corporate governance is India is rarely seen take case of Satyam and the way it was given to Mahindra, Gitanjali gems, Reliance, Birla clan…. its best for people to invest in tax free bonds atleast these days we have this option. Tension free 8.5% tax free returns, making it around 12.5%pa for a guy like me in 30% tax slab.

  2. Just to let it be known. I invested Rs 100000 four years back in LIC Mkt plus and got Rs 100502 today. That tells wherefrom and whereto the LIC moneys go! People have long though not healthy lives in India and LIC’s cash flow will be positive till this lasts!

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