Tuesday, October 19, 2010

Public v/s private sector

Generally in a public v/s private sector debate it is said in favour of the private sector that it is far more efficient than the public or government sector. But two recent instances – one from San José in Chile and the other from Delhi in India go against this premise.

On the 5th August 2010, when 33 miners were working deep inside a gold and copper mine in San José, about 700,000 tonnes of rock tumbled down and completely blocked the only exit from the mine. It was an accident waiting to happen because San Esteban, the private company owning the mine, had been violating for quite some time all norms of safety by over-mining. It had also not provided the obligatory emergency escape shaft. The company hardly did anything to locate the trapped miners, no one knew whether they were alive. The Chilean government chipped in immediately after the accident and rescuers working for it were able to establish contact with the miners after 17 days, fortunately all of them were alive. And what was the response from San Esteban? It promptly stopped the miners’ salaries because there being no production in the mine it was not in a position to pay. What the government did makes a case study of one of the most challenging rescue efforts in the history of mankind. Engaging the world’s best experts, employing the most advanced technology and sparing no costs the government kept the miners supplied with fresh air, water, food, medicines and video link with their families, and then was successful in pulling out to safety and civilization all 33 miners from their prison for 69 days, 700 metres below the surface.

The Delhi Metro Rail Corporation (DMRC), a government of India company, has introduced rapid transit raised and underground rail travel in Delhi. Thanks to the DMRC, today hundreds of thousands of Delhi’s residents and visitors to the city travel in air-conditioned comfort at an average speed of 30 kmph, not having to bother about congested roads. A couple of years ago, for the first time in Delhi, a joint sector project between DMRC and Reliance was planned, an express rail link between the New Delhi railway station and the Indira Gandhi International Airport to be in operation before the Commonwealth Games. The DMRC was to construct the civil infrastructure and Reliance was to lay the track and signalling and procure and run trains. The DMRC completed its part of the work and handed it over to Reliance on time but the latter could not do its bit in time leading to the Commissioner of Railway Safety denying it a safety certificate. Even now, after the Games are over, it will be some more weeks before Reliance gets the permission to ply trains.


  1. one needs to make a distinction between genuine private sector companies like Infosys, TVS, Hero Honda, Kotak , Max etc etc and companies like Reliance, Sahara , UB Group etc
    these are two very different types on organisations - the former are a genuine businesses that offer great products and services to consumers on the other hand the latter depend on government contracts or licences and make money by influencing government policy and not because they offer great products.

    the first category are the result of free market economy and second a product of government controls .

    actually the second category cannot be referred to as private sector at all - they are the very antithesis of the free markets

  2. dear mr. jaswal. just by giving one example you cannot prove that public sector is better or vice versa. if you give an example of the chilean mines even i can give an example of the russian submarine disaster. in that one the russian government did nothing for the trapped marines on the ocean bed and they all ultimetely died.

    should i claim by this example that the defence ministry should be privatised in russia or all other countries ?

    i hope you will agree that in general (if you look at the larger picture) that atleast private companies are profitable and public companies are loss making, which eventually force governments all over the world, to levy and raise taxes. i hope you will atleast agree with me on this.

    i request you to look at the larger picture and not try to prove your point by giving rare examples like the chilean mines.

    as far as your example of reliance is concerned, i agree with viney - please compare the private sector with public sector only. please dont compare private sector with semi private/semi government sectors. it will lead to nowhere.

  3. "... two recent instances – one from San José in Chile and the other from Delhi in India go against this premise" does not mean that the premise was wrong, it just says that it is not always right!

    It is good that the genuine private sector has now clearly been differentiated from its crony capitalist cousin. And I agree that in the business of business, the 'genuine' private sector is better than the public sector. But in India, how many companies are there in this ‘genuine’ private sector?