Answer

Public Sector Undertakings (PSUs) contribute 20% to India’s national income and 40% of total wages. Meanwhile, India’s consulting industry, projected to reach $24 billion by 2025, is increasingly influencing PSU operations. This shift necessitates examining its impact on governance, administrative efficiency, economic sovereignty, and public service delivery.

Drawbacks of Growing Reliance on Private Consultancies by Public Sector Undertakings (PSUs)

• Rising Consultancy Costs: The government increasingly spends large sums on consultancies, reducing funds for internal capacity building.
  For example: BSNL hired Boston Consulting Group (BCG) for ₹132 crore, diverting crucial financial resources from internal restructuring.
• Strategic Decision Outsourcing: PSUs outsource core strategic planning to firms that lack accountability for long-term performance.
• Erosion of Internal Expertise: Excessive dependence on external consultants weakens institutional knowledge, creating a perpetual reliance on outsourcing.
• Conflict of Interest Issues: Consultancy firms work across sectors, raising concerns over biased recommendations favoring private interests over PSU sustainability.
  For example: McKinsey & Company advised multiple Indian PSUs and private competitors, creating a potential conflict in policy recommendations.
• Market-Driven Approach in Public Services: Profit-focused consultancy models can undermine PSUs’ social responsibilities, leading to reduced service quality in unprofitable areas.

Impact of Growing Reliance on Private Consultancies

Alternative Approaches to PSU Reforms

• Strengthening Internal Expertise: Building in-house research units and training PSU employees in strategic decision-making reduces consultancy dependence.
  For example: ISRO develops internal teams for satellite launches, ensuring self-reliance instead of hiring foreign consultants.
• Independent PSU Advisory Bodies: Establishing publicly accountable PSU advisory bodies, staffed with experienced government professionals, ensures expertise without private conflicts.
  For example: The Standing Conference of Public Enterprises (SCOPE) provides policy guidance to PSUs, minimizing reliance on external firms.
• Public-Private Knowledge Partnerships: Collaborations with Indian universities and research institutions enhance policy innovation within PSUs.
  For example: The Power Finance Corporation partnered with IIT Kanpur for smart grid research, ensuring knowledge transfer to PSU employees.
• Incentivizing Internal Innovation: PSUs should introduce internal innovation incentives, encouraging employees to propose cost-effective solutions.
  For example: Indian Railways’ ‘Rail Vikas Shivir’ invited employees to pitch modernization ideas, reducing external consultancy needs.
• Transparent Performance Audits: Regular third-party PSU performance reviews by government auditors rather than private firms ensure accountability and long-term sustainability.
  For example: CAG audits on PSU performance help identify inefficiencies, ensuring corrective action within government oversight.

Balancing consultancy use with strong in-house expertise is key to economic sovereignty and efficient governance. PSUs must invest in capacity building, adopt technology-driven solutions, and ensure public-private synergy with accountability. Strengthening indigenous decision-making will foster self-reliant, transparent, and citizen-centric public service delivery in a dynamic economy.

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