Public sector performance deteriorated more due to administrative policies of the state rather than any…

Question

Public sector performance deteriorated more due to administrative policies of the state rather than any other reason. Defend this statement with the help of examples.

Ghissu Editorial · Accepted Answer

Public sector decline stems mainly from state administrative policy: over-centralisation, uneconomic pricing and soft budgets, and procedure over accountability, while even political interference and market factors work through these choices. The 2023 CAG report on Telangana's SPSEs links their losses to delayed audits, weak oversight and poor transparency.

**Introduction**

Public sector performance decline in India is largely due to administrative policies that create inefficiencies, despite⟦1⟧ other contributing factors. These policies shape the operational environment of PSUs, often limiting their ability to respond effectively to challenges.

**Administrative Policies and Their Impact**

1. **Over-centralization and Bureaucratic Rigidities**: The Second Administrative Reforms Commission highlights how centralized control and multiple veto points delay PSU decisions and reduce managerial autonomy. This excessive hierarchy causes inordinate delays and cost escalations, undermining efficiency.

2. **Pricing Policies and Financial Losses**: Telangana SPSEs’ 2023 CAG report shows chronic losses linked to uneconomic pricing and governance gaps⟦3⟧⟦2⟧ like delayed audits and weak transparency. Such soft budget constraints reduce incentives for efficiency and encourage dependence on subsidies.

**Other Contributing Factors**

1. **Technological Deficits and Market Environment**: Outdated technology and limited competition reduce PSU competitiveness, though these are influenced by administrative policies. Market failures and regulatory constraints also shield PSUs from necessary reforms.

**Examples Supporting Administrative Policies**

1. **CAG 2026 Audit**: Reveals persistent governance gaps in Central PSUs, including inadequate independent directors and accounting deviations, underscoring systemic administrative weaknesses.

2. **Digital Public Infrastructure⟦4⟧ Reforms**: Initiatives like Aadhaar and DBT show how administrative reforms focused on transparency, accountability, and technology can significantly improve public service delivery and efficiency.

**Way Forward**

1. **Decentralize Decision-Making**: Empower local bodies and frontline managers with autonomy and resources to improve responsiveness and reduce delays in service delivery.

2. **Strengthen Performance Management**: Institutionalize robust monitoring, accountability mechanisms, and reward systems to foster a culture of results-oriented governance.

**Conclusion**

Administrative policies remain the primary driver of public sector deterioration, requiring urgent reform focused on decentralization, accountability, and efficiency to restore PSU performance and public trust.

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