The PSU play in healthcare

201707ehm12The days of public sector units (PSUs) in India are clearly numbered. Once hailed as navratnas, some of these jewels in the crown are today facing headwinds. Seven PSUs are earmarked for disinvestment in this financial year: Indian Oil Corporation (IOC), Steel Authority of India (SAIL), National Thermal Power Corporation (NTPC), Rural Electrification Corporation (REC), Power Finance Corporation, Neyvelli Lignite Corporation (NLC) and National Hydroelectric Power Company (NHPC). Public sector banks were first on the list and now it is national carrier Air India’s turn. Once considered upstarts, Indigo and Spice Jet are looking at the possibility of acquiring Air India.

But some PSUs are here to stay, not just because they are being run well enough to make decent profits. Majority control of PSUs in strategic and sectors like public transport (Railways), those linked to the nation’s fuel security (ONGC, GAIL), financial security (SBI), power (NTPC) etc., will remain with the government. Which means that PSUs as a concept are here to stay but they will have to up their game as these disinvestments are a sign that the government will not bail them out for lax financial management as in the past.

A job in a PSU is still a much sought after option, as it comes with many benefits, like accommodation and medical coverage. With salaries not keeping pace with the cost of healthcare, it is no wonder that reliable and quality healthcare facilities for the family and post retirement, is a strong pull factor. With huge employee bases, some of these disinvestments might face trouble from employee unions, who fear that they will lose out on key benefits.

Take the case of the Indian Railways. According to, there are 125 railway hospitals, with 13963 beds and around 133 private recognised hospitals. To put this into perspective, Apollo Hospitals Enterprise Limited (AHEL) had a bed count of 9,554 as per their FY2016 annual report, with plans to add another 1,045 beds in the next three years.

With a bulging pension and consequently medical expense spend, there is no doubt that the Railways is a key provider of healthcare services to a sizable section of India. Healthcare facilities run by all PSUs are open to the general public, at slightly higher fees than their own employees.  As the cover story in the July issue of Express Healthcare points out, PSUs are more crucial contributors to the country’s healthcare indicators, with a better reach than the private sector in some cases. (See pages  18-21, Healthcare PSUs: Energising change)

There are signs that PSUs are taking a closer look at their employee benefit policies. The Railways is the largest government employer with over 13.35 lakh employees and correspondingly has the highest number of pensioners. Last year, the authorities got a rude shock when they realised that among PSUs, the Railways had the largest increase in pensioners in the 80-100 years age group. Numbering 2.86 lakh pensioners, the 80-100 age group formed 20 per cent of the its total pensioner population of 13,75,483 and drew a combined pension of at least Rs 8,000 crore. (

The Railways immediately embarked on a house-to-house drive to verify signatures of pensioners in this age group, obviously suspecting that many of these could be fake. The obligation to subsidise the healthcare of an increasing number of aging pensioners, as well as current employees and their dependents, will definitely impact the railway’s health budgets. Almost all PSUs will scrutinise their health spends to ensure that the funds get maximum spread. Part of this employee health spend is at empanelled private sector facilities, given that PSU health facilities pass on the more complicated cases to multi-speciality hospitals. These empanelled hospitals too could see increased critical scrutiny by PSU benefits committees as they try to link health outcomes with funds.

PSUs would find themselves backed into a corner. Employees will demand better care, while  PSU managements will be compelled to look for ways to cut cost and squeeze out more productivity and efficiencies. This could lead to many flashpoints in the near future.

As some of PSU disinvestments come through, it will be interesting to see how the restructured managements manage to maintain the same commitment to healthcare and other employee benefits.

Viveka Roychowdhury