Decision-making in the public sector

World Bank Reprint Series: Number Ninety-six V. V. Bhatt Decisionmakilng in the Public Sector Reprinted with permission from Ecmomnic and Political Wveekly, Bombay, vol. 13, no. 21 (May 27, 1978), pp. 30-45  Decision Making in the- Public Sector Case Study of Swaraj Tractor V V Bhatt The ch(7racteristic fcature of the dcvelopm/ent process since Wor7ld War II hlas beenz thte deliberate ass tumption by'the State of the function of reguluating the I'eiee and pL.L'ttrl of socio-econonlic developmIent) In a large number of LDCs, the? State is also playing an ive role in p)romnoting and managin" enterprises in the manufacturing sector, The fun*ctioningzr (atnd growth of these enterprises depen(l on the decision- making process in the public sector. This proces.LS of riecision7 making, wvthich is ccmiplex entpoigh in the private sector, is inevitahlly mzuch more! conplcx in the putblic sectorA. This case studq of the Swarai traec 'r h1as beenz undertaken with a view to uindcrs tci,ili, the pro- blem of decision-making in putblic manufacturing enterprises in lndia. The paper is diiiclecl into five sections. Section 1 provides somne informnat'ion about the tractor in- dusfry in general, Secticin II narrates the storyt of the .SThvarai tractor. In Sections III and IV sonme pro- blems abouzt the decision-making process care raised and some conjfectures mnade abouzt puiblic sector be- havizour. In the final sectioA,z an attempt is made to formzulate somne explaznatory hyi,pothieses abolut the public sector decision-making process .-Z hypctheses that mnany have general relevance for the LDCs with mixed economies. I tractor case, the year when the new agricultural Introduction There is another charlacteristic of strategy - the so-called green revolu- BEFORE we present the Swarai trac- the tractor industry that is also rele- tion - was formulated. The domestic tor case, it is essential to give some vant to niote. In the tractor industry ipmoducrtion of tractors started in background with regard to the tractor there are economies of scale both in i9fli-fil with a licensed installed capa- industry. In North AmeriLc.a tractors Production as well as dkitribution. It city on a two shift basis of 8,500 units began to replace draultht animals has been estimated for the US that by two firms Tractor and Farm (usually horses) around 1900 and this approximately the same economies of Equiipment (TAFE) and Bicher Tractors substitution process was completed be- scale, around 20 per cent, would attach Indlia Ltd (Eicber)-the former with fore World War II. In Europe, this to distribution expansion from 20,000 a capicitY of 7,000 units and the substitution occurred during the first t` 9,)(A( IlTits as woull(d acilre to a latter with a capacity of 1,500 units. decade after the war as small versatile rdution cxpanlicri.6 This is part Both were permitted foreign colla- tractors and government suppor.t for f the rea,sen why the industry in thle boration in 1961. TAFE with Massey- tractor purchase became widely avail- W`est is dotyiuatdl bv a few rirmiis. re- Ferguson, UK and Eicher with Eicher able.3 sultine ini lioliolistie coiiipctition as of the Federal Republic of Germany. Most of the technical d&velopment well as colluion. As against this domestic capacity, it of the tractor had taken place by In a durable good like a tractor, the was estimated that the demand for World War II and much of it occurred farmer essentially buys tractor services traclcrrs would increase substantially as in the US. However, the truly revo- and henice is c-oncerned in his purchase a result of the adoption of newv agri- lutionarv deo elopment of the pre-war dfecision about after- sales service and cultural strategy in Punjab, Haryana period, the "Ferguson System", came parts ivail.cllty. Farmers' loyalties or and Western UP. With large increases not from the US but from the U.1K and preferenice are dealer orientel and in land prodcictiity, farmers were fac- was introduced in the US in 1939. By sales of tractors thus crucially depenid inig a farm power shortage dlurinig the this time tractor-technology had moire