ABSTRACT
In the Indian context, the operation of soft budget constraints and monopoly privileges when conjoined had a decisive impact on the operations of state owned firms. It is a well known fact that inertia plays an important role in the persistence of institutional anomalies of all manner. Dysfunctional or unprofitable departments do not in any way compromise the survival of the firm, and while irate customers might resort to voice to communicate their complaints and grievances. It is true that in certain situations where ownership is completely delinked from management, giving rise to an agency-information problem, the efforts of state authorities to compel productive efficiency from managements can be hindered by the lack of adequate information about the causes of poor performance. As management theorists are fond of repeating, developing 'correct' policies for restructuring is not sufficient; an organizational capacity or 'will' to restructure is also necessary.
