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Govt weighs greater autonomy for CPSEs

NEW DELHI :
The Union government is in the process of granting greater autonomy to central public sector enterprises (CPSEs), allowing them to be professionally run and giving them a greater say in making business decisions to help them compete with private-sector rivals on an equal footing.

“The cabinet secretariat has been deliberating the matter since January with the ministry of finance, NITI Aayog and the department of public enterprises. A draft note has already been prepared based on which inter-ministerial consultations will begin soon,” a government official said on condition of anonymity.

Speaking at a post-budget interaction at IIM-Ahmedabad on 25 February, finance minister Nirmala Sitharaman said India’s new PSE policy had paved the way for the presence of public enterprises in a scaled-up and professionally run manner in strategic sectors. “Even if they are one or two or three or whatever bare minimum (PSEs) is for that particular sector, it will be a public sector undertaking of a good, solid presence. So, it is a commitment from our side to ensure we are going to make professionalized, well-managed, well-endowed PSEs that will be nimble in their operations,” she added.

Announcing the new PSE policy in the FY22 budget, Sitharaman said a bare minimum of PSEs will be maintained in four areas of strategic sectors, and the rest privatized, while in the non-strategic sectors, all PSEs will be privatized or closed.

The group of strategic sectors identified include atomic energy, space and defence; transport and telecommunications; power, petroleum, coal and other minerals; banking, insurance and financial services. Later, notifying the policy, the disinvestment department said that in strategic sectors, the bare minimum presence of the existing public sector commercial enterprises at the “holding company level” will be retained under government control.

R.S. Sharma, former chairman and managing director of ONGC Ltd, said giving decision-making autonomy to CPSEs is a very good idea in principle, provided it is implemented in spirit. “At present, nothing moves in the PSEs without a nod from the administrative ministries because they don’t want to lose control over PSEs. The entire decision-making process should be given to the board of directors. A succession plan should be set in motion in PSEs well before the chairman retires, and potential candidates should be identified well in advance,” he added.

In a report on PSEs for FY19, a parliamentary committee recommended that empowered PSE boards, comprising independent experts will enhance the quality of decisions, overall management supervision and governance, while ensuring that nearly all strategic decisions are taken at the board level and not passed on to the respective ministry, thereby increasing the speed of decision-making.

“For instance, the board must be sufficiently empowered to take nearly all strategic decisions such as formation or dissolution of partnerships/ joint ventures, mergers/ acquisitions, the appointment of CEO, creation of below board-level positions, etc. The board must also be permitted to appoint new directors to replace retiring board directors, as is the case with private organizations,” the report said.

The panel said while PSEs must adhere to the highest standards of governance, excessive scrutiny from the Central Vigilance Commission and the Comptroller and Auditor General and the fear of the Central Bureau of Investigation often leads to stalled or over-cautious decision-making. “Distinction must be made between mala-fide action and taking a business risk. The former needs to be punished, while the latter, protected. Further, fraudulent and mischievous complaints (with mala-fide intent) against PSE management personnel should be penalized,” it added.

A query sent to the finance ministry didn’t elicit any reply till the time of going to press

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