Separate ownership and management
The Centre is finally moving on the recommendations made by an expert panel led by SK Roongta, former chairman of Steel Authority of India, to reform the functioning of the central public sector enterprises (CPSEs). A group of ministers (GoM) has been formed to take a final call on the issue.
This is a positive step given that the committee?s basic mandate was to suggest ways to make CPSEs more proactive and result-oriented in reaping opportunities available in the global market. Today’s fast-moving market calls for an expeditious decision making process?something that is crucial to making CPSEs competitive.
However, the moot issue is whether the committee?s recommendations are enough or we need to go beyond that to empower CPSEs so that they could operate in both overseas and domestic markets with the same freedom as available to multinational companies?
Despite the far-reaching reforms of the 1990s, the work culture of CPSEs still seems to be driven by the necessity to comply with procedures rather than results. PSUs remain subjected to a multi-layered accountability framework involving administrative ministries, Comptroller and Auditor General, Central Vigilance Commission and Parliament.
CPSEs have to deal with too much governance which delays their decision-making and exacts a toll on their operational performance. If the government really wants CPSEs to become multinational companies, the surveillance layer has to be rationalised.
The Roongta committee has suggested a redefining of the roles of supervisory bodies like the administrative ministry and the vigilance vis-a-vis CPSE. Further, the panel has also favoured making the process of selection of chief executives less complicated and more reliable by carrying out CVC clearances just after the shortlisting of candidates for interviews.
Some of the recommendations of the committee are quite path-breaking and could go a long way towards making CPSEs competitive. For example, the suggestion to fix a minimum three-year tenure for chief executives while dispensing with the condition that those applying for the job of directors should have at least two years of service left is one which would go a long way towards ensuring that there is a big enough pool of experienced executives available for filling the top vacancies in CPSEs. The committee has also supported the idea of granting functional and financial autonomy to CPSE boards in creating new posts below the level of director, though payment may be made to them according to the guidelines laid down by the department of public enterprises.
It also favoured setting up a separate specialised body within the Public Enterprises Selection Board (PESB) exclusively for the selection of chiefs of Maharatna and Navratna CPSEs. ?The criteria for selection should have greater emphasis on the leadership qualities, strategic thinking, capabilities to manage the external environment and domain expertise. Appointment of CMDs should be made three months before the term of the incumbent CMD is to expire?, the committee said.
The committee has also proposed setting up a Standing Empowered Committee to approve joint venture investment proposals beyond the financial autonomy of the CPSE boards.
But there are experts who suggest that the government needs to go beyond what has been recommended by the Roongta panel to separate CPSEs from the day-to-day control of the administrative ministries. Why should the government place curbs on a CPSE board’s financial powers when it can easily raise funds from the market like private players?
?There is a board of directors to supervise the functioning of a CPSE management. The board?s work is in turn reviewed by the administrative ministry. The government?s concern should be only that the CPSE is making profit, that it is doing corporate social responsibility and that it is functioning in an ethical manner. Beyond that, it has no business to meddle in the CPSE?s functioning?, one expert told FE.