The central public sector has been in a transformation phase ever since the government started economic liberalisation in 1991. Reforms have brought confidence to CPSEs. Meanwhile, the government is mulling further reforms to improve the functioning of the CPSEs so that they could compete with the private sector on an equal footing. DPE secretary Bhaskar Chatterjee spoke to FE?s Praveen Kumar Singh and Subhash Narayan about new reform measures being considered by the department. Excerpts:

The government has granted mini-ratna, navratna and maharatna status to CPSEs to enhance their autonomy. How far have they benefited from this empowerment?

PSUs still show reluctance in taking decisions fearing CVC, CBI and other investigative bodies. The public sector is still not sure how much decision-making powers it has. I think there is no real way to get around this problem because the public sector is answerable to Parliament. But a good thing is that now they are shedding their conservativeness.

In a new trend, PSUs are increasingly hiring manpower on contract. How healthy is this practice?

It is a very healthy trend and should be pursued. Recruitment is a major problem in the public sector because for us recruitment is a cradle to grave issue. We don’t have the flexibility of firing as the private sector has. Once we recruit an employee we have to service the pay for 40 years, and even post retirement, for many years we will have to look after him. But a PSU may need a person for a particular job that may last for just five years. So I should hire a person for five years and not for 70 years. Therefore, like in the private sector, CPSEs should have dedicated staff at the headquarters and branches. For all other works, they should go for contractual labour. This is the order of the day, globally.

Currently, there are 300 vacancies for independent directors on the boards of PSUs. Is that not an alarming scenario?

If we presume that you have 3-4 independent directors? post on the board of a PSU, the total number of such directors will turn out to be at least 1,000 considering 249 PSUs are in existence. At any given point of time, there will be 15-20% vacancies for independent directors no matter how hard we try. Vacancies in the range of 150-200 are an acceptable level.

PSUs have been criticised for delayed decision making, one of the reasons for which is overloaded boards. How can we deal with this problem?

The size of the board is a function of the size of functional directors on the board. If a listed PSU says it needs six functional directors, the overall requirement of independent directors would be eight as the government would also put in two of its own nominees on the board. This is a Sebi norm and companies have to comply with it.

How well are PSUs implementing CSR programmes?

Companies are doing CSR work, but when you ask them what specific activities are you doing for CSR, they say things that don’t fall under the framework that we have prepared. I asked one company recently (not naming the company) what do you do on CSR, the PSU replied that we do all our CSR activity on the 31st March of every year. Why? Because the PSU writes cheques to temples and NGOs. That is their CSR. We have said in our guidelines that donations are not CSR. Similarly, housing, hospitalisation, etc. of own staff are not CSR. However, we are seeing signs of gradual acceptance of the new system by companies because this is something that they have to do whether they want it or not. Winds are blowing in this direction across the globe.

The latest PSE survey (2009-10) shows the market cap of CPSEs has dropped as a percentage of the market cap of BSE-listed firms year-on-year. What is the reason?

Oil marketing companies contribute the most to the total market cap of CPSEs and ironically they are facing under-recovery. However, the market cap of CPSEs will improve dramatically next year. We are a very small percentage in terms of number of companies in the market place, but account for almost 25% of market cap. As we list more companies on stock exchanges, our market cap will shoot up.

DPE is understood to have prepared guidelines on employee stock options? What is the implementation status?

We have asked CPSEs that 20% of performance related pay should be given as ESOP to non-unionised employees to give them long-term benefits. Nalco has already moved in that direction a month ago. I hope many other companies will move in this direction soon.

The government keeps cleaning the balance sheets of sick companies but nothing is done for their future. What is DPE doing about it?

We have proposed that a corpus be created to fund the future plans of sick companies. It would be funded through budgetary support and the corpus can be replenished once the company starts making a profit.