Time to revisit Roongta report

By: | Published: December 3, 2014 1:21 AM

The government needs to expedite implementation of Roongta committee recommendations aimed at making...

The government needs to expedite implementation of Roongta committee recommendations aimed at making the central public sector enterprises globally competitive through enhanced functional autonomy. The report  was submitted in 2010 to the UPA government, but action on it is still awaited.

The CPSEs need more functional autonomy to compete with nimble-footed private players as the Modi government prepares to further open up the economy. Many policies governing PSUs have outlived their utility and need to be replaced with policies suited to the emerging business environment.

For example, because of the requirement of at least two years of unspent service, many competent officials are unable to apply for the top job, making the task of head-hunters difficult. The Roongta panel has recommended dispensing away with this policy.

The committee has also suggested fixing a minimum three-year tenure for managing directors and chairmen to bring some stability in the management of PSUs.

The government should also reform policies to free PSUs from the clutches of administrative ministries, which tend to unnecessarily interfere in the day-to-day affairs of corporatised entities, hampering decision-making. A holding company model has been under debate for a while but no decision has been taken so far.

By speeding up PSU reforms, the government can also better manage its disinvestment programme. Most PSU stocks trade at a discount on exchanges owing to the risk of the ministries interfering in their working and imposing policies which could hurt their commercial interests.

PSU stocks will definitely get a major boost if the recommendations of the panel are implemented. That would in turn help the government reap higher proceeds from PSU sell-offs.

The panel has also affirmed that having a business development committee in addition to the audit, human resources and remuneration committees would help strategise and evaluate business development proposals and guide a company’s diversification, acquisition, joint ventures, new business entry, organisational structure review, etc.

The committee recommended that the Comptroller and Auditor General of India (CAG) publish an annual report on the best practices in different CPSEs, as observed by it in the process of doing the oversight functions, to be shared with other CPSEs. This, according to the

Confederation of Indian Industry, is expected to not only help CPSEs learn from each other and improve their performance but also create a positive mindset around the role of the CAG among them.

The committee has recommended that at least 30 additional CPSEs be listed in the next three years. Additionally, where there is a specific need to enter a partnership in line with the board’s approved strategy, an in-principle clearance should be taken from the administrative ministry.

To reduce government intervention, the panel has suggested segregation of the government nominee’s role on the board from his position in the government. This would empower the government nominee to suggest perspectives in line with other independent directors without prejudice.

Any official views of the government could be conveyed to the board during board meetings. This ensures that government views are taken into consideration along with the other stakeholders.

The panel recommended increased autonomy for CPSE boards in the selection of consultants, vendors with proprietary technologies, technology partners, joint venture partners and acquisition of companies. It is necessary to give CPSEs more flexible selection/search processes and the provision to negotiate settlements. However, such autonomy will bear fruit only when managements are provided with clear guidelines.

The committee further observed that the CPSEs have little say in the board composition. Boards often lack domain knowledge, and there are delays in appointments. The report suggested that the department of public enterprise/the public enterprise selection board (PESB) should formulate a panel of approved names from where independent directors can be selected.

This panel of directors should be updated every six months. Apart from administrative ministries, CPSE boards should be allowed to suggest names of independent directors to the panel. The nomination committee should identify knowledge gaps in the board and recommend candidates from the approved panel. The Central Vigilance Commission should examine the database of directors/personnel and make vigilance clearances to them available online.

The committee recommended that a separate body should be constituted within the PSEB specifically for the selection of CMDs and CEOs of Maharatna and Navratna CPSEs.

In addition, a vigilant framework should be developed in discussion with the CVC. However, internal vigilance clearance should not be the responsibility of the central vigilance officers (CVOs) of CPSEs. Instead of assigning CVOs on short-term deputation, the CVC should maintain a panel of CPSE executives–at the level of executive directors and directors–who could be evaluated for the positions of CVOs.

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