1. PM Narendra Modi to prod heads of public sector enterprises

PM Narendra Modi to prod heads of public sector enterprises

Capex, autonomy, procurement policy, role of independent directors likely to be on agenda.

By: | New Delhi | Published: October 20, 2017 6:47 AM
NDA, National Democratic Alliance, Narendra Modi, central public sector enterprises Prime Minister Narendra Modi. (PTI)

The National Democratic Alliance (NDA) government is drawing up a strategic plan for the central public sector enterprises (CPSEs) in what could signal its intent to revamp these units in order for them to contribute to the economy and nation-building in a more efficient manner. According to official sources, Prime Minister Narendra Modi will deliberate with the top executives of these companies on the ways to improve their performance. CPSEs in recent years have enhanced their profile with a much larger share in public investments without compromising on their contribution to the government coffers by way of dividends and taxes. In the first conference with the CPSE top brass after he assumed office, Modi will ascertain from them the ways to make these companies capable of playing transformative roles to boost economic growth, the sources said. At the same time, the government is going ahead with its plan to complete strategic sales of a clutch of CPSEs this fiscal, in what marks revisiting the policy after 13 long years. On their part, the CPSE chiefs are likely to list out key issues faced by them like autonomy, disinvestment plans, and the need to improve the memorandum of understanding system with the government where financial targets are set. Making the boards of these firms more professional and flexible to market realities is also on the agenda.

Given the easing of the exclusivity enjoyed by the state-owned companies in government procurement, these firms are in greater need to grapple with market realities. At the same time, sources said, certain obligations cast on them by the government are constraining their efforts to compete with private firms in the market place. Ahead of the the conclave with the PM in November, a meeting of CPSEs would be organised on October 31 by the department of public enterprises (DPE) and the administrative ministries concerned. Already, DPE and the relevant ministries have started holding informal rounds of meetings with groups of government-nominee directors, independent directors of CPSEs in preparation for the session with Modi.

With private investment hard to come by, the central PSUs came to the rescue of the economy in the last couple of years. With persistent government prodding, the CPSEs are investing about Rs 4 lakh crore in various projects in the current fiscal, Rs 1 lakh crore more than the government capex of Rs 3 lakh crore. The central PSUs invested Rs 3.2 lakh crore and Rs 4 lakh crore in FY16 and FY17 respectively, compared with Rs 2.53 lakh crore and Rs 2.9 lakh crore in FY16 and FY17, respectively, by the Centre via the Budget.

Among other issues, the the role of independent directors in CPSEs may be raised as many of them are not able to function independently due to conflicting government guidelines, sources said. The Companies Act requires independent directors to act independently, but there are government guidelines that require them to first deliberate the issues with relevant ministries before taking a position on the board. This practically undermines the role of these directors, an official said. Similarly, issues related to quality of capital expenditure are also likely to be raised in the meeting with the prime minister.

The overall net profit of the 244 operating CPSEs went up by 12.54% to Rs 1.16 lakh crore in FY16. They recorded a turnover of more than Rs 18.54 lakh crore, which was 7% less than that of previous year. CPSEs contributed more than Rs 2.78 lakh crore in FY16 to the central exchequer by way of duties, taxes, interest, dividend, etc, up 38.6% year-on-year. The CPSE with the highest market capitalisation is Oil and Natural Gas Corporation at Rs 2.19 lakh crore (BSE). The 47 listed CPSEs constituted 10.7% of the total market capitalisation of companies listed at as on September 29, 2017.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

  1. No Comments.

Go to Top