Segregate ownership and management, say experts

Greater autonomy in administrative and financial matters, setting up a holding company for quicker decision making, promotion of inclusive development through CSR are few key initiatives needed for reforming PSUs

GN Bureau | November 8, 2014


(From left to right) M Narendra, RG Rajan, UD Choubey, Ajay Dua, RK Tyagi, Kishalaya Bhattacharya
(From left to right) M Narendra, RG Rajan, UD Choubey, Ajay Dua, RK Tyagi, Kishalaya Bhattacharya

Greater autonomy in administrative and financial matters, setting up a holding company for quicker decision making, segregation of ownership and management and promotion of inclusive development through corporate social responsibility (CSR) are few key initiatives needed for reforming public sector undertakings (PSUs). This was deliberated by experts in a panel discussion on 'unlocking the potential of PSUs' at PSU Awards, 2014, organised by Governance Now on November 7.

Ajay Dua, former secretary, ministry of industry and commerce underlined two main points: the idea of disinvestment and ownership of PSUs. Dua said there are some positive developments towards disinvestment. Oil and Natural Gas Corporation Limited (ONGC) would be the first corporation to make an announcement in this regard and other companies might follow the suite.

He added that the government is open to the concept of privatising sick companies which cannot be revived under the government purview.

Dua also spoke about the ownership relationship between the PSUs and the government. “Ownership has been mixed up with management,” Dua said.

Dua pointed out that separation between the two, management and ownership, would double the efficiency.

Citing the example of France where the biggest players were government owned, Dua said that the French government never got involved in the day to day decisions. “They are only concerned with the end result. All routine decision making is left to a board which is duly appointed,” he said. “The concept of multiple-accountability has driven away flexibility here,” said Dua.

Speaking about the need for PSU-related reforms, RK Tyagi, chairman, Hindustan Aeronautics Limited (HAL) said that time has come for public enterprises to have a holding company which can take major policy decisions.

Speaking on disinvestment, Tyagi said the guiding principle for PSUs is to contribute for the society. The disinvestment proceeds can be used well for needy sectors. “There are 20 crore people who are not assured of the second meal of the day. Money from disinvestment can be used to help these people.” Tyagi also talked about investing more in research and development (R&D) and skill development.

RG Rajan, CMD, Rashtriya Chemicals and Fertilizers Ltd, said that the PSUs always look towards the government for directions. “Government directives should be given as per requirements of companies. International benchmarks should be implemented.”

He said there was no ownership policy in regard to PSUs. There was a need for the private-public partnership model to be implemented.

Vinay Sahasrabuddhe, national vice president, BJP, spoke about corporate social responsibility (CSR) by the public enterprises. “PSUs can go extra mile where government and NGOs haven’t gone and can ensure that welfare scheme reaches to the people”, said Sahasrabuddhe.

He said that there is a need for evolving a new CSR culture. “If the achievements of the PSUs are well documented more and more such public enterprises will get motivated,” he said.

Kishalaya Bhattacharya, national business head – government and PSU and business alliances head, Ricoh, said that reforms were needed in the PSUs since the policy in the government had changed.

He said that disinvestment as such was not helping either PSUs or people who are looking to grow with the PSUs.

He also said that both the PSUs and the government would get maximum benefit if private players also got involved.  He added that the comfort level in PSUs is too much, it has to be decreased.

M Narendra, former chairman and managing director, Indian Overseas Bank, said that right from historical nationalization public sector banks (PSBs) had important role to play in economic development and growth.

Further stressing upon the importance of PSBs, Narendra said, “PSB plays major role in providing credit to infrastructure sector where private investment could not suffice the needs.” He also added public sector bank gave huge credit to the tune of Rs 1 lakh crore every year to agriculture sector.

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