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Give them space

The government would do well to respond to the PSU demand for more autonomy

Written by The Indian Express | Published: October 24, 2012 2:56 am

At the prime minister’s first major meeting with PSU chiefs,structured along the lines of his recent interaction with the heads of major private sector companies,the essential point that those at the helm of the country’s top 25 state-owned enterprises tried to drive home was the need for real autonomy in decision-making. It’s not a new demand. But it assumes greater significance at a time when a number of these companies find themselves pulled in different directions,with the finance ministry asking them to unlock their cash reserves and the administrative ministries advising caution. This invariably leads to a tug-of-war in the boardrooms of the “maharatna” and “navaratna” PSUs.

A case in point is Coal India’s legal spat with The Children’s Investment Fund. This stems from the ministry’s decision on a coal pricing policy that appears to militate against the long-term commercial interests of the company. There are other examples of the same syndrome,such as engineering major Bharat Heavy Electricals Ltd losing out on a potential acquisition bid involving the Czech power utility company Skoda Power four years ago,largely because of the time taken in acquiring administrative clearances. Delays in wading through clearances have also put paid to the chances of public sector natural resource firms acquiring assets abroad — unsurprisingly,the strike rate of Indian PSUs is abysmal when compared with their state-owned counterparts from China or even Indian private sector companies. While the issues of autonomy and empowerment figured on the top of the agenda,the discussions at the PM’s meet also included issues such as managements acquiring a say in a company’s disinvestment plans and improvements in the annual target fixation model.

The fact that,despite the shackles,a number of public sector enterprises have managed to make a mark for themselves,comparable to their competitors in the private sector,is encouraging. That these state-owned companies matter in the larger scheme of things is illustrated by the fact that the 248 Central public sector enterprises together registered a turnover of Rs 14,73,000 crore in the financial year 2010-11,of which the 45 listed PSUs together account for 22 per cent of the total market capitalisation of all the companies listed on the BSE. The time has certainly come for a clear-sighted and coherent policy that enables these firms to carry out their businesses in uncluttered commercial terms.

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