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Dented confidence: The ‘trust’ element in PPPs

The exit of National Skill Development Corporation CEO, and the circumstances leading to it, has led to a trust deficit in India Inc.

Written by P Vaidyanathan Iyer |
November 24, 2015 1:09:57 am
Arun Shourie The sudden exit of Dilip Chenoy, managing director and CEO of National Skill Development Corporation (NSDC), the company tasked with skilling India’s millions, has left India Inc perturbed.

Prime Minister Narendra Modi listens intently to India Inc. In his limited interaction with industry leaders, top executives, research analysts, bankers and economists, he has patiently lent his ear to their woes, complaints and suggestions. He seldom interrupts them, except when he has to take his own officials to task. But at the end, he chooses to deliver a message of his own, often laced with anecdotes from his own experience of running Gujarat. He hasn’t met them a lot since he assumed charge, neither in groups nor individually. But, in the last 18 months, his government too has not done enough to enthuse the private sector to start investing. On the contrary, in at least a couple of instances, the government has sent signals that it is not so keen to work closely with the private sector. And it hasn’t been able to let the private sector take the driver’s seat even in areas understood best by the latter. There are three examples where his government has not quite appreciated the expertise that the private sector brought to the table. In doing so, it has actually dented the confidence of India Inc, and the industry at large.

Let’s start with the last one. The sudden exit of Dilip Chenoy, managing director and CEO of National Skill Development Corporation (NSDC), the company tasked with skilling India’s millions, has left India Inc perturbed. Several high-profile private sector members on NSDC board have made their concern known to the government. The Ministry of Skill Development and Entrepreneurship may not publicly acknowledge, but the circumstances under which Chenoy quit, has left a bad taste. An NSDC board member, who did not want to be named said, private sector executives will think twice before accepting any government offer. Chenoy’s exit, as another private sector representative on NSDC board confides, was without “grace” and “humaneness”.

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The NSDC board, over its last two meetings — on October 13 and more recently, November 9 — decided to appoint an interim CEO, and simultaneously advertise for hiring a full-time professional. But the exit of Chenoy, who was director general, Society of Indian Automobile Manufacturers (SIAM), and earlier with the Confederation of Indian Industry (CII), has raised larger questions over the government’s appetite to handle public-private partnership (PPP) ventures.

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NSDC, structured as a not-for-profit company under Section 25 of the Companies Act, is 51 per cent held by the private sector with the balance 49 per cent owned by the government. Formed in 2008, it started functioning effectively in 2010 and in the last five years, claims to have trained 36.46 lakh youths, of which 22.52 lakh have been employed, translating into a placement achievement rate of 62 per cent.

In the October 13 meeting, when Chenoy’s resignation was placed on record, private sector representatives on the NSDC board took strong exception to the circumstances under which he quit. Representatives from the government too were present in the board meeting. When contacted, Rohit Nandan, secretary, skill development ministry, said he was too new to the job when this happened. “It would be good if you talked to NSDC chairman about it,” he said. He denied when asked if the NSDC chairman expressed any concerns about the events and the manner that led to Chenoy’s resignation. Chenoy denied to comment on the affair, and said he would rather let the NSDC spokesperson do the needful.

NSDC, initially under the administrative control of the Ministry of Finance, was brought under the purview of the Ministry of Skill Development and Entrepreneurship by the NDA government last July. Soon enough, the Comptroller and Auditor General (CAG) was allowed to audit its books.

Meanwhile, in the backdrop of Assembly elections in Bihar, the ministry asked NSDC to set up 40 model or iconic skill development centres in each Parliamentary constituency of the state to skill school dropouts. It curtailed the travel plans of the NSDC brass and at times, called it for meetings at very short notice. There were skirmishes too over footing bills of government representatives on the NSDC board for their overseas travel.

As things were getting difficult for Chenoy, the CAG sent its ‘long para’ — observations based on an in-depth examination of NSDC’s books — to the ministry for comments in August this year. The auditor took a critical view of the change in NSDC’s structure from a public limited to a private limited company and the high remuneration for its brass compared with other PSU heads. It also said that despite being funded by the taxpayers’ money, the government did not make efforts to increase its ownership rights and board representation in the company.

While the NSDC gave a point-by-point response to CAG’s concerns, a board member of NSDC, who did not wish to be named, told The Indian Express, “The CAG did not make a fair comment. This model has been extremely good… It is true that the private sector did not put in any significant money in NSDC as equity, but in five years, the company has put in place a system that is scalable.” What the government does not realise, the board member said, is the fact that NSDC funded ventures only to the tune of 60-70 per cent. “The balance money was raised by the private company on its own,” the board member noted.

But this is not the first time that a private sector executive’s tenure came to an end under extenuating circumstances. The government had decided not to extend the tenure of Raghu Raman as the CEO of Natgrid (National Intelligence Grid). It was conceived as an intelligence gathering mechanism to counter terror after the 26/11 Mumbai attacks. Raman was heading a joint venture between Mahindra and British Aerospace before he joined Natgrid on December 1, 2009. He drew a salary of Rs 10 lakh a month, much higher than a secretary-level rank officer in the government. Many in the bureaucracy raised an eyebrow in the case of Chenoy too, who drew a Rs 1 crore annual package.

Two other ventures, India Brand Equity Foundation (IBEF) set up by the government in association with the Confederation of Indian Industry (CII) and Invest India, in partnership with the Federation of Indian Chambers of Commerce and Industry (Ficci), have also more or less been taken over by the government. They were funded by the government, but were driven by private sector executives. Now IBEF has moved its office from Gurgaon to Udyog Bhawan, home to the commerce and industry ministry and Invest India is learnt to be relocating to the Vigyan Bhawan Annexe from its office at the Ficci headquarters in Delhi.

When asked about exit of private sector CEOs from PPPs, NSDC chairman S Ramadorai, said, “PPPs are an essential model for creation of measurable impact on the ground. Dialogue, discussions and outcome measures result in getting the best out of all stakeholders. The youth of this country need to benefit in terms of jobs and a vibrant entrepreneurship ecosystem. Nation building is all about a commonality of purpose with youth at the Centre and no turfs or rigid positions.” The last few words ring the loudest: no turfs or rigid positions.

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