Unleashing enterprise

The Cabinet has taken the first welcome step towards greater autonomy for Central Public Sector Units. Following the recommendations of the Report on Empowerment of Central Public Sector Enterprises prepared by a group of experts headed by Arjun Sengupta, the Cabinet gave the navratnas and mini-navratnas the powers of mergers and acquisitions without having to get government approval. The Cabinet also gave central PSUs the powers to set up subsidiaries or Joint Ventures up to Rs 1,000 crore without government permission. The limit for capital expenditure without government approval has also been hiked. Greater powers have been given to PSUs for foreign travel.

These decisions are welcome. However, this is only a limited step and much more needs to be done. The managements of PSUs should be given autonomy over labour, managerial, pricing and investment decisions like private companies. The expert group, for example, wants Central PSUs to have independent boards. It recommended that the concerned ministries should not interfere with their functioning. The management of the PSU should be accountable to the board and not to the ministry. The ministry concerned should not review the PSU more than twice a year. Instead, supervision should be done by sector specific supervisory boards. Supervisory boards on energy, manufacturing, infrastructure, trading and services, food and agriculture and social sector have been proposed.

The government should now implement the other recommendations of the committee. It should create an environment in which PSUs can operate like businesses instead of being treated like domains of ministries regardless of the commercial interests of the enterprise. This should be a first step to creating enterprises that can later be saleable. Having given autonomy to its PSUs, the government should then be free to sell off its stake — even beyond 51 per cent — without having to seek Parliament approval, as recommended by the Sengupta committee.