In 1954, Pandit Jawaharlal Nehru had described public sector enterprises (PSEs) as ‘temples of modern India’. PSEs were conceived as instruments to bring socio-economic transformation of the country. Those were the mainstay for self-reliant growth. Some important objectives were to create infrastructure, absorb technology, encourage innovation, generate employment and achieve certain social objectives. Private capital was inadequate. Public sector was dominating the corporate sectors. Talents got attracted toward PSEs. They emerged as model employers. It was expected that PSEs would generate surplus after some years of operation. However, except a few PSEs, most of them could not provide reasonable return even after few decades of operation. Later the government had pronounced that the core objective function of PSEs, which are engaged in commercial activities, is to ‘create shareholder value’ or in simple terms to ‘make money’, albeit without taking recourse to unfair means. Most of PSEs compete with private sector companies. Therefore, they adopt private sector management practices, such as appointing employees on contract, to the maximum extent possible. They also use the same performance metrics, which are being used to measure the performance of private sector enterprises. The Department of Public Enterprises (DPE) issues PE Survey every year covering the performance of central PSEs. The latest available on its website is the survey for the year 2010-11. During the five-year period (2006-07 to 2010-11), the turnover of CPSEs has increased from Rs 9,64,890 crores to Rs 14,73,319 crores, which is an increase of around 53 per cent. On the other hand, the number of employees (excluding casual and contract employees) has gone down from 16.14 lakhs to 14.44 lakhs, which is a decrease of around 11 per cent. The decrease might have resulted from the increase in the ratio of ‘the number of casual and contracted employees’ to the number of total employees and marginal increase in turnover per employee. There is a chapter on performance overview. It does not provide information on CSR and sustainability initiatives or contribution in social development. These show that the government expects PSEs to focus on the objective of generating surplus.
In spite of this radical change in the objective of PSEs, they are often used as instruments to implement public policies. For example, the government, some times, prompt the investment and lending policies/decisions by public financial institutions, it often subtly guide the dividend policy to match its financial requirements, and it administers pricing of some petroleum products being marketed by PSEs on socio-economic considerations.
India is now ushering into another phase of socio-economic transformation. No one argues against the CSR and sustainable development. The government has taken various initiatives to persuade companies to take up the responsibility to make the living of this and future generations better. It has issued various guidelines, including the guidelines on the social, environmental and economic responsibilities of companies. The guidelines are voluntary in nature. Companies are expected to implement them in their true spirit. Unfortunately, companies, except those that are highly respected and successful, are not very enthusiastic in implementing them. In this situation the government should use PSEs as instruments to provide thrust to the government initiatives.
The DPE has included CSR and sustainability in the parametres being used to evaluate the performance of PSEs. In the Memorandum of Understanding (MOU) it has assigned 5 per cent weight to CSR and 5 per cent weight to sustainable development initiatives. It has issued CSR guidelines for CPSEs, which requires PSEs to spend a specified percent of their profits, which varies from 0.5 per cent to 5 per cent depending on net profit, in CSR. Higher the profit, lower is the spending in terms of the proportion of profit. The board and the concerned administrative ministry are required to monitor the implementation of guidelines.
These initiatives are inadequate. Weights in the MOU for CSR and sustainable development initiatives should be increased. Moreover, weight should be assigned for effective implementation of the government guidelines. The government should make sustainable reporting (global reporting initiative) mandatory for PSEs. These will create a culture of CSR and sustainable development initiatives within PSEs. It will also enable the government to showcase successful CSR projects and performance of PSEs in terms of CSR and sustainable development initiatives. It will enhance the industry learning on identification and implementation of social projects and will create a general awareness of corporate responsibilities.
Let us make PSEs temples of modern India, where companies join hands with the government to accelerate socio-economic changes for the welfare of all, including those who are underprivileged.
email: email@example.com Affiliation: Chairperson, Riverside Management Academy