Move to give PSUs more autonomy in M&As and joint ventures

Also want prohibition on investigating deals unless clear evidence of corruption

The department of public enterprises (DPE) has proposed that boards of central pubic sector enterprises (CPSEs) be given greater autonomy to select technology partners, joint venture partners and to acquire companies. The department also demanded that deal struck by CPSEs not be opened for investigation unless there was a clear evidence of wrongdoing.

The demands, made by the department recently to a group of ministers (GoM) headed by Finance Minister P Chidambaram, assume importance as charges of corruption fly thick and fast, affecting the decision making process of public sector units. The department has also sought a review of its model conduct rules to impose punishment on erring employees of CPSEs even after retirement, said those in the know. The GoM said the department may revisit the rules to this effect, sources added.

DPE, a nodal department for most public sector units, wanted the CPSEs to obtain in-principle clearance in advance from their administrative ministry for entering into competitive negotiations with prospective partners, companies to be acquired and joint ventures. Currently, companies do this by calling an Expression of Interest (EoI) and inviting tenders for competitive bidding. It suggested that after taking clearance from the administrative ministry, possible partners be pre-identified.

According to the department, the committee empowered by the board of the public sector unit concerned would, then, enter into negotiation with the prospective partners with a set of parameters. The empowered committee will obtain the formal approval of the board on its recommendations, before finalising the deal. On matters beyond the delegated financial powers of the board, approval of the standing empowered committee constituted by the government should be obtained, the department suggested.

It also recommended the deal so approved not be opened for investigations or review unless clear evidence of wrongdoing or corruption comes to light.

The GoM asked the department for separate proposals on selection of technology partners, selection of joint venture partners and acquisition of assets and companies.

The GoM will have a separate meeting on this issue. Chidambaram has been authorised to take a final view for making the recommendation to the Cabinet.

There are certain financial restrictions on the amount of investment even on Maharatna public sector enterprises for acquiring companies abroad. These can invest up to 15 per cent of their net worth in one project, limited to an absolute ceiling of Rs 5,000 crore. The overall ceiling on such equity investments, mergers and acquisitions in all projects put together will not exceed 30 per cent of the net worth of the CPSEs concerned.

All the proposals involving investment over the delegated powers are to be sent for approval of the Cabinet Committee on Economic Affairs.

According to a report by the Comptroller & Auditor General, 29 government companies and one statutory corporation had formed 296 joint ventures as on March 31, 2009. These comprised 129 incorporated joint ventures with investments of Rs 4,371.06 crore and 167 unincorporated joint ventures with investment of Rs 8,959.69 crore.

LOOKING FOR MORE LEGROOM

* The department of public enterprises wants the central public sector enterprises to get clearance in advance from the government for entering into competitive negotiations with prospective partners

* The department also seeks a review of its model conduct rules to impose punishment on erring employees of central public sector enterprises even after retirement

* The group of ministers will have a separate meeting to discuss these issues. Chidambaram has been authorised to take the final view for making the recommendation to the Cabinet