Scope Moots Changes In Psu Divestment Route

Standing Conference of Public Enterprises (SCOPE) has suggested certain modifications to the Special Purpose Vehicle (SPV) proposal mooted by Finance Secretary Vijay Kelkar so as to enable it to impart real autnomy to Public Sector Enterprises (PSEs) shortlisted for fast-track disinvestment.

According to Scope, the SPV proposal in the present form would not meet the avowed objectives of autonomy and better performance of Public Sector Enterprises (PSEs), unless the control of PSEs is wrested from the administrative ministries by tranfering the ownership rights arising from holding government equity to another separate body.

This could be done in two ways: one, the ownership rights could be exercised by one nodal ministry such as the Department of Public Enterprises (DPE), with an independent mechanism for selection/nomination/removal of CMD/directors, and transforming PSEs into Board-run companies with no directives from the government.

Two, the ownership rights could be exercised by the SPV itself, in which case it could be formed as a non-profit trust/society/company, with the entire government shareholding in PSEs transfered to it (but not exceeding 49 per cent at any point of time), to be managed by eminent persons who would take care of the public interest.

In this case, the SPV will have to be a standing body and not a one-time vehicle.

According to the suggestions made by Scope to the finance minsitry, "the second alternative may be preferable as it will ensure proper distancing of the government from the PSEs, ensure necessary autonomy, and lead to the desired improvement in their performance, at the same time enhancing the value of the shares, which would fetch a better price on disinvestment."

In an earlier meeting with the Finance Secretary, Scope chairman Udesh Kohli had sympathasied with the concerns expressed by G V Ramakrishna, chairman, Disinvestment Commission, regarding ministrial control, corporate governance, and functional freedom of PSEs in the aftermath of disinvestment.

"There is an apprehension that the ministrial control and interventions may become more pronounced, particularly when there will not be any fear in the absence of outside checks...and may lead to worsening of the situation," the Scope proposal enunciates.

If the ownership rights are exercised by one nodal ministry (like the DPE), and in its capacity as owner it elects CMD/Directors on the Board, only one government nominee should be appointed from the concerned ministries, the proposal suggests.

Furthermore, "in such an event, it has to be clearly provided that the Board's decision will be taken by majority vote, with the chairman having the casting vote."

In all the above options, when the PSEs become Public Enterprises (PE) and the external controls and accountability mechanisms are withdrawn, it will be necessary to develop internal accountability mechanisms such as Internal Audit Committee and Internal Vigilance Committee, the Scope report highlights.