Letter to BS: Exposure to public sector undertakings hurts LIC's returns

This refers to Krishna Kant’s report “Large exposure to PSUs hurts LIC’s returns” (July 19). One wishes that all stakeholders join in and debate the issue of resource management by the Government of India, the state governments and public sector undertakings (PSU), banks both in the public and private sectors and other organisations that source public savings for their funding/business needs. It would be fallacious to compare every investment with the equity investment in Sensex shares. But there is a case for a reasonable positive return on investment of funds raised from the public, for the absence of which, there may be diverse reasons. The absence of functional freedom to work within the contours of mandated responsibilities stands in the way of professional fund management by statutory bodies and PSUs including public sector banks.

For historical reasons, despite talk about non-interference in the internal affairs of statutory bodies and PSUs, the government has retained ownership rights over these institutions and ensured amenability of management, irrespective of changes in the Central governments. Right from board-level appointments to remunerations for the junior-most employee in the smallest PSU, the government directly or indirectly keeps a rein. These directly impact investment decisions.

This leads to the issue of transparency in the directed deployment of resources. When comparisons are marked-to-market, governments too need to move away from dependence on captive pools such as SLR funds, funds with LIC, pension fund with National Pension System administrators etc. for market borrowings. Also, for public investments in government of India savings schemes such as EPF, PPF, and G-Secs, interests should be made market-related. 

M G Warrier  Mumbai

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