Navaratna Boards To Be Allowed Greater Autonomy On Investment

The industry ministry is set to kick start its next round of reforms with the professionalisation of the boards of Navratnas, the nine public sector undertakings identified by the government for being promoted as global giants. Industry ministry sources confirmed that a note in this respect had been finalised and would be submitted to the cabinet soon.

The note proposes to free the management of the nine PSUs from a range of controls.

The Navratnas are Bharat Heavy Electricals Ltd, Steel Authority of India Ltd, Videsh Sanchar Nigam Ltd, Hindustan Petroleum Corporation Ltd, Bharat Petroleum Corporations Ltd, IPCL, Indian Oil Corporation, Oil & Natural Gas Corporation and National Thermal Power Corporation.

 

The cabinet note envisages providing these PSUs with total operational freedom, greater autonomy in investment decisions through an increase in investment ceilings, freedom to raise capital and to hire and fire staff (through voluntary retirement scheme). Measures such as employees stock option to retain the staff will also be permitted.

The note however does not include measures to free the management of these PSUs from audits by the Comptroller & Auditor General (CAG) and enquiries by the Central Bureau of Investigation, Central Vigilance Commission, and Committee on Public Undertakings. The government undertakings will continue to remain accountable to Parliament and its committees.

These are some of the controls against which PSUs in general have been chaffing since they feel that accountability of an organisation to a multiplicity of agencies hampers quick decision-making.

These controls can go only when the government holding in PSUs falls below 51 per cent, sources said.

In terms of operational freedom, the Navratnas will be permitted to float joint ventures.

Freedom to raise capital for expansion will also be permitted, subject to the caveat that the governments holding will not be diluted without its explicit permission.

The government proposes to raise the strength of boards of the nine PSUs to increase their efficiency.

However, the government would continue to exercise its option to appoint government directors in proportion to its holding.

Once the government distances itself from the day-to-day affairs, the only way that it can exercise control over a company as a majority shareholder would be through these directors, industry ministry sources said.

Besides, along with the freeing of management, accountability will be imposed on the management of these public sector undertakings through the appointment of internal audit committees. These committees will monitor the internal management of the company.

The industry ministry recently notified the doubling of investment ceiling of all profit-making the government-owned organisations, in line with the budget announcements.

The focus this time will be on the Navratnas, ministry sources said.