Navaratna Boards To Be Packed With Experts From Private Sector

The industry ministry has proposed that at least a third of the directors on the boards of the navaratnas the nine public sector enterprises that the government wants to turn into global players should be non-executive directors.

These non-official directors will be eminent personalities selected from the corporate world who will bring to the specific PSU board a broader perspective of the domestic and international corporate world. Financial institution nominees will be separate from the proposed non-official directors

The ministry has suggested that the non-official directors should be selected not by the Public Enterprises Selection Board (PESB) but by an independent experts panel, which is proposed to be set up specifically for the purpose. The selection procedure is also proposed to be made transparent.

 

The proposal to induct a large number of non-official directors in non-executive posts is significant. There is a view within and outside government circles that the existing concept of non-executive directors on PSU boards has failed in its attempt to introduce a wider corporate perspective as the current lot of non-executive directors are mostly official appointees of the government.

Hence, the ministry has proposed that while the government may continue to exercise its ownership control through the official directors on the board, there should be a large number of non-official directors chosen from the private sector.

The ministry has also recommended a relaxation in the Public Investment Board (PIB) approval criteria. These criteria force PSU boards to seek fresh government approval each time an investment plan above a certain pre-specified ceiling is to be implemented.

It has been suggested that the net worth of PSUs should form the basis of a ceiling on investment. This will enable larger PSUs to take decisions on large investment proposals without seeking government approval.

The proposed relaxation in the investment ceiling will, to a large extent, take the PSUs outside the ambit of the PIB. Further, they will give the company boards wide powers to choose their own funding methods, as well as allowing easy access to domestic and international capital markets.

These proposals form part of a note prepared by the department of public enterprise under the industry ministry. The note is to be discussed by the Union cabinet, which will then formally ratify the process of granting increasing autonomy to the nine chosen PSUs.

The navaratna note was one of the 24 items on the agenda of the cabinet at its Tuesday meet.

However, the cabinet failed to take up the issue.

Industry minister Murasoli Maran had recently stated that the government had selected nine PSUs or navaratnas to be promoted as multinational companies. These companies would, therefore, be granted greater autonomy within a broad mission statement set by the government. However, the government would continue to retain ownership of at least 51 per cent of the companies shareholding.

The navaratnas consist of the Oil and Natural Gas Corporation, Indian Oil Corporation, Hindustan Petroleum Corporation Ltd, Bharat Petroleum Corporation Ltd, Bharat Heavy Electricals Ltd, National Thermal Power Corporation, Steel Authority of India Ltd, Videsh Sanchar Nigam Ltd and IPCL.