Public Sector Blueprint

By first defining what is strategic, core and non-core, and then recommending illustratively 100 per cent disinvestment in Modern Foods, 74 per cent in ITDC and 49 per cent in Gas Authority, the commission has made it difficult for non-action on disinvestment to continue. On the other hand, by formulating an elaborate strategy for the restructuring and restoration to health of a large number of units which are doing none too well, the commission has not only demonstrated its commitment to saving and securing as many public sector jobs as possible, but has also made clear that the surest way to kill them is to let the present system continue.

 

The first major recommendation of the commission is that disinvestment proceeds should be put in a designated fund so as to separate them from other non-debt capital receipts and thus highlight the importance of the numbers that disinvestment involves. Second, it has argued against using the proceeds of disinvestment as straightforward budgetary aid: it says that the long-term drain on the exchequer from loss-making units is best reduced by using the proceeds of initial disinvestment in the healthy units to restructure rescuable ones and paying for voluntary retirement schemes (VRS) for the workers of those that cannot be rescued. It has calculated that the current cost of the losses of the sick units in the next five years will be at least be Rs 7,200 crore. So if the turn-around and VRS costs for the rescuable and terminal cases is less than that, then it is worth it. Logically, it has recommended that the national renewal fund, which has remained substantially unutilised, should be merged with the disinvestment fund. Another major recommendation is the creation of a special empowered group with the cabinet secretary, finance secretary and others to be in final charge of the disinvestment process.

But what is likely to create the maximum ripples is not what the commission says about disinvestment, but about managing the public sector better. After arguing that the government should restructure and improve the functioning of units wherever possible before disinvestment, the commission has made major points on how they ought to be properly run. Laying down the guiding principles of autonomy, accountability and good governance through professional boards, the commission has recommended far greater delegation of powers for all units, and maximum delegation for the successful ones. The ministry should operate only through boards which should contain independent experts. Top management should be selected solely by the Public Enterprises Selection Board which should itself be revamped; top managers should be appointed for at least five years, if necessary by relaxing retirement norms. And to improve their confidence in taking commercial risks a pre-investigation board should sanction CBI investigation for the top managers and committees of individual company boards for the rest. The recommendations have these and many more facets which should keep the argument mills running for quite some time.