The department of public enterprises (DPE) is in the process of overhauling CPSE guidelines in a bid to bring the public sector on a par with the private sector, at least in matters of transparency and accountability. The exercise is dictated by the fast-changing business environment. The DPE?s vision is that its guidelines should help CPSEs compete and thrive,rather than hinder their operations. OP Rawat, secretary, DPE, discusses his department?s plans with FE?s Noor Mohammad. Excerpts:
We understand that the DPE is conducting a review of CPSE guidelines. What is the trigger for undertaking the exercise?
The business environment and technology are changing fast. Our objective is to formulate guidelines that would help CPSEs sustain and thrive. I have suggested this exercise be undertaken more frequently. Every second year we should have a relook at these guidelines. That would help bridge the gap between the CPSEs and private sector in matters of transparency and accountability.
I have set up groups in consultations with stakeholders such as PSUs and administrative ministries to review Guidelines relating to areas like the memorandum of understanding (MoU) system, corporate social responsibility (CSR) and corporate governance. We have already received draft recommendations on the MoU system and final recommendations are expected anytime.
Is CSR not an unnecessary distraction for CPSEs?
I differ with it. CSR is not detached from core business. The thinking the world over is that business can be made more profitable by creating enhanced value for economy as well as society. That brings CSR into core business. For example, suppose there is a thermal power generator which focuses on power generation only and nothing else. But the business will suffer after sometime if social benefits are not included. Utilizing coal ash for preparation of hollow bricks is an option for the generator. Hollow bricks do not let in heat and make the whole enclosure (building) air-conditioned. This increases the energy efficiency of the house. CSR is not ad-hoc charity.
Why are you revising CSR guidelines which were formulated only a couple of years ago?
We are reviewing existing CSR guidelines based on monitoring reports. In 2013, we will have new guidelines. The 2010 guidelines are not comprehensive enough. New guidelines will deliver value to both business and society.
CPSEs fare worst when it comes to implementing corporate governance practices, according to a recent survey? What is the reason?
It is because procedure for appointing non-official directors to a CPSE board is very lengthy and takes time. There is no lack of will (among PSUs). In fact, PSUs are the best in complying with guidelines laid down by the Securities and Exchange Board of India. They have to satisfy a multi-accountability mechanism.
The DPE has recently paved the way for appointment of private sector executives as non-official directors to CPSE boards? Why we need private sector directors on a PSU board?
Private sector executives will bring different kinds of skills and domain expertise to the CPSE board. Moreover, private sector executives have higher autonomy and they take more risk, their experience will benefit PSUs.
Are you doing something to ensure that independent directors on CPSE boards perform?
As of now, there are no guidelines on the role and responsibility of non-official directors on the CPSE board. But we have taken initiatives in this regard. The Institute of Chartered Accountants of India has prepared draft guidelines for us. Comments are being sought from PSUs and their administrative ministries on the document. After that, guidelines will be finalised.
