Creating efficient enterprises

May 21 2014, 08:30 IST
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SummaryNew government can take Roongta panel blueprint forward

The role of central public sector enterprises (CPSEs) may have shrunk in the economy in the liberalisation era, however, they still form the backbone of sectors like oil & gas, mining, power and steel. Their investments are also growing at a decent rate. CPSEs, for example, reported a 17% growth in their investment in 2012-13.

What is needed to boost their economic role is to delegate more functional autonomy to these entities so that they could compete with private and multinational players on an equal footing in India and abroad.

Fortunately for the NDA, which is set to form government at the Centre next week, the blueprint for further public sector reforms is already in place. The Roongta committee, which was set up by the Centre in 2010, had given its recommendations last year. Besides, some of the recommendations of the Arjun Sengupta committee, such as allowing CPSE autonomy to raise equity from the market without government approval, which appeared a bit radical at the time when the report came in 2004, now merit consideration.

UD Choubey, director general, Standing Conference of Public Enterprises ( Scope) feels, “There is a need to completely restructure CPSEs by giving them autonomy, integrated with accountability, to ensure an efficient decision-making process.”

The Roongta panel has stated that having “a business development committee—in addition to the audit, human resources and remuneration committee—would help strategise and evaluate business development proposals and guide a company’s diversification, acquisition, JVs, new business entry, the review of organisational structure, etc.”

The committee also recommended that the Comptroller and Auditor General of India (CAG) publish an annual report on the best practices in different CPSEs, as observed by it in the process of doing the ‘oversight functions,’ to be shared with other CPSEs. “This”, according to the Confederation of Indian Industry,”is expected to not only help CPSEs learn from each other and improve their performance, but also create a positive mindset around the role of the CAG among them.”

The Roongta committee recommended that at least 30 additional CPSEs be listed in the next three years. Additionally, where there is a specific need to enter a partnership in line with the board’s approved strategy, an in principle clearance should be taken from the administrative ministry.

To reduce government intervention, the panel suggested segregation of the government nominee’s role on the board from his position in the GoI. This would empower the government nominee to suggest perspectives

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