Any opinion on whether the government is mismanaging public sector enterprises (PSE) needs to be evaluated on two distinct time periods: from UD Choubey
post-Independence to 1991 and from 1992 to the present. In post-Independent India, the country adopted a centrally-planned model of mixed economy for equitable distribution of national resources and balanced economic growth. This model entrusted a critical responsibility to PSEs for achieving the goal of economic development with social justice. This was a time of extreme deprivation in Indian economy, which was predominantly agrarian and labour-intense with scarce capital resources.
As time passed post-Independence , there were instances of mismanagement , rent-seeking from various quarters. Nevertheless, it was in the post-1992 period when economic liberalisation became the locus standi of corporate PSEs and we witnessed improvement in corporate governance with nine-times growth in net profit and 35% growth in turnover.
The hidden wealth of a large number of PSEs was unlocked with listing on stock exchanges and value creation for stakeholders became a matter of paramount importance . MoU system and Navratna/miniratna and now maharatna were gradually introduced to provide greater autonomy. Today, 18 Navratna companies contribute about 15% of India’s GDP. No doubt this is the result of better autonomy and a continual reforms process but, at the same time, there are cases of mismanagement.
Autonomy is a key issue in management of PSEs, but there is a need for complete separation of ownership (government) and the board-level management (PSE). Ownership should not transgress into the managerial domain. There should be a balance between autonomy and state control. The tendency to get involved in actual management of PSEs needs to be revisited by the government. It is also observed that PSEs are not utilising the full power granted to them and knock at the door of the respective ministry before arriving at a decision.
At the same time, administrative ministries interfere in the board meetings through government-nominated directors. The chairman/CEO of PSE does not have control over government director (or independent director) who becomes remote-sensing ballistic control devices on the CEOs! Notwithstanding the above, organisational inefficiencies also crept into the PSEs over a period of time. This resulted in propagation of poor work ethics and lack of managerial accountability.
Other instances of interference by government are with respect to taking government approval for creation of posts above a certain level. The board may be a superior body to decide about growth and running of the company . Creation of posts should be left to the board as it takes a long time to get the clearance of the administrative ministry.
There is also a need to reform the process of selection of directors and CEOs as it takes a long time. Several factors are responsible for such delays, including human weakness. Even the appointment of CEOs needs to be speeded up to reduce the period during which the PSE is being run an acting chief.
Thus, not only government but also the PSEs are responsible for present state of affair. Instead of accusing the government or the PSE, there is need for improvement through open-house interaction that SCOPE can provide.