The Hindu Business Line : `Institutional innovation' of doubtful merit

THERE HAVE, of late, been media reports of a "move to shield PSUs (public sector units) from Parliament". The core points raised by such reports are that the present system of parliamentary accountability affects the ability of PSUs to function efficiently, and that top PSU managers typically spend one-third of their time answering queries raised by parliamentary bodies.

The idea is not to limit the role of Parliament but to make it more effective. PSUs must be board-managed and freed from excessive state control so that they can focus on other stakeholders in an increasingly competitive market. Proposals for overhauling the parliamentary accountability of PSUs is being considered in the context of an internal expert committee report on empowering the PSUs' Chief Executive Officers.

Among the proposals under consideration, one is that Parliament assigns the task of monitoring the financial, technological and physical performance of the PSUs to independent auditors who would, in turn, report back to Parliament.

According to a media report, this would be an effective way for Parliament to exercise its ownership rights over the PSUs, and also focus on their strategic decisions. But would this `institutional innovation', at an embryonic form still, not limit the role of another constitutional functionary — the Comptroller and Auditor General? The proposal may only end up raising political hackles.

But, according to sceptics, when the auditing profession has not been able to fully pierce the financial veils woven around corporate malpractices in India and abroad, will it be able to throw any great light on the technological and physical performance of PSUs any more than the CAG's team?

Also, the proposal is that the auditor's report will be placed before Parliament. What about the scrutiny thereafter? Will there subsequently be no political hindrance?Advocates of these innovative changes refer to the practices in Norway. But they probably overlook the fact that in that country, the Parliament does debate reports and ensures that heads roll if necessary.

It is not encouraging that after having a robustly working Constitution for more than half a century now, measures are proposed that shrink or efface the role of institutions it has created, all in the name of making Parliament more effective.

Anyway, such arguments on parliamentary accountability versus PSU efficiency are not new. Of course, in the current context of economic reforms, the logical way out would be transitioning to the new economy through disinvestment, and similar initiatives. This is easier said than done. For, it is difficult to put through any measure that even faintly suggests erosion of control by Parliament and its sub-committees. Protests that it is not to limit parliamentary control but to make it `effective', do not really hold water. Anyway, the suggested remedies — `board managed' and `freeing from excessive state control' — sound merely like more of the officialese that has been heard for quite a while now.

Are CEOs really spending a lot of time answering parliamentary queries on micro-management issues? But we need to remind ourselves that we are pursuing the economic reforms programme as a vibrant parliamentary democracy. Any move to circumscribe the parliamentary role will be a non-starter. It is better to carry Parliament along in the reforms process.

A slew of other proposals is also planned for the PSUs.

Some examples: Create a (cumbersome) two-tier board system for public sector companies just to get over the regulatory requirement of appointing to the board sufficient number of independent directors; seek ideas from retired PSU executives to reinvigorate the sick units instead of pursuing harder but practical options; and move PSUs from individual Ministries and bring them under the purview of the Prime Minister's Office to keep political interference at bay.

But all these may only create more problems than they solve.

(The author is a former Executive Director of LIC.)

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