The Hindu Business Line : Power to unlock

It has been rightly pointed out in the editorial ‘The power to unlock’ (Business Line, September 18) that listing alone will not help unlock the value of a public sector concern as much as managerial autonomy and competitive remuneration for the skilled personnel. All the same, listing is a basic requirement in the process of value unlocking.

At times, due to political constraints, the Government is not allowed to take any progressive step. The Centre and all State governments must reduce their stake in public sector undertakings (PSUs) and go for IPOs to the extent of at least 67 per cent of total equity in each concern. The next step must be to professionalise the management in all these concerns and ensure good corporate governance. There must be no political interference in the functioning of any of these organisations. Professional way of functioning and good corporate governance are vital for value unlocking.

Many PSUs still function in a bureaucratic way and the accent is on conformity to rules and not on results. This must change.

Standardised pay scales must go and managements must be given full authority to fix the pay based on broad guidelines to be issued by the Government. Pay scales must be initially fixed on the basis of talent and subsequent hikes purely on performance. Performance-linked incentive schemes must also be given. Such an approach alone can spur good performance. This system of remuneration will go a long way in helping PSUs improve their financial performance . Once this is achieved, value unlocking will automatically happen. Public participation by way of shareholding will bring about better accountability on the part of managements and boards. This strategy must be adopted by the Centre and the States to unlock value and ensure better financial performance.

K. K.Ammannaya Udupi