After banks, Centre turns to reform of PSUs

After initiating key changes in the functioning of public sector banks, the Centre is gearing up to usher reforms in Central Public Sector Enterprises (CPSEs). Under consideration is fixing the tenure of the Chairman & Managing Director (CMD).

A senior Government official told BusinessLine that work has started on a fresh reforms proposal based on the SK Roongta panel report. The Roongta panel submitted its report way back in November 2011, during the UPA regime. Though there were inter-ministerial consultations and also discussions by a Group of Ministers, things did not progress.

One of the key changes being considered is fixing a minimum three-year and maximum five-year term for the CMD. This is irrespective of age at the time of appointment. At present, the retirement age of a CMD is 60 in most cases, and 58 in some.

This will also require the age bar for selection to be raised by two years from current 45-58 years. The current norm mandating minimum of two years of service remaining on date of vacancies for CMDs post will also need to be done away with.

The Roongta panel has said that in the absence of adequate succession plan in many CPSEs, several competent executives don’t get considered for these positions.

“Consequently, it is leading to lack of appropriate competencies and low motivation at the highest levels in many companies. It is recommended that all the executives who don’t attain the age of superannuation on the date of vacancy may be considered eligible as far as age qualification is considered. Those selected for such positions may be given a fixed tenure of five years or allowed to serve until the age of 63 years, whichever is earlier,” it said.

Another key reform is the listing of at least 10 CPSEs every year during the next five years. This will take the total number of listed CPSE to nearly 100.

The are two advantages of this – first more retail investors will get to own shares of CPSEs which are considered quality stock, and second, the Centre will get to mop up additional resources through disinvestment, the official said.

Currently, there are 46 CPSEs listed on the bourses apart from almost all the public sector banks barring Bhartiye Mahila Bank and two associates of State Bank of India – State Bank of Patiala and State Bank of Hyderabad.

Since, the SEBI norms restrict listing of only profit making companies, there are more than 100 CPSEs that are profit making. The Centre has already approved disinvestment through initial public offers (IPOs) in Hindustan Aeronautics and Rashtriya Ispat Nigam Ltd which will pave the way for their listing.

Recently, the Centre split the post of the Chairman and Managing Director in a public sector banks and appointed four Managing Directors & Chief Executive Officers.

Similarly on December 10, the Cabinet approved diluting the Government’s holding in public sector banks to 52 per cent from 58 per cent.

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