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Joining the chorus for revamping the boards of the Central Public Sector Enterprises (CPSEs) and re-organise their structure for better functioning is also the Economic Survey, thus raising expectations on some announcement on this front in the Union Budget to be presented on Monday.
“While disinvestment and rationalisation of some of the CPSEs is being planned, there is also a need to strengthen the ones that would be retained in their respective sectors so as to fully meet with the expectations of the government. An important step in this direction would be to completely revamp the Boards of the CPSEs to reorganise their structure, enhance their operational autonomy coupled with strong corporate governance norms including listing on stock exchanges for greater transparency,” the Survey has pointed out in the Chapter dealing with Industry and Infrastructure.
Click here to read the full survey
Speaking to BusinessLine, Arvind Virmani, Chairman, Foundation For Economic Growth & Welfare (EGROW); President, Forum for Strategic Initiative (Former CEA, Ministry of Finance & Executive Director, IMF), said: “The Union Cabinet has previously approved the Strategic Industry policy, which provides a framework for privatisation of PSUs and PSBs (Public Sector Banks). The details of the framework and the Privatisation policy are awaited. A road map for privatisation could be provided in budget along with identification of specific PSUs and/or PSBs.”
As indicated in Economic Survey, the remaining PSUs under government control, would need to continue to improve their management systems and economic efficiency, he added.
On January 27, the Union Cabinet is understood to have approved a new policy for PSEs, hinting that a broadsheet for disinvestment is expected to be announced by Finance Minister Nirmala Sitharaman in the Union Budget to be presented on February 1. This is in continuation of a policy announced as part of the Atmanirbhar Bharat initiative by Sitharaman.
Commercial activities
The Survey points that the government has taken several measures to reduce PSE presence in commercial activities both through the stock market route and through strategic sale and that this policy to withdraw has been a subject of discussion in several economic surveys (more specifically 2000-01, 2001-02, 2002-03) reflecting the deliberations in the government on the matter.
“Under the aegis of the Atmanirbhar Bharat Mission, the government has proposed to rationalise the participation of the CPSEs in commercial activities. It has been argued that the existence of the CPSEs should only be in the ‘strategic sectors’. Accordingly, the number of PSEs in the strategic sector will ideally be limited to four–others would either be merged or privatised or brought under holding companies.
“Further, the CPSEs in the non-strategic sectors would be privatised as per guidelines issued. This initiative is expected to bring healthy competition in sectors and will also assist the government to focus extensively on ‘strategic sectors,” the Survey said, adding that “Hence, there has been a delay in conducting annual audit and in preparing financial statements of the CPSEs.”
As of January 15, 2021, based on provisional information with Department of Public Enterprises, there are 366 CPSEs as of March 2020. Of these, 256 are in operation, but only 171 CPSEs recorded profit during FY20.
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