Best & brightest

EDITORIAL

The proposed move by the government to grant greater flexibility to the three qualifiers to the Maharatna status — ONGC, NTPC and SAIL — in taking financial decisions appears to be yet another example of its piece-meal approach towards autonomous functioning of public sector companies. The proposal to allow the board of directors of these companies to clear investments of up to Rs 10,000 crore without government nod comes barely a couple of months after a similar hike was announced at the time of upgrading the three companies from Navratna status to the newly created category of Maharatna on December 23, 2009. At that time, the centre had raised the powers of the boards of these companies to clear investments up to Rs 5,000 crore from the earlier limit of Rs 1,000 crore. While the proposed hike, if effected, would surely come handy for these companies to plan their globalisation drive, the proposal indicates that the centre doesn’t have a long-term policy with regard to these companies. The absence of clarity on the policy front has often been argued as one of the biggest hindrances in the quest of state-owned companies to attain greater heights. It also raises the question of whether public sector companies (not just the three Maharatnas) should be totally freed from governmental control and converted into fully board-run companies. The issue assumes significance in the backdrop of government moves to speed up the disinvestment process, which would result in the shares of a large number of public sector companies slipping into the hands of the public through initial public offerings (IPOs) or greater dilution of the government holding through follow-on offers. With their shareholding becoming wider, PSUs no longer remain answerable only to the centre. They also have the responsibility of living up to the expectations of shareholders from the public who put in money in these companies. The continuous intervention of the government and shifting policy framework affect the public perception of these companies and often act as a drag on their valuations and attractiveness in the stock market. A case in point would be the recently closed follow-on public offering of NTPC, which despite its reasonable pricing relative to its peers in the private sector, failed to elicit a healthy response from the investing public. The centre was saved of the blushes by the other state-owned entities from the financial sector, including LIC and SBI, which helped the issue to sail through. Of course, giving up control is easier said than done. As in the past, the officialdom, that wields substantial influence over the future of these companies and often derives undue benefits from them, would find it extremely difficult to deprive themselves of the goodies. However much these PSUs are freed on the investment decision front, the umbilical chord with the government will remain intact as long as the power of appointing the top officials of these companies remains with the official machinery. Therefore, along with making them board-run companies, the centre should also create an independent body that takes care of the top appointments in these companies so that the brightest and best are able to lead these entities. With their resources and their brand name, large PSUs can take the lead and carry the country’s flag as Indian business intensifies its globalisation drive. There appears to be no valid reason for keeping them under shackles.