New Delhi, July 25
In a significant decision, the Union Cabinet today granted more autonomy to the boards of profit making central public sector enterprises (CPSEs) allowing the management of these companies to take a host of decisions independently, including mergers, acquisitions, appointments and foreign travel of executives.
The decision to devolve greater managerial and commercial autonomy to navratna, miniratna and other profit making CPSEs, the government says, is in line with its commitment to strengthen these companies in a competitive environment.
The management of these companies will now be empowered to take decisions for merger and acquisition to navratna and miniratna CPSEs subject to stated conditions and financial ceilings.
The power to incur capital expenditure has also been enhanced to Rs.500 crore or equal to net worth, whichever is lower, in the case of miniratna-I; to Rs 250 crore or 50 per cent of the net worth, whichever is lower, in the case of miniratna-II; and Rs 150 crore or up to 50 per cent of their net worth, whichever is lower, in the case of other profit making CPSEs.
The boards will now be empowered to delegate the powers relating to human resource management (appointments, transfer, posting, etc.) of below board level executives to the sub-committees of board or to executives of the PSE.
The Chairman and Managing Director (CMD) of the concerned PSE will be empowered to approve business tours abroad (other than study tours, seminars etc.) of functional directors up to five days’ duration in emergency under intimation to the administrative ministry.
Following today’s decision, the ceiling on investment to establish joint ventures and subsidiaries by navratna and miniratna CPSEs will be enhanced to 15 per cent of the net worth in one project limited to Rs 1,000 crore in the case of navratna, Rs 500 crore in the case of miniratna-I and Rs 250 crore in the case of miniratna-II. The overall ceiling will be increased from 15 per cent to 30 per cent of the net worth for all projects put together.
In addition, the condition relating to government guarantee will be relaxed wherever such guarantee is required by external donor agencies.
“This proposal deals with the issue of devolving full managerial and commercial autonomy to successful profit making enterprises operating in a competitive environment”, Minister of Information and Broadcasting Jaipal Reddy told newspersons after the Cabinet meeting.
The CPSEs can broadly be put in five categories, namely, (a) navratna CPSEs, (b) miniratna CPSEs, (c) other profit making CPSEs, (d) marginally profit making/loss incurring CPSEs and (e) chronically sick CPSEs.
“The navratna, miniratna and other profit making companies could be considered as successful CPSEs. Phasing out of trade barriers under WTO, increasing globalisation and the entry of private sector in different areas, which were earlier exclusively reserved for the public sector under the policy of ‘commanding heights’ have of late put the CPSEs in a highly competitive environment. All the navratna CPSEs and many of the miniratna and other profit making CPSEs are listed in the stock exchanges and many of these have the inherent capability and potential of improving their performance level to heights comparable with successful private sector companies. However, in order to achieve their full potential, the CPSEs need more powers and autonomy”, Mr Reddy said.
