Whether the government is able to
successfully execute its aggressive privatisation plan—all but a small
number of PSUs are to be privatised— remains to be seen, but what is
clear is that PSUs are in all manner of trouble. In the case of BSNL,
for instance, this newspaper reported, it has been almost a year since
the government first forced the telecom PSU to cancel its 4G tender—to
prevent Chinese suppliers from bidding for it—but there is still no
clarity on how long it will take BSNL to get the network running.
For
one, since there were non-Chinese vendors who could have bid for the 4G
network, there was really no reason to cancel the tender. More
worrying, since the government decided that the tender design would be
changed, and that BSNL would no longer bid out a turnkey contract, where
the winner would be responsible for building out the entire
network—this will allow smaller Indian vendors to participate as
well—the PSU has told the government this could set it back by around
two years.
And, as FE reported on Monday, around
three-fourths of PSUs don’t even meet the statutory norm for something
as simple as having the required number of independent directors. While
72 major central PSUs require 325 independent directors (IDs), they have
just 184; among the prominent defaulters, Coal India has no IDs, ONGC has just a tenth of what it requires, and SBI
has a little over 40%. Though it is not clear why there is such a big
shortfall, one possibility is that all such nominations have to be
cleared by the government, whether formally or informally.
Nor is this the only problem area.
Several
years ago, Sebi had come out with a rule that the minimum public float
of a listed company had to be 25%; while that was relaxed for PSUs, they
were unable to meet that criterion even after several extensions. Since
there is no real reason why something so simple cannot be achieved—once
the initial listing is done, selling more shares is just procedural—the
only explanation is that PSU chiefs are worried that, if the share
prices rise after the additional float, they will be accused of not
getting the best price for the company.
Since it will be several
years till the government is able to privatise most PSUs, it clearly
needs to be working on finding solutions to give PSUs the autonomy they
need to function. It is because of this lack of autonomy, mainly, that
the majority of PSUs continue to do badly relative to their
private-sector peers. Indeed, till this is sorted out, it is unclear how
PSU managers are going to be able to deliver on the new goals of market
capitalisation, return on capital or capex targets that are now part of
the performance-related-pay of all PSU staff.