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.
