Prime Minister Manmohan Singh is believed to be upset with the pace of reforms in the public sector. It is possible that the performance of the Board for Reconstruction of Public Sector Enterprises has not met his expectations.
The Board has been holding periodic meetings to discuss various measures to revive or restructure public sector undertakings and has also made several recommendations. For instance, the Board has finalised recommendations for as many as 37 PSUs. But only three of these proposals have so far reached the Cabinet for its decision.
But the pace of public sector reforms may not be what should really upset the prime minister. There are many other issues concerning the public sector that should perhaps bother him a little more. Some weeks ago, the petroleum ministry had proposed to induct some Congress loyalists into the boards of state-owned oil companies.
What reforms could have been achieved by inducting Congress members into the boards of oil PSUs was difficult to fathom and, expectedly, gave rise to a controversy. And even before that controversy could die down, reports of Congress loyalists getting appointed on the boards of public sector banks have surfaced.
Seven such appointments have already been cleared, and a dozen more may be in the offing. Government officials say that these appointments have been cleared by the Appointments Committee of the Cabinet.
So, it is not just the BRPSE which may be slow on public sector reforms, the government itself is encouraging a system in which politicians, belonging to the ruling party, are being given an opportunity to occupy board positions in banks and PSUs, even though they may have no experience, no domain expertise and no qualification to justify such a selection.
If you talk to BRPSE chairman, Prahlad Basu, you might get a different impression of the problem concerning public sector reforms. It seems a lot of deliberations are taking place and recommendations are getting finalised, but they eventually are not landing up before the Cabinet.
For instance, recommendations on the procedures for appointing non-official independent directors on the boards of PSUs have been finalised. But where are they? Shouldn't the government have taken a look at them before allowing different ministries to go ahead with their plans to fill the board vacancies in PSUs under their charge with their favourite Congress politicians?
Apparently, the Board has also suggested that there should be no more than two government nominee directors on the boards of PSUs. And the chairmen of the PSUs should be empowered to review the performance of these nominee directors once a year and the continuation of such directors should depend on their contribution and usefulness as members of the board.
Also, the pay and perquisites of a chairman and managing director of a PSU should be raised to Rs 50,000. Similarly, whole-time directors should be given a pay of Rs 45,000. At present, the CMD's salary in most PSUs is pegged to the salary that a secretary in a union ministry draws.
Even more radical is the suggestion that the year of superannuation for the CMD and whole-time directors should be raised to 65 years instead of 58-60 years in most PSUs.
If indeed all these recommendations are ready, why is Manmohan Singh complaining about the slow pace of public sector reforms? Why can't the PMO call for these recommendations and take a quick view of them before ordering their implementation after obtaining appropriate approval by the Cabinet? But the problem could be the manner in which BRPSE functions under the auspices of the industry ministry.
Officials in the industry ministry are yet to come to terms with the functioning style of BRPSE and its chairman. Some of them point out that many of these recommendations may have been discussed but not formally cleared by the board and hence cannot be referred to the PMO or the Cabinet.
It is clear that public sector reforms are in a jam. The ministries are taking advantage of the lack of action to be initiated and enforced by BRPSE. The government will do well to take quick remedial measures.
During the early days of reforms in the 1990's, P V Narasimha Rao took advantage of the absence of a full-fledged Cabinet level industry minister and brought the ministry under the PMO's direct administrative control and pushed through the first phase of divestment in PSUs. It is now time for Manmohan Singh to do something similar.
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