Blue-chip PSUs to be unshackled

NEW DELHI: Blue-chip PSUs are set to get more autonomy in asset transfers, raising fresh equity, divestment of shareholding in subsidiary companies and appointment of independent directors. The department of public enterprises (DPE) has written to economic ministries to work on the new guidelines in a bid to provide greater autonomy to the companies.

The DPE has said the listed PSUs need to reconstitute their boards to give representation to independent directors under clause 49 of the listing agreement. Failure to follow the regulations may result in delisting of companies. Unlisted companies should also consider inducting independent directors.

According to highly-placed sources in the government, the proposal on giving more autonomy to PSUs has been vetted by the finance ministry. It has also asked the administrative ministries to process the proposal of PSU listing on fast-track basis to capture good value at markets.

“It is necessary to enable the functional autonomy of the PSUs. The finance minister has stressed the need for more PSUs to get listed. In order to abide by Sebi guidelines, a requisite number of independent directors would have to be inducted on the company boards,” an official said.

Once approved, the policy would set the road for more companies to hit the Street. Already, public offerings from PGCIL and Rites are being finalised, and other PSUs like CIL, SAIL, NTPC and NMDC are looking at IPOs or follow-on offers to raise resources for meeting expenditure requirements for expansion.

While the government would have a final say in approving market issues of PSUs, the process of formal Cabinet approval may be discontinued and the issue could be realised by approval of the regulators and the Cabinet secretariat.

A group of ministers (GoM) on PSU autonomy had earlier rejected the proposal to do away mandatory government approval for public issues of PSUs.

The issue of PSU autonomy was earlier studied by noted economist Dr Arjun Sengupta. In his report, he had argued that even with equity holding of less than 51%, the government can retain control over the PSUs, just like private enterprises where the promoters have less than 51% but they retain full control over the enterprise.

The recent development over PSU autonomy also follows earlier government decisions where Navratna companies have been given additional powers to invest in expansion projects or sell their assets without going through the government approval system.

Regarding appointment of independent directors, the government is mulling whether the present policy where such appointments are cleared by the appointments committee of the Cabinet could be dispensed with. This would put more responsibility on company boards.