PSUs can take a call on JVs, fresh floats

NEW DELHI: State-run public companies, which have often been treated as the fiefdoms of their parent ministry, may finally attain freedom.

The Cabinet is slated to discuss and decide on a new autonomy package for PSUs, which will include empowering the companies to take decisions on joint ventures, divestment in subsidiaries and fresh float of equity.

What’s more, PSUs will now directly be governed by Presidential directives instead of orders from the administrative ministries. The development on PSU autonomy comes at a time when serious questions were being raised by several blue-chip companies on autonomy.

A case in point is the controversy over ONGC and the administrative ministry’s directives to intervene in company matters.

The cabinet note, which is based on the recommendations of the Arjun SenGupta committee report, has also proposed that the holding company of a profit-making PSU could be empowered to transfer assets, float fresh equity and divest shareholdings in their subsidiaries, provided it falls within the category of Navratna.


The company must, however, retain the PSU character, sources said. PSUs are now likely to be governed by Presidential directives as the government may bar administrative ministries from issuing any direct orders to the central public sector enterprises (CPSE), sources said.

Directives could, however, be issued on the advice of the department of public enterprises (DPE), sources in government said. In order to ensure that DPE would not push for any arbitrary decision, it has been proposed that any such decision would be vetted by the cabinet secretary, sources added.

Further to provide greater autonomy to the CPSEs, it has also been proposed that administrative ministries should not review performance of any CPSEs more than twice in a financial year. More autonomy is proposed for profit-making PSUs.

Profit-making PSUs, including Navratnas and mini-ratnas, would be empowered to establish joint ventures and subsidiaries in India. However, equity investment should not be more than Rs 100 crore or 15% of company’s networth, whichever is less, in one single project.

A CPSE may, however, enjoy an overall ceiling of 30% of its networth for total investments (JVs). Other issues to provide autonomy to CPSEs include empowering them to lay down their own procedural guidelines for foreign travels of their CEOs and executives.