PSUs must take govt nod for arms
By Gunjan Pradhan Sinha & Rajeev Jayaswal, TNN |
Highlights
NEW DELHI: Autonomy may not come that easily for public sector companies. Profit-making PSUs may not be allowed to set up subsidiaries and joint ventures even if it is within their financial powers to do so.
The group of ministers (GoM) on PSU empowerment has said that as a new business venture involves transfer of assets from the public undertaking, such an act would be considered unconstitutional. It is argued that once a public asset is transferred from one beneficiary to another, it amounts to a change in the nature of the public asset.
As per Article 12 of the Constitution, CPSEs are considered ���instruments of the state���. If a PSU wants to go in for a JV with another PSU, the move will require Parliamentary approval. To carve out a new subsidiary, a Cabinet approval alone will not be sufficient ��� it will also require Parliament approval.
The GoM, headed by minister of external affairs Pranab Mukherjee, has clearly stated in response to the recommendations of the Arjun Sengupta Committee on empowerment that delegation of powers should not lead to change in the character of the public sector unit. The government should ensure no asset stripping takes place when a new joint venture or subsidiary is created.
However, the GoM has made no comment if the reverse is true. In other words, with this logic, it implies that if a PSU gains a private asset, it will also need Parliamentary approval as it could amount to change in the character of the PSU.
ADVERTISEMENT
The ad hoc group of experts (AGE) headed by Dr Arjun Sengupta had recommended in its report that ���current restrictions regarding capital expenditures, joint ventures etc need to be done away with. Such decisions should be left entirely to the board of directors. However, if that is not possible in one stroke, as the first step towards this desirable goal, enhanced powers should be given to navratnas, miniratnas and other profit-making companies in respect of capital expenditure, setting up JVs and subsidiaries, and subsequent investment in JVs.���JVs between navratnas, mergers and acquisitions, appointment of directors in subsidiaries and JVs etc should also be left to the profit-making enterprise as per the recommendations. The view was taken by the GoM as a part of the third tranche of recommendations being considered by the group based on the AGE report. The GoM is likely to consider another set of recommendations as a part of the third tranche in a meetings likely to be held soon.
Download
The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.
The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.
Download
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
ADVERTISEMENT
