Arguing that PSUs must be made more independent, UD Choubey explains how better vigilance can make institutions more transparent and ensure they are the custodians of public money that they are meant to be.
Peter Drucker said in 1989 that tomorrow will be a time of corporate governance. Unfortunately, India ranks abysmally (133rd) in the world on corporate governance, where there is no certainty of deliverables.
Surprisingly, PSUs have not been accused of malpractice or corporate governance frauds, as private enter¡prises often have by adopting incorrect method to pursue profits by juggling accounting systems, concealing liabilities and inflating profits.
PSUs, on the other hand, have been referred to as custodians of public money and are part of the various checks and balances of the system, answerable to the Central Vigilance Commission (CVO), Comptroller and Auditor General (CAG), Central Bureau of Investigation (CBI), Competition Commission of India (CCI), etc. Therefore, institutional accountability is placed high in priority. Such accountability should not be limited to the PSUs, but must pervade the private space after all, the money they rotate is also public money and the private enterprises must be made equally accountable under, say, Right to Information (RTI). A good vigilance system leads to better transparency and accountability.
That said, the public sector often suffers from comp¡liance rather than the right mindset transparency and accountability in letter rather than in spirit. This spirit must come from the top members of the Board, chair¡man and top management. The structure of the Board in PSUs is such that half the board strength comprises inde¡pendent directors, who can influence and diffuse this spirit.
Divesting power: There is a need to separate PSU ownership from board level management. This is essentially required because owner is the government, who works en route administrative ministry, which in turn has full control of the Board, nothing without its formal or informal consent. There is a need for the right of this ownership to be relinquished in favour of an independent, impartial, sovereign committee of the government. The administrative ministry should not have any say in the committees functioning, whether it is in terms of nominations, strategy or monitoring, Sovereign commit¡tees were established in many coun¡tries after the 2008-09 recession USA, UK, Norway, France, Sweden, China and Malaysia have taken away the say that the administrative ministry has had.'
Prior to that recession, we have seen the Kumar Mangalam Birla Committee, the Narayana Murthy Comm¡ttee, and so on. But it is after that downturn period that developed countries have realised that capital in the hands of private entit y can be dangerous. This is why the concept of welfare state is very difficult. Today, Washington, not New York, decides the US´finances, where it is Congress that decides on stimulus and other welfare measures. Some other countries have created sovereign wealth funds, an impartial body inde¡pendent of the administrative ministry.
In our heterogeneous and complex system, accountability is tested and evaluated at many layers by a Comm¡tte of the Parliament on Public Undertaking, Parliamentary Committee of the administrative minis¡try, Consultative Committee of the administrative minis¡¡try, Estimate Committee, SC/ST Committee, Rajbhasha Committee. This is their accountability towards the ´We the People´ concept enshrined in our Constitution.
Indeed, there is no clear cut policy on the goal and objective. What is the role of the owner of the PSU? An ownership policy must be circulated to all the stake¡holders that this is what we own. Al¡though they sign MoUs and conduct quarterly performance review meetings of the ministry, the fact remains that PSUs are even today an extended arm of the administrative ministry. In the absence of clear-cut owner¡ship policy, it provides only a passive ownership, and passive ownership means a marriage of convenience to influence the board formally and informally for extraneous reasons or a social or political reason. That is why the board should be separated from these hazards.