Whether the government is capable to effectively execute its aggressive privatisation plan—all but a little quantity of PSUs are to be privatised— remains to be observed, but what is clear is that PSUs are in all manner of problems. In the case of BSNL, for instance, this newspaper reported, it has been just about a year considering the fact that the government initial forced the telecom PSU to cancel its 4G tender—to stop Chinese suppliers from bidding for it—but there is nevertheless no clarity on how lengthy it will take BSNL to get the network operating.
For one, considering the fact that there had been non-Chinese vendors who could have bid for the 4G network, there was definitely no cause to cancel the tender. More worrying, considering the fact that the government decided that the tender design and style would be changed, and that BSNL would no longer bid out a turnkey contract, exactly where the winner would be accountable for developing out the complete network—this will let smaller sized Indian vendors to participate as well—the PSU has told the government this could set it back by about two years.
And, as FE reported on Monday, about 3-fourths of PSUs do not even meet the statutory norm for anything as basic as getting the expected quantity of independent directors. While 72 key central PSUs call for 325 independent directors (IDs), they have just 184 amongst the prominent defaulters, Coal India has no IDs, ONGC has just a tenth of what it calls for, and SBI has a tiny more than 40%. Though it is not clear why there is such a major shortfall, one possibility is that all such nominations have to be cleared by the government, no matter if formally or informally.
Nor is this the only trouble location.
Several years ago, Sebi had come out with a rule that the minimum public float of a listed corporation had to be 25% though that was relaxed for PSUs, they had been unable to meet that criterion even soon after a number of extensions. Since there is no true cause why anything so basic can’t be achieved—once the initial listing is performed, promoting more shares is just procedural—the only explanation is that PSU chiefs are worried that, if the share costs rise soon after the more float, they will be accused of not having the finest value for the corporation.
Since it will be a number of years till the government is capable to privatise most PSUs, it clearly requirements to be working on discovering options to give PSUs the autonomy they have to have to function. It is due to the fact of this lack of autonomy, primarily, that the majority of PSUs continue to do badly relative to their private-sector peers. Indeed, till this is sorted out, it is unclear how PSU managers are going to be capable to provide on the new objectives of industry capitalisation, return on capital or capex targets that are now aspect of the overall performance-connected-spend of all PSU employees.