New Delhi: Plans are afoot to fix a tenure of three years for chief executives of companies run by the central government in order to improve accountability, transparency and efficiency.
add_main_imageThe government has floated a cabinet note for consultation to this effect as these state-controlled firms, which employ 1.39 million people, struggle to compete with private sector rivals.
The proposal also calls for employees of a public sector enterprise to be made eligible to apply for the position of chairman and managing director even if they don’t have two years of service left, according to several people aware of the development, who declined to be named.NextMAds
Such measures come in the backdrop of allegations of impropriety in these firms that are being probed by the Central Bureau of Investigation and Central Vigilance Commission, the anti-corruption watchdog of the federal government.
India has around 260 companies controlled by the central government, which have invested a total of ₹ 7.3 trillion as on 31 March 2012, according to the department of public enterprises. This doesn’t include seven state-run insurance firms.
The proposal to fix tenure is based on the recommendations of the report of a panel headed by S.K. Roongta, former head of Steel Authority of India Ltd, on Reforms in Central Public Sector Enterprises, which was submitted to the Planning Commission, India’s apex planning body, in November 2011.
“A cabinet note based on the Roongta committee’s recommendations and the group of ministers’ comments on each of the recommendations has been circulated and can be expected to be considered by the cabinet shortly,” said an official at the department of public enterprises, which is a unit of the ministry of heavy industries and public enterprises. He requested anonymity.
The Roongta panel had highlighted the issue of so-called over-governance. “Compliance to summons from various quarters comes at a heavy cost of time and money. Over-governance, in turn, promotes conservative, cautious and risk averse organizational culture, with procedures being paramount and outcomes becoming secondary,” the panel wrote in its recommendations.
The adoption of the recommendations has no bearing on the current situation at public sector undertakings where appointees will serve according to their terms determined by the appointments committee of the cabinet, said the official cited earlier.sixthMAds
Another government official confirmed the proposed move.
The Roongta panel in its report strongly recommended that the tenure of the chairman and managing director, and directors in central public sector companies should be a minimum of three years, irrespective of their age at the time of the first appointment.
Not many are convinced that the move offers a long-term solution.
“This is only a stop-gap step,” said T. Sankaralingam, former chairman and managing director of NTPC Ltd, India’s top power utility.
“In the absence of succession planning, highly competent officers in CPSEs (central public sector enterprises) are many times not left with two years or more of service when posts of functional directors/CMDs fall vacant. As a consequence, CPSEs lose the benefit of getting this pool of talent to occupy the deserving board level posts. Quite often, these competent executives lose their motivation while serving for rest of their tenures,” the report said.
“Those selected for such positions may be given a fixed tenure of five years or allowed to serve until the age of 63 years, whichever is earlier,” the panel wrote. The panel had also recommended that extension of service up to a maximum two years may be allowed at the levels of deputy general manager and above.
“Some of the PSUs have not done a proper succession planning,” said Sankaralingam, who is currently the non-executive chairman of Hyderabad-based East Coast Energy.
Mint has earlier reported inordinate delays in the appointment of full-time, board-level positions and independent director posts.
“There is a crisis of leadership in the public sector space. So much so that in the case of some PSUs, once the current CMD retires, no other directors are eligible to apply for the top post,” the head of a PSU said, requesting anonymity.
This comes at a time when the Indian government wants state-owned firms to work towards reviving economic growth.
Another chairman and managing director of a large state-run company, who also didn’t want to be identified, said: “The tenure and eligibility has become a serious and genuine problem.”
The Public Enterprises Selection Board oversees hiring for state-owned firms. The appointment of board-level executives is a time-consuming process and takes at least one year to be completed.
The Roongta panel also stressed the importance of board-level appointments in a time-bound manner.
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