The Telegraph
Since 1st March, 1999
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Scope widens for sick PSU chiefs
- Hint of late retirement, fatter pay packet

Calcutta, Nov. 19: The Standing Conference of Public Enterprises (SCOPE) has proposed to the Board for Reconstruction of Public Sector Enterprises (BRPSE) to increase the superannuation age of the chairmen and directors of 88 sick public sector units from 58 to 65 years and give them a pay package which is on a par with that of profit-making PSUs.

There are 230 central public sector undertakings in the country. Of them, 140 are profit-making and 88 suffer losses. The remaining two are neither profit-making nor are they in the red. In Bengal, there are 15 such sick PSUs. The total loss of sick PSUs is Rs 8,000 crore.

SCOPE feels that running a sick unit is far more difficult than a healthy one. Hence, provision for installing a competent management team, including CMDs and directors, with a long tenure, should be made. Pay scales of employees should be the same as that of profitable PSUs.

“In fact, a special pay package should be designed for competent persons who are willing to take up the challenge of reviving sick units,” SCOPE chairman Sarthak Behuria said.

The board and management should be sufficiently empowered to implement the revival plan and carry changes midway, if required. The SCOPE proposal also recommended 15 per cent of purchase preference for sick units.

BRPSE has already sent recommendations about certain companies to the administrative ministries. An estimated Rs 5,000-crore package has already been formulated by the BRPSE and is awaiting the Union cabinet’s approval.

Despite the large number of sick units, the return on investments of PSUs has increased to 21.4 per cent and they have been able to contribute 30 per cent of the government’s revenue receipts in 2004-05.

On the revival of sick PSUs, S.M. Dewan, director general of SCOPE, said the business models of the companies should be re-examined and a new objective formulated. The revival plan should carry a long-term perspective for technology needs and sufficient funds should be provided at low interest rates at the right time.

SCOPE also prefers that the government should opt for the maiden offer route for divesting in CPSUs. This makes the board more accountable and transparent in its dealings. It feels that the proceeds of selloff should be used to turn around sick PSUs rather than filling the budgetary gap.

The apex agency for PSUs is also vocal about the appointment of independent directors on the board of companies. Behuria raised questions about the independence of the independent directors.

He said the Securities and Exchange Board of India has suggested that 50 per cent of the directors should be independent. “But we feel that 33 per cent of the board should be independent directors.”

SCOPE has also taken an initiative to help the government and other business houses appoint independent directors. It has prepared a list of 20 former chief executives of PSEs who have the relevant experience to become independent directors.

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