Major Policy Initiatives and Decisions During 2007

Year End Review 2007

Industry is a major contributor to the fast growing indian economy. Heavy Industry and Public Sector Enterprises played a pivotal role in almost all the sectors of the economy, including those of infrastructure, such as power, rail and road transport during 2007. They catered to the requirements of equipment for basic industries like steel, non-ferrous metals, fertilizers, refineries, petrochemicals, shipping, textiles and a host of industrial machineries including paper, cement, sugar, etc. The Ministry of Heavy Industries and Public Enterprises continued to play an important role for the development of a wide range of intermediate engineering products like castings, forgings, diesel engines, industrial gears and gear boxes during 2007.

PERFORMANCE OF CPSEs

As per the policy on Public Sector contained in the National Common Minimum Programme (NCMP) of the UPA Government, various steps were initiated during the year in terms of restructuring and revival of sick Public Sector Enterprises as also to provide autonomy to the profit making Public Sector Enterprises.

BRPSE

The Board for Reconstruction of Public Sector Enterprises (BRPSE) continued to address the entire gamut of issues pertaining to revival/restructuring of public sector undertakings. The Board advised Government on measures to strengthen the Public Sector Undertakings in general and making them more autonomous and professional. The Board also monitored incipient sickness in Central Public Sector Enterprises and suggested ways and means, and sources for funding the revival/restructuring packages.

The revival packages sanctioned by Government generally envisage posting of profits by the CPSEs within 1 to 2 years of sanction of their revival package. Shri Nitish Sengupta, Economist and former Secretary to the Government of India joined as the new Chairman of BRPSE recently.

AUTOMOTIVE SECTOR

One of the major industrial sectors in India is the automotive sector. In the recent past, the focus has ostensibly been on capital goods and engineering industries including auto industry.

One of the greatest challenges before the auto industry today is increasing labour productivity. Besides, the investment in R&D in the auto sector is not commensurate with its growth potential. In order to facilitate the R&D in this sector, the Government proposed to support those companies which would achieve substantial reduction in energy consumption and at the same time look for use of alternative fuels including hybrids.

GROWTH OF COMMERCIAL VEHICLES

During April-July, 2007, the domestic sales of passenger and commercial vehicle segments have registered a positive growth rate of 12.6% and 3.5% respectively.

The automobile industry has performed very well during the past few years. The details of domestic sales of the various segments of the sector during the first four months of the current financial year are as under:

Automobile Industry is making a contribution of 17% to the pool of indirect taxes.

NATRIP

The Government is striving to introduce superior safety, emission and performance standards in automotive sector. To achieve this objective, the National Automotive Testing and R & D Infrastructure Project (NATRIP) continued its efforts for creating state-of-the-art Testing and R & D infrastructure in the country. The purpose is to encourage consolidation and confluence of generic R & D initiatives, deepening of manufacturing and all round sectoral growth leading to optimum realisation of its potential in the national economy.

FINANCIAL AUTONOMY TO CPSEs

Apart from the above, the Government also implemented a number of measures to strengthen the profit-making CPSEs which included greater financial autonomy, professionalisation of Boards, delegation of enhanced financial powers, adopting corporate governance practices and review of Nava Ratna and Mini Ratna Schemes

NAVARATNA AND MINIRATNA SCHEMES

The Government had identified nine Public Sector Enterprises that had comparative advantages and potential to emerge as global giants as Navratnas. The PSEs were given enhanced autonomy and delegation of powers to incur capital expenditure, entering into joint ventures, effecting organisational restructuring etc. Recently, some more PSEs have been proposed to be included in the Navratna List. Similarly, some more PSEs were included in the Miniratna List during the year on the basis of their excellent performances and turnover.

The Finance Minister, Shri P. Chidambaram conferred Navratna status on three Central Public Sector Enterprises (CPSEs), viz (i) Bharat Electronics Limited, (ii) Hindustan Aeronautics Limited and (iii) Power Finance Corporation Limited in New Delhi on 22 June, 2007. Earlier, the Navratna Companies consisted of nine CPSEs : BHEL, BPCL, GAIL, HPCL, IOC, MTNL, NTPC, ONGC and SAIL.

INCENTIVE TO EXECUTIVES OF CPSES

The Government has issued guidelines on the appointment of Chief Executives and Functional Directors in sick/loss making Central Public Sector Enterprises (CPSEs) under approved revival package. These guidelines, issued in July 2007 inter alia, state that any Board level incumbent who has contributed exceedingly well in the turn around of the sick CPSE, his tenure may be extended till he attains the age of 65 years and in case of fresh appointment of a Chief Executive or any Functional Director, relaxation of cut-off age for applying, to 62 years, with minimum tenure of 3 years, could be considered. Further, Chief Executives and Functional Directors of these CPSEs would be considered for a lump-sum incentive up to maximum of Rs.10 lakh out of the profits of the CPSE besides usual pay, allowances and perks attached to the post.

The incentives to Chief Executives/ Functional Directors will enable the Government to attract Board level executives capable for turning around sick CPSEs and give them continuity of tenure for the revival package to succeed.

MOU EXCELLENCE AWARDS

Prime Minister Dr. Manmohan Singh inaugurated the Conference of Chief Executives of Public Sector Enterprises jointly organised by the Department of Public Enterprises (DPE) and Standing Conference of Public Enterprises (SCOPE) in New Delhi on March 8, 2007. The theme of the Conference was “Empowering Public Sector for Growth”. The Prime Minister also presented “SCOPE Awards for Excellence and Outstanding Contribution to the Public Sector Management” and “MOU Awards for Excellence in Performance”.

SCOPE MERITORIOUS AWARDS

The Standing Conference of Public Enterprises (SCOPE) has instituted six awards in the fields of Environmental Excellence and Sustainable Development; Research & Development and Innovation; Best Practice in Human Resource Management; Corporate Social Responsibility & Responsiveness; Good Corporate Governance; and, Best Managed PSE set up under Section 25. The awards for the year 2005-06 were presented by Shri Sontosh Mohan Dev, Minister for Heavy Industries & Publlic Enterprises in New Delhi on September 5, 2007..

The SCOPE Meritorious Award for Corporate Social Responsibility and Responsiveness went to National Hydroelectric Power Corp. Ltd.; the award for Best practice in Human Resources Management was given to Indian Oil Corporation; the award for Good Corporate Governance was bagged by NTPC Ltd.; the Research & Development and Innovation award went to Bharat Heavy Electricals Ltd.; the award for Environment Excellence and Sustainable Development was received by Neyveli Lignite Corporation; while the National Safai Karamcharis Finance & Dev. Corp. was adjudged the Best Managed PSE set up Under Section 25.

SCOPE Meritorious Awards are presented to recognize significant achievements of member public enterprises in various fields leading to business excellence and competitive advantage; to encourage and motivate them; to achieve higher goals of excellence; and, to reward those enterprises which have demonstrated extra ordinary skills and have made a mark in chosen fields which have been primarily responsible for growth/turnover of the enterprise.

CORPORATE GOVERNANCE

The National Common Minimum Programme (NCMP) of the UPA Government envisages a strong and effective public sector and pledges to devolve managerial and commercial autonomy to successful profit making companies operating in a competitive environment. There is a need for appropriate public accountability of the Central Public Sector Enterprises (CPSE) managements regarding discharging of their duties and responsibilities keeping in view the fact that large public funds have been invested in them. Thus, it is imperative that ethics and probity are maintained in the functioning of CPSEs. Good Corporate Governance practices, therefore, should be built into the management systems of CPSEs

The Government has considered the above and approved the implementation of Guidelines on Corporate Governance for CPSEs. The “Guidelines on Corporate Governance for CPSEs” was released in New Delhi on 22 June, 2007 by the Finance Minister Shri P. Chadambaram. These guidelines have been formulated through a consultation process with various stakeholders and keeping in view the relevant laws, rules and instructions.

These guidelines cover issues like composition of Board of Directors, setting up of Audit Committees, role and powers of Audit Committees, issues relating to subsidiary companies, disclosures, accounting standards, risk management, compliance and schedule of implementation, etc.

These guidelines though voluntary in nature should be followed by all CPSEs as proper implementation of these guidelines would protect the interests of shareholders and relevant stakeholders. The compliance with these guidelines requires to be reflected in the Directors’ report, Annual Report and Chairman’s speech in the Annual General Meeting. The Department of Public Enterprises would also grade the CPSEs on the basis of their compliance of the corporate governance guidelines.

Source: Press Information Bureau
Date: January 01, 2008

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