World over Eighties signaled a transition in the traditional role of State’s participation in economic activities. Other than ideology, Technological Development and evolving of newer business processes accelerated this process. The traditional belief that natural monopolies such as power, telecommunications, railways, etc. can be best served by the public sector has undergone a change. In telecommunication the advent of telephony changed the concept of natural monopoly, while in power the scope to reorganise separately as generation, transmission and distribution has facilitated reorientation. The above transition, however, needs to be preceded by institutional reforms so that enabling and regulatory institutions are in place to facilitate competition and protect the interest of consumers.

Public Sector in India
In India Public Sector restructuring has been a subject of debate for a number of years. While various committees were and white papers prepared, a cohesive implementation strategy is yet to be initiated. Public sector in India has come under the scrutiny of expert committees for reasons similar to those elsewhere. The return on capital employed has been below acceptable levels. The Organisations have often being plagued with problems of excess manpower, poor project management, lack of continuous technological upgradation and engaging in noncommercial activities.

Trends In Public Sector Restructuring

The reforms initiated in India in 1991 saw public sector finding a mention in the new Industrial Policy of July 1991. The new Industrial Policy envisaged the following:

• Portfolio of public sector will be reviewed with a view to focus public sector on strategic, high technology sector and essential infrastructure.
• Public sectors, which are chronically sick, will be referred to BIFR.
• In order to raise resources and encourage wider public participation, a part of governments share holding would be offered to FIs, mutual funds, employee’s etc.
• Boards of public sector will be made more professional and given greater power.
• There will be greater thrust on MOU through which management will be granted greater autonomy and will be held accountable.
• To facilitate fuller discussion on performance, the MOU signed between Government and the public enterprises would be placed in Parliament.

Sick PSUs and BIFR
Despite the policy pronouncement, the measures on ground for PSU reforms remained feeble. A National Renewal Fund (NRF) was setup in 1992 to serve as a safety net for workers affected due to modernisation, technology upgradation and industrial restructuring on Central PSUs. The annual provision for NRF is shared across a number of competing PSUs enabling a gradual reduction in excess labour of concerned PSU.

For the sick PSUs referred to BIFR, solutions remain elusive with BIFR functioning only as another point of reference. With no well-defined exit policy and labour law reform, sick units either taken over from private sector, or PSU origin, continue to defy solution.

MOU and Management Autonomy

MOU system was introduced in mid eighties to grant greater functional autonomy to the PSUs with well-defined accountability, and to protect them from any interference in discharging day-to-day management function. With passage of time MOU is losing its significance. The controlling ministry has not been distanced from the PSU. The system multiple audits by agencies such as CAG, CVC, parliamentary committees etc continues taking away valuable management time in responding to parliamentary queries and audit replies.

In 1997, The Government of India granted enhanced autonomy to select PSUs to assist them in becoming global giants. The boards of the select PSUs identified as ‘Navaratna’ have delegated decision making authority with respect to incurring capital expenditure, entering into joint ventures, structuring and implementing schemes in personnel area including creation/winding of all, posts up to non Board Directors, and rising debt from international market. Similar autonomy with limitations was also granted to other profit making PSUs identified as  ‘Miniratnas’. Though the autonomy with respect to above delegation are subject to restrictions, it is a welcome departure from the controls the Government earlier exercised over PSUs.

Disinvestment of PSU Shares

Of all the measures of PSU reforms announced in 1991, PSU disinvestments has received maximum media attention .As a part of the budget speech Government had announced partial disinvestments in select PSUs in order to raise resources, encourage wider public participation and greater accountability. In the initial rounds of disinvestments, the Government had to face allegation of receiving sub-optimal value through sale of some PSU scripts. In 1996, Government constituted disinvestments Commission, to advice on–extent, mode, timing and pricing of disinvestment. The Disinvestment commission upto March 1999 had submitted nine reports to the Government covering 45 PSUs. The disinvestment exercise undertaken by the Government has been more to bridge the budget deficit then effect a change in management of PSUs. In 1998 –1999,the Government realised around Rs.4200 crore by inter-resale of it s equity in ONGC, IOC &GAIL. The year wise realisation through disinvestment of PSU shares is shown in the table below.

Professionalisation of PSU Boards 
The Government has issued guidelines on composition on SBU Board of Directors to make them more Professional. The guidelines provide that outside professionals should be inducted in the boards of PSU in the form of non-official Directors whose number should be at least 1/3 of the Actual strength of the Board. It is also envisaged that the number of Government Directors on the Board should not be more than two. Under the Navratna/Miniratna package, the board of select PSUs have professionalised by inducting a minimum of 4 non-official Directors incase of Navratnas and 3 in case of Miniratnas.

Problems and Prospect of PSU restructuring
 
Tenure of the CEO and Board of Directors 

The managerial problems in the PSU begin with the tenure of CEO and the Board of Directors. The selection, service conditions and the tenure of the Board of Directors is subject to the Government rules and regulations.  Unlike the private sector where CEO have almost a decade to nurture the company, in PSU the rules with respect to superannuation tends to focus attention on short term strategies-co-terminus with CEO’s tenure. There is, hence a need to provide continuity in the management by appointing CEO and other members in the Board of Directors for longer tenure with representation of shareholders other than GoI Shareholders.

Multiple-Audit 
The business decision in PSUs gets influenced by presence of a number of controlling agencies, such as the Ministry, parliamentary committees, CAG, CVC etc. The end result of this is recourse to a risk adverse approach to business. For example, there is a non-consideration of purchase of second hand equipment where on the spot decision is required and transparent processes such as global bid are not available. In today’s context of global competition, there may be decisions, which will bring substantial gain to the company. In some cases there could be decision which may put company to loss to be sheltered from excessive exposure of vigilance machinery of the Government, otherwise it will dampen the decision making process in commercial matters.

The role of administrative Ministry also needs to change. Like a shareholder of any other company, the Ministry’s role should be limited to contributing as shareholder in AGM/EGM of the companies, and providing it the requisite support. The role of Ministry in day-to-day Management through correspondence should be avoided.

Non Commercial Activities   
PSUs are expected to function on commercial consideration are burdened with activities against their commercial interest e.g. takeover of some sick/potentially sick unit. Investment in newer units based on socio-political consideration. This results in non-flexibility of to the company to reorganise its own business. Regularisation of contract labour under article 12, forces PSUs to absorb extra labour without any consideration to the existing manpower strength. PSUs are unable to spin-of loss making units or close operations in those units, which have become operationally unviable.

Conclusion
The current policy direction in relation to divestment of PSUs suggests that Government is finally taking a comprehensive view of restructuring the public Sector. The consideration of containing budget deficit alone, hence, would not be the criteria for disinvesting. The Government has decided to give up management control in Bongaigaon Refinery and Petrochemical Limited, MMTC, STC, ITDC, IA, AI, Hindustan Cables and Sponge Iron India Limited. The Rangrajan committee setup for disinvestment has recommended that in non-reserved sectors Government’s role should be confined to that of an investor and not as owner. By reducing its equity holding to less than 51% in non-reserved sector Government will allow the PSUs to become Board managed companies. This will remove the problems related to multiple Audits, Article-12 and Grant the companies real autonomy. The issues related to labour legislations and exit policy will remain, but that should happen as a part of economy wide reform.