Given the past performance of the central public sector as a whole and with changing times and technological development taking place at a faster pace government decided to bring a shift in the scene.
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The motives for creating central public sector enterprises in India initially were driven by mix of reasons , political, ideological, social and economic . Public sector companies were expected to develop industrial base , generate employments, may not make profit but if happens it was merrier. But that was in the early ’80s. After that CPSE’ have seen changes in their business and regulatory environment over last few decades. Three decades back when country embraced the path of liberalisation, deregulation, privatization CPSE’ started falling from commanding heights – the position it perceived then. Post liberalisation CPSE’ are perceived as controlled by vested interest, inefficient and badly managed with low returns on capital employed , case for privatization to bring efficiency and focus towards market.
At the end of 2019-20 total number of central public sector undertaking were 366 of which 256 were operational, 96 were under construction and 14 were under liquidation; total capital employed were in these enterprises were Rs 31,16,455 crores with a gross revenue of Rs 24,61,712 crores with 171 earned profit of Rs 1,38,112 crores and 84 incurred a net loss of Rs 44817 crores. Total number of employees were 1473810 comprising of all categories :regular and non-regular.
Given the past performance of the central public sector as a whole and with changing times and technological development taking place at a faster pace government decided to bring a shift in the scene. An year back Government of India notified its new policy on public sector enterprises keeping in view Atmanirbhar Bharat. The new policy envisages classification of central public sector undertakings into strategic and non-strategic sectors and exempts certain undertakings those are setup as not for profit companies under the Companies Act, 2013 or those supporting vulnerable and weaker sections of society. The strategic sectors are (a)Atomic Energy, Space, and Defence;(b)Transport and Telecommunication;(c)Power, Petroleum, Coal, and Other Minerals;(d)Banking, Insurance, and Financial Services.
New policy desires a bare minimum presence of central public sector enterprises in the strategic sector. Public sector in the strategic sector/ non-strategic sector which are not performing well to be taken up for privatisation, merger, subsidiarisation with another central public sector enterprises (CPSE) or will be closed.
To implement the new policy the Department of Public Enterprises (DPE) has been brought under the finance ministry, which was earlier under the ministry of heavy industries and public enterprises. It has been brought under the finance minister in a bid to ease coordination regarding future strategic restructuring and disinvestment plans with a clear demarcation of responsibilities been worked out between Department of Investment and Public Asset Management (DIPAM) and DPE. DPE is to identify CPSEs for privatisation or closure in non-strategic sector in consultation with administrative ministries / NITI Aayog / Department of Expenditure and DIPAM to take in principle approval from CCEA in respect of such identified CPSEs. Besides, DPE is also to set up a Special Purpose Vehicle (SPV) for asset monetisation once the SPV is approved by the Cabinet. DPE will drive the closure process for CPSEs , on the lines of disinvestment process being run by DIPAM.
DPE will follow a set procedure in implementing closure process. It will work out the statutory dues, taxes (including minimum alternate tax)and cesses and liabilities towards central and state governments. It has to intimate about the closure of the organization to the employees and other stakeholders in consultation with the ministry of labour and employment . DPE will work out along with dues of employees, labilities to secured creditors , estimation of receivables and estimation of the value of movable assets from market or net realizable perspectives – by independent third parties. Movable assets has to be disposed in a transparent manner following an Auctioning agency or through Forward Auction platform. DPE has also to estimate budgetary support required from central government to implement the process. Updating of land records and its and current status like possession of land, whether any encroachment taken place, geo mapping etc. has also to be done by DPE. Movable assets are to be delinked from the CPSEs, all kind of leasehold land will be returned back to the state government and freehold land would be transferred to SPV.
Boards of CPSEs are to settle wages /salaries of employees and complete the VRS/VSS with the support of the administrative ministry /department in a time bound manner. Administrative ministry will negotiate regarding settlement of the dues of the secured creditors as one time settlement at minimum value; while deciding priority of settlement Insolvency & Bankruptcy Code 2016 is to be consulted and followed.
Once the requisite formalities related to settlement of all liabilities and assets are completed , Boards of the CPSEs shall take necessary steps for filing an application for removal of the name of the company from the Registrar of Companies. CPSE’s have to apply section 248 of the Companies Act 2013 along with it revised form of STK-3A issued by MCA ,which enables the authorized person of the administrative ministry to furnish the indemnity bond and absolves individual directors of CPSEs for any future liability of the company.
Why government wanted to bring this change ? Indeed, if CPSEs are not reformed, all such areas remain stagnated and the roots of economic reforms become too weak; thus the need to further reshape how CPSEs are being transformed within India’s new context as an increasingly open and dynamic economy- Atmanirvar Bharat. With this necessity in mind I consider it fundamental to offer an overview of the reform process with special focus on the CPSEs and their implications on the rest of the economy. Indeed, the challenges are enormous, but benefits are also coming to light.
It’s a gigantic task by all measures and the trouble is that we have few , if any , maps to guide us on journey or even to show us how to find path. Employees interest is to be protected by all means and that is to be seen by the overall employee class in the country – whether it is reskilling – training. rehabilitation or adequate compensation paid to them is important. DPE has been entrusted with many responsibilities and multifarious tasks it is expected to perform. How DPE will execute these work is a matter to be closely observed. We are generally bombarded with promises of immediate gratification , instant success and fast temporary relief, all of which lead may to exactly in the wrong direction- hence need to follow baby step.
The author is Professor of Finance, Great Lakes Institute of Management, Gurgaon. Views expressed are personal
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