Economy / Public Sector - Evolution, Reforms and Performance / Challenges for PSUs..
Challenges for PSUs..
- Constitutional Constraints (Article 12):
- Definition of State: Article 12 of the Constitution of India defines the State, and PSUs are considered a part of it.
- Obligations towards Welfare: The State, as per the Constitution, has obligations towards the welfare of citizens and employees of PSUs.
- Impact on Autonomy: Autonomy of management is curtailed in human resource (HR) policies due to constitutional provisions.
- Need for Amendment: There is a need for suitable amendments to make PSUs more dynamic by addressing constraints imposed by Article 12.
- Tenure of CEO and Board of Directors:
- Short-Term Focus: Unlike the corporate sector where CEOs have longer tenures, in PSUs, the focus is often on short-term strategies due to the co-terminus nature of CEO tenures.
- Continuity in Management: Ensuring longer tenures for CEOs and Board members, with representation from shareholders other than the government, can provide continuity in management.
- Multiple Audits:
- Influence from Multiple Agencies: Business decisions in PSUs are influenced by various agencies such as Administrative Ministries, parliamentary committees, Comptroller and Auditor General (CAG), Central Vigilance Commission (CVC), Central Bureau of Investigation (CBI), and courts.
- Risk-Averse Approach: This results in a risk-averse approach to business decisions, leading to a loss of entrepreneurial dynamism in PSU leadership.
- Role of Administrative Ministry:
- Need for Change: The role of the administrative ministry needs to evolve, moving away from micromanagement. Day-to-day interference in management should be minimized to allow for more autonomy.
- Non-Commercial Activities:
- Social Reasons vs. Autonomy: Some PSUs, taken over by the government for social reasons, lack autonomy to reorganize their businesses profitably.
- Challenges in Closure: Mandates such as the regularization of contract labor and the absorption of excess labor under Article 12 make it challenging for PSUs to spin off loss-making units or close unviable operations.
Addressing these challenges requires a comprehensive approach involving legal amendments, changes in management practices, and a shift in the role of administrative ministries to foster a more dynamic and commercially focused environment for PSUs.
