This article is from Jul 02, 2021

Most of the appointed Directors in Public Sector Units have links with BJP – RTI report reveals.

A RTI information obtained by Indian Express and their further investigation on it reveals that most of the appointed Independent Directors of Central Public Sector Undertakings have a BJP Connection. Some even served as an MLA under the BJP party.

The current BJP government is pursuing the ideology of ‘liberalization’ in its fiscal (financial) policy decisions. The BJP government is proposing a “liberalized market” to reduce the state’s financial burden and to increase revenue by selling state-controlled, state-run companies to private and corporate entities.

According to the 2019 survey results, there are currently more than 300 PSUs in India. It is agreeable that some of the big Public Sector Units such as BSNL have been unable to cope-up with the private players and are not earning enough revenue for the government. However, they are said to be the biggest asset to the government and can be a profitable business if proper reforms are made. In this context, a few months ago, Union Finance Minister Nirmala Sitharaman announced in a budget that the government would privatize non-strategic, low-income public sector companies which includes banks and insurance companies. According to this, only 12 public sector companies might remain under the control of the government.

As discussed in the budget meeting, atomic energy and electricity, space, defence, transport and telecommunications, petroleum, coal and other minerals, banking insurance and financial services have been identified as the four major strategic sectors. The presence of Public Sector Enterprises (PSE) (government’s involvement) in these sectors will be minimal. The remaining PSE which comes under strategic sectors will be either merged with other companies or converted into subsidiaries or privatized. The policy decision is that other PSE’s in non-strategic sectors will either be privatized or shut down.

Bank employees are now currently engaged in protest against this decision. This aside, there is another problem which lies in the appointment of Independent directors. The number of Independent directors in Public Sector Units is reducing year by year. According to Companies Act 2013 , “Independent directors should make up one-third of the total number of directors in each public sector company.” Institutional Investors Advisory Services (IIAS) reports that the main reason for the reduction is the non-appointment of directors in State-owned public enterprises.

Appointed Independent directors are unofficial directors. They have no direct connection to the companies they work for. They do not engage in the day-to-day operations of companies. But they will make decisions on policy making and planning. The reason they are appointed in this way is that they can have the freedom to act independently and can make decisions without any biases.

Standing conference of Public enterprises (SCOPE) , which works on policy advisories, reforms , pursuing professional excellence in PSU held a conference titled ”Independent Directors in PSUs-Growing Challenges”. In that conference, the Director General of SCOPE and former Chairman of GAIL India Dr.U.D. Choubey said that there is a need for transparency in appointing the Independent Directors.

He said, “Appointing enough Independent directors has been a challenge. The main challenge here is to minimize the appointment process and to establish a strong and transparent system. We need to establish a strong and transparent process to achieve high professionalism. We need to find qualified people like professionals, academics, researchers, finance and management experts..”

But , the latest news is that more than half of the appointed Independent directors in government-owned enterprises (CPSEs) in India are affiliated with the BJP government and some even served as MLAs, according to RTI data obtained by the Indian Express.

Subsequent investigation made by Indian Express in 146 Public Sector Undertakings (PSUs) reveals that in 98 PSUs , a total of 172 Independent directors are working. Of which 86 persons who are currently working in 67 PSUs are affiliated to the ruling BJP party. They served in various capacities such as Secretaries, state Vice-Presidents, former MLAs and former spokespersons in BJP.

Rather than depending only on the tax revenue and imposement of taxes as the only source of income. A Government should reform the state owned enterprises which plays an important role in enhancing the livelihoods of the people by carrying out various professional activities. Making government owned enterprises into a commercially viable resource is the way forward. Privatizing the public sectors which are built on tax payers money and hiring members of their own party to manage them will lead to a decline in the quality of public sector enterprises.

Links :

how-independent-are-independent-directors-of-psus-half-from-bjp

india-business/300-psus-may-shrink-to-barely-two-dozen

number-of-independent-directors-on-decline-psus-mainly-responsible-for-reduction-report

upa-govt-gujarat-hc-public-sector-bank-directoris

https://www.primedatabase.com/article/2017/12.Article-U.D.Choubey.pdf

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