Good start to fixing PSUs

Given how bureaucrats are loath to surrender even an iota of their power, prime minister Narendra Modi has done well to appoint Tractors and Farm Equipment (TAFE) chairperson and managing director Mallika Srinivasan as the head of the Public Enterprises Selection Board (PESB) that is responsible to selecting top personnel in PSUs. This is the first time PESB will be headed by someone from the private sector; the job is mostly given to retired bureaucrats. Coupled with the new policy that envisages the government retaining just a handful of PSUs in a few sectors and the push towards privatisation, this is clearly a good thing. That said, it is important to keep in mind that, in the past too, there have been some high-profile private sector individuals that have been the chairmen of PSUs such as Air India; yet, that did little to genuinely change their performance.

So, while applauding the decision to hire a private sector person to head PESB, it is important to empower her to be able to do the job she needs to do. That includes, for instance, allowing PESB to, if need be, hire top-notch search firms to locate the ideal candidate for top jobs in PSUs; it means that, after the PESB has come up with its recommendations going beyond the usual clutch of PSU managers, the line ministry or the Appointments Committee of the Cabinet (ACC) must accept the recommendation.

Tough as that may sound, it is actually the easy part. Once the PESB has chosen people, they need to be allowed to function with relative autonomy. As this newspaper has been arguing for a long time, the best way to do this is to either approach the Supreme Court to remove PSUs from the list of ‘instrumentalities of state’ or to amend the Constitution to ensure this; reducing the government stake to 50% or below is another way to retain control but to free the PSUs from the clutches of the CAG, CBI and CVC. While this can ensure a certain kind of freedom, if PSUs are to be run well, they need to be free of bureaucratic control as well and doing that is not easy. In the case of the oil PSUs, for all the talk of operational freedom, during the run-up of oil prices, they were informally asked to absorb the hike as the government didn’t want to give the Opposition a handle in the various state elections that were being held. And PSU banks are routinely treated as an arm of the state and asked to open Jan Dhan bank accounts, waive commissions on payments, etc. If this attitude doesn’t change, appointing a private sector head of PESB may not ultimately do much to fix the system.