PSU execs barred from taking benefits from sister units

the government has stated that executives of state-run firms cannot take sitting fee or share in profit from the subsidiaries and JVs of the company that employs them...

In a significant development, the government has stated that executives of state-run firms cannot take sitting fee or share in profit from the subsidiaries and JVs of the company that employs them.

The ruling is bound to open a Pandora’s box as many directors in public sector companies in the past have taken sitting fee, bonus, share in profit or stock options from the subsidiaries or joint ventures of their parent firms.

“The same will apply to government officials on boards of central public sector enterprises,” the Department of Public Enterprises said in an order.

Story continues below this ad

It asked the executives to deposit such monetary gains with their parent firms but did not make it clear how it will recover the money taken in past particularly from those who may have already retired or died. Also, the issue of tax paid on the amount received in the past has not been addressed, an industry watcher said, adding the policy may at best have to be implemented from prospective effect and not retrospectively.

“The whole time of a government/CPSE employee (including chief executive and functional director) is at the disposal of the government/CPSE, which pays him/her. Therefore, he/she may be employed in any manner required by the Government/CPSE, without claim for any additional remuneration,” the DPE order said.

A case in point is Petronet LNG Ltd, a joint venture of Indian Oil, Bharat Petroleum, GAIL India and Oil and Natural Gas Corp. Each of these oil PSUs nominates one director on the Board of PLL and he receives up to Rs 27 lakh in profit share for past two fiscals. They all paid 33 per cent income tax and spent the amounts under heads ranging from marriage of their wards to buying property, the industry watcher said.