PSUs facing competition should be divested first — MTNL Chief

NEW DELHI, APR 2: Public sector units which are being forced to compete with the private sector should be disinvested first to provide a l...

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NEW DELHI, APR 2: Public sector units which are being forced to compete with the private sector should be disinvested first to provide a level playing field and greater autonomy, Mahanagar Telephone Nigam Ltd (MTNL) chairman S Rajagopalan said today.

Once the Government decides to exit from a sector and the regulatory environment is set up to ensure fair competition, "it will be wise to disinvest in the PSUs which are being forced to compete with the private sector," he said.

"New business processes have to be introduced keeping in line with what the competitors do," Rajagopalan said, adding this would be possible only when Government reduces its stake below 50 per cent.

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Government did not realise the "full value" of shares from disinvestment process so far as the market perception of the sell-off process has been low, he said.

In fact, the value of the shares will be much more when the Government tries to go below 50 per cent as it increases the accountability of the board, he said.

Criticising bureaucratic business procedures, Rajagopalan said, "PSUs have to be given some freedom to determine their policies, marketing strategies, pricing their products and services, inducting professionals and having the freedom to take entrepreneurial decisions, he added.

Rajagopalan stressed that for each PSU, there should be a long-term strategy instead of a piecemeal divestment. Referring to suggestions by the Ministry of Finance and the erstwhile Disinvestment Commission about Special Purpose Vehicle (SPV), he said although it reduces the government holding before the sell-off and hence fetches higher value on shares, PSUs should be granted autonomy before the sell-off.

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SPVs may not be in the interest of the PSUs since it may have to raise resources at high interest rates, he added.

About privatisation, he said offloading 49 per cent stake in a PSU removes Parliamentary control, superintending by Central Vigilance Commission (CVC), Central Bureau of Investigation (CBI) and Comptroller and Auditor General (CAG). Yet the board of directors will still be under government control.

But holding 26 per cent stake in a PSU, government can have a say in major decisions of the company and run it as a private company, he said.

"There is again a third alternative where government can hold below 26 per cent and retain some kind of veto power through its `golden share’ on the board," Rajagopalan suggested.

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He summarised the various options saying "in the Indian context any privatisation process should factor the interest of the employees."

While employees may accept a good voluntary retirement scheme (VRS), they may not prefer retrenchment, he said.