PARLIAMENT OF INDIA - Rajya Sabha Secretariat - Intranet

233PARLIAMENT OF INDIARAJYA SABHADEPARTMENT-RELATED PARLIAMENTARYSTANDING COMMITTEE ON INDUSTRYTWO HUNDRED AND THIRTY- THIRD REPORTONDEMANDS FOR GRANTS (2012-2013)PERTAINING TOTHE MINISTRY OF HEAVY INDUSTRIES AND PUBLIC ENTERPRISES(DEPARTMENT OF PUBLIC ENTERPRISES)____________________________________________________________________________(PRESENTED TO THE RAJYA SABHA ON 26 TH APRIL, 2012)(LAID ON THE TABLE OF THE LOK SABHA ON 25 th APRIL,2012)RAJYA SABHA SECRETARIATNEW DELHIAPRIL, 2012 VISAKA, 1932 SAKA)

PARLIAMENT OF INDIARAJYA SABHADEPARTMENT-RELATED PARLIAMENTARYSTANDING COMMITTEE ON INDUSTRYTWO HUNDRED AND THIRTY- THIRD REPORTONDEMANDS FOR GRANTS (2012-2013)PERTAINING TOTHE MINISTRY OF HEAVY INDUSTRIES AND PUBLIC ENTERPRISES(DEPARTMENT OF PUBLIC ENTERPRISES)____________________________________________________________________________(PRESENTED TO THE RAJYA SABHA ON 26 TH APRIL, 2012)(LAID ON THE TABLE OF THE LOK SABHA ON 25 TH APRIL, 2012)RAJYA SABHA SECRETARIATNEW DELHIAPRIL, 2012 VISAKA, 1932 SAKA)

C O N T E N T SPAGES1. COMPOSITION OF THE COMMITTEE ………………………………… ( )2. INTRODUCTION…………………………………………………………. ( )3. REPORT…………………………………………………………………….4. RECOMMENDATIONS/OBSERVATIONS OF THE COMMITTEE – AT AGLANCE………………………………………5. MINUTES……………………………………………………………………

COMPOSITION OF THE COMMITTEE(Date of Constitution 31 st August, 2011)RAJYA SABHA1. Shri Tiruchi Siva — Chairman2. Vacant3. Shri Bhubaneswar Kalita4. Shri Ashk Ali Tak5. Vacant6. Shri Natuji Halaji Thakor7. Prof. S. P. Singh Baghel8. Shri Srinjoy Bose9. Shri Nandamuri Harikrishna10. Dr. Vijay MallyaLOK SABHA11. Dr. Rattan Singh Ajnala12. Shri Kamlesh Balmiki13. Shri Sabbam Hari14. Smt. Poonamben Veljibhai Jat15. Shri Ramsingh Kaswan16. Shri Kaushalendra Kumar17. Smt. Putul Kumari18. Shri M. Krishnaswamy19. Smt. Ingrid Mcleod20. Shri Bharat Ram Meghwal21. Shri Somen Mitra22. Shri Gorakhnath Pandey23. Shri Kishn V. Patel24. Shri R. K. Singh Patel25. Shri B. Y. Raghavendra26. Shri Ramsingbhai Patalbhai Rathwa27. Shri Ijyaraj Singh28. Shri E. G. Sugavanam29. Shri Bibhu Prasad Tarai30. Shri Suresh Kashinath Taware31. Shri Subhash Bapurao WankhedeSECRETARIATShri S.N. Sahu, Joint SecretarySmt. Sunita Sekaran, DirectorShri Vimal Kumar, Joint DirectorShri Anil Kumar Saini, Assistant Director

(i)INTRODUCTIONI, the Chairman of the Department-related Parliamentary Standing Committee onIndustry, having been authorized by the Committee, hereby present this Two Hundredand Thirty-third Report on the Demands for Grants (2012-13) pertaining to the Ministryof Heavy Industries and Public Enterprises (Department of Public Enterprises).2. This report is based on the material supplied by the Department of PublicEnterprises such as the background note, Annual Report, Answers to Questionnaire sentby the Secretariat and submissions made by the Secretary of the Department and itssenior officers and Secretary, BRPSE on 9 th April, 2012.3. The Committee considered and adopted the Draft report at its meeting held on20 th April, 2012.New DelhiApril, 2012TIRUCHI SIVAChairmanDepartment -related ParliamentaryStanding Committee on Industry(ii)

REPORTPublic Sector Enterprises constituted key and critical part of ourmixed economy which were conceived and put into operation afterindependence for transforming India into a modern and industriallyadvanced nation. The underdevelopment and retardation of our economycaused by colonial rule could never have been addressed except by the largescale mobilization and deployment of human, economic and technologicalresources of the State through these enterprises. Primacy given to the PSEsarose out of the fact that the private enterprises were not adequatelyequipped to undertake the mammoth task of creating infrastructure and otherfacilities which were indispensable for nation-building. The role played bythe public sector enterprises in discharging their responsibilities to generatewealth, create employment opportunities and provide necessary conditionsfor industrialization and economic regeneration of our country has been welldocumented. While our first Prime Minister Pandit Jawaharlal Nehru hailedthe public sector enterprises as the commanding heights of the economy he

simultaneously wanted those enterprises to be run on business principlescombining both the public purposes and profit generation.2. The country is proud of the public enterprises for their role in takingour economy forward and ensuring the resilience and strength of ourindustrial sector. In spite of the adoption of the economic reforms and theimportance given to the private and corporate sector as the engines of theeconomic growth in 21 stcentury India, we have to fully harness thepotentialities of the public sector enterprises in boosting our economicgrowth. Rather these enterprises have been revitalized to face the challengesof a market and globalised economy which is increasingly driven bycompetition, innovation, good corporate governance, research &development and greater quality consciousness. The Prime Minister of ourcountry Dr. Manmohan Singh while giving away the MoU and SCOPEAwards to the best performing Central Public Sector Undertakings inJanuary 2012 acknowledged that these enterprises remained critical to theprocess of nation-building even today. Stating that the Governmentremained committed to a strong public sector in our country he made it clearthat both public and private sectors need to work together to meet thedemands of our rapidly growing economy. He also assured that the

Government remained supportive of those public enterprises which neededassistance to become viable again.3. The significance of our public sector enterprises has been betterunderstood in the context of the financial crisis which originated in theUnited States of America. It is boldly articulated by the top leadership ofour nation that India could withstand the challenges posed by that crisisprimarily due to the resilience of these enterprises. This renewedaffirmation of faith on public sector enterprises augurs well for our economywhich has to be a mix of both public and private sectors.4. The number of CPSEs has increased from five during the first fiveyear plan to 250 during the Twelfth Five Year Plan. The nodal Ministry forthe public sector enterprises is the Ministry of Heavy Industries and PublicEnterprises. The Department of Public Enterprises which is part of theMinistry had its origin in 1965 in the form of a Bureau of Public Enterpriseswhich was set up on the recommendation of the Report of the EstimatesCommittee of the Third Lok Sabha. The Department is entrusted with theresponsibilities to frame policies for the central public enterprises and issueguidelines for their functioning. It performs its duties in coordination withother concerned Ministries and central public sector undertakings. Itsprincipal responsibilities are:-

(i)(ii)(iii)(iv)(v)(vi)Co-ordination of matters of general policy of non-financial naturerelating to Public Sector Enterprises.Issue of Presidential Directives and Guidelines to publicenterprises & formulation of policies pertaining to Public SectorEnterprises.Policy matters relating to composition of Board of Directors ofCPSEs, delegation of powers to the Board, categorization of topposts, scheduling of CPSEs & investiture and review ofMaharatana /Navratana/ Miniratna status to CPSEs.Publication of the annual survey of CPSEs known as PublicEnterprises Survey.Memorandum of Understanding (MoU) between the Public SectorEnterprises and the administrative Ministries/Departments.Policy relating to Voluntary Retirement Scheme & Counselling,Retraining and Redeployment Scheme (CRR) for rationalizedemployees of CPSEs.(vii) Matters relating to Board for Reconstruction of Public SectorEnterprises (BRPSE).(viii) Settlement of disputes through Permanent Machinery ofArbitration (PMA) among Public Sector Enterprises and betweenPublic Sector Enterprises & Government Departments exceptdisputes relating to tax matters.(ix)Matters relating to International Centre for Promotion ofEnterprises (ICPE) & Standing Conference of Public Enterprises(SCOPE).5. While examining the Demands for Grants of the Department of PublicEnterprises, it is important to bear in mind not only the work profile of theDepartment but also its vision and mission. While the vision is “To evolvepolicies, reform programs, guidelines and mechanisms towards the

establishment of a strong and effective public sector” its mission is “Tocontinuously improve the management of public sector enterprises byprofessionalizing management, goal setting and reviewing performance,developing a comprehensive Management Information System (MIS),evolving guidelines for corporate governance and social responsibility andstrengthening institutional mechanism for revival of sick units”.6. The Committee is aware that the Department while finalizing thetargets for Memorandum of Understanding for different central public sectorenterprises gives weightage, among others, to research and development,manpower management and net worth which are integral to the successfuland vibrant functioning of the CPSEs. It is acknowledged now that one ofthe reasons for which such enterprises lacked ability to compete both atdomestic and international markets is absence of adequate research anddevelopment capabilities. The Committee strongly feels that the visionand mission of the DPE must be further expanded to include issues likeresearch & development capabilities and manpower planning in theabsence of which the CPSEs quite often do not generate greaterproductivity and incur loss leading to their sickness and closure. Theissue of research & development is of course the responsibility of theconcerned public sector enterprises. But if the DPE is guided by vision

and mission to enhance the research & development capability andother critical factors which are essential for making our PSEstechnologically advanced and competitive, then it would better help theDPE to take the cause of public sector enterprises forward.TheCommittee feels that the vision and mission of the DPE incorporatingsuch factors would be more impactful on the CPSEs for making themcompetitive and result oriented. It would also make the CPSEs moreaware of the fact that for their survival and growth these have to standon their own and prove their worth in the expanding market and globaleconomy. Such a modified vision and mission statement would alsoenable the DPE officials to emphasise on the issue during theirinteractions with CPSE representatives.Overview of Demands for Grants7. The table below shows the budgetary estimates (BE), revisedestimates (RE) and the actual amounts spent both under the plan and nonplanheads.(Rs. in crore)Year BE RE ActualPlan Non Total Plan Non Total Plan Non Total-plan-plan-plan2010-11 10.50 5.22 15.72 10.33 7.85 18.18 9.41 7.70 17.112011-12 11.00 7.69 18.69 10.16 8.29 18.45 7.79 7.06 14.852012-13 13.00 8.93 21.93 - - - - - -

8. It is evident that the budgetary estimate under the planning headwhich stood at 10.5 crores for the year 2010-11 has been reduced to 10.33.The reduction has also taken place for the year 2011-12 and the budgetaryestimate which stood at 11 crores was reduced to 8.29 crores. However, ifwe examine the figures which were used for actual spending we find that inboth the years the actual spent amount has been less than the revisedestimates. What is noteworthy is that the non-plan expenditure for both2010-11 and 2011-12 have been increased and the actual spending in thisrespect has been less than the revised estimates. The figures clearly indicatethat money earmarked under the revised estimates could not be utilized.When the Committee wanted to know the reasons for reduction of budgetestimates amounting to 10.33 crores under the planned expenditure to 10.50crores the Department of Public Enterprises stated that the reduction to thetune of 0.17 crore took place to divert that amount for non-plan expenditurefor the purpose of meeting the foreign visit of Secretary, DPE for the years2008-09, 2009-10 and 2010-11. It was also explained to the Committee thatthe actual expenditure was reduced to Rs.9.41 crores due to non-receipt ofcomplete bill and, therefore, Rs.0.89 crore was surrendered. The details ofthe explanation of the Ministry in this respect has been given in(Appendix –I).

9. The Committee finds that non-plan expenditure for the year 2010-11which stood at 5.22 crores was increased to 7.85 crores. However, the actualexpenditure of Rs.7.70 crores was less than the revised estimates. Same isthe case for the year 2011-12. The Department of Public Enterprisesexplained that the increased amount in the revised estimates was allocated tomeet expenses which included:1. TA & DA to members of Task Force, Bureau for Restructuring ofPublic Sector Enterprises and Search Committee2. Printing of Public Enterprises Survey 2008-093. Payment of bills like telephone, petrol, taxi charges, payment ofwages to daily workers4. Charges for computer stationery, payment of arrears arising out ofgrade pay of Assistant/PA/class IV employees. (Appendix – I)10. Similarly, the Department explained that the reasons for differencesduring the year 2011-12 for plan expenditure could be attributed to thedecision of the Governments of Odisha, Assam and Madhya Pradesh tospend their own amount for research, development and consultancy for theirstate level public enterprises. Originally the DPE was supposed to spendmoney under the scheme Research Development and Consultancy.However, when the concerned state Governments spent their own money,the DPE decided to re-appropriate 0.6 crore from the plan head to non-planhead. (Appendix – II)

11. The Department of Public Enterprises also explained the reasons forwhich money from plan head was transferred to non-plan head to meet theexpenditure arising out of TA & DA to members of Task Force, BRPSE andSearch Committee. (Appendix – III)12. The Department also explained the reasons that the plan budgetaryestimates for 2012-13 was increased due to introduction of the new schemecalled ‘Skill Development/Training Programme of Executives of State LevelPublic Sector Enterprises’ for which a sum of Rs.1 crore has been allotted.Similarly, the budget for the scheme ‘Counselling, Retraining andRedeployment’ was increased to Rs.8.60 crore from Rs.7.80 crore torestructure the entire scheme. (Appendix – IV)13. The DPE explained that the non-plan expenditure which stood atRs.11.65 crore at the budgetary estimate level was reduced to Rs.8.93 croredue to the previous pattern of reduced expenditure the account of which hasbeen given in the preceding paragraphs. The detailed explanation of theDPE can be seen in the (Appendix – V).14. The Committee is given to understand that normally moneyearmarked for spending under the plan head is not transferred to thenon-plan head. Of course, the Department must have re-appropriatedthe money under the explicit approval of the Finance Ministry.

However, it is to be borne in mind that the lack of funds to meet thenon-plan expenditure is indicative of absence of sound planning by theDPE. It must foresee and anticipate such spending and approach theFinance Ministry for allocation of funds for the purpose of meeting nonplanexpenditure. It strongly recommends that the DPE must not divertfunds from the plan to non-plan head. The officials of the DPE mustforesee the non-plan expenditure and accordingly submit their estimatesto the Ministry of Finance for adequate allocation of funds. TheCommittee hopes that the Department will adopt a proper strategy sothat it does not divert the plan fund for the non-plan expenditure. TheCommittee strongly feels that the Department must spend the moneyput under the plan head to achieve the desired results.Scheme for Skill Development/Training programme of Executives ofState Level Public Enterprises (SLPEs)15. Skill development is central to the manpower planning. It alsoconstitutes a critical factor for enabling the employees to augment theircapacity so that they can enhance the productivity of the enterprise andcontribute to the wealth generation of our country. As mentioned earlier, theDPE has taken up a new scheme called ‘Skill Development/Trainingprogrammes of Executives of State Level Public Sector Enterprises’ and asum of Rs.1 crore has been allocated for this purpose. The Committee also

was informed that the amount in plan head in the budgeted estimates for theyear 2012-13 has been increased due to the introduction of this new schemethe objective of which is to impart training/knowledge to themanagers/executives/employees at the State Level Public Sector Enterprisesfor improving their skills. It was placed before the Committee that the fundswill be released as grant in aids to States and Union Territories based onpolicy guidelines formulated by DPE.16. The Department, while answering a query of the Committee, informedthat the Scheme is yet to be introduced as the allocation of Rs.1.00 crore istentative and may need to be increased. As for the modus operandi, theCommittee was informed that each State/UT will be asked to undertake aSWOT (Strength, Weakness, Opportunity and Threats) analysis of theirSLPEs. They will be asked to ignore the strength and focus onweaknesses/‘WOT’, and accordingly identify the training needs.17. The Committee takes note of the fact that the DPE intends tofocus attention on the deficiencies and weaknesses of the employees ofthe SLPEs so that it could take measures to mitigate or rectify them andimprove their capabilities. But, while doing so, it would be selfdefeatingto ignore the strengths of the employees whose skills are to bedeveloped. In the syllabus of the modern management discipline SWOT(Strength, Weakness, Opportunity and Threats) has been adopted to get

a broad view of the dark and brighter sides of the human resourcesdeployed in an enterprise. In ignoring the strengths the positive aspectswould be completely lost sight of. The concept of ‘Core Competence’has been increasingly emphasized in the modern organization tohighlight the inherent resilience and capabilities of the employees. Itwould be appropriate for the Department to stress on ‘CoreCompetence’ while adopting the SWOT analysis. This would enable theDepartment and the concerned enterprises to have a better grasp of thetalent pool available at their disposal and their plus and minusdimensions. The Committee recommends that the good performance ofthe SLPEs may be factored into any decision to allocate funds for skilldevelopment. Besides, the weightage also should be given to theenterprises which function in core areas of our economy which arecritical to economic growth and expansion. The Committee also hastensto add that the SLPEs utilizing locally available resources and creatingjob opportunities may be accorded priority.18. The Committee, while taking note of the programme for skilldevelopment of SLPEs, is constrained to observe that the Department ofPublic Enterprises has no scheme for training its own officers both atthe national level institutes and in the reputed training establishmentslocated in some of the world class universities and institutes. The

officials of the DPE are quite often engaged in imparting trainingfacilities. They are also engaged in finalizing the MoUs whereweightage is given to several parameters which are indispensable forenhancing growth, productivity and competitiveness of the PSEs. Ifthese officers are not adequately trained, both at the national andinternational levels, their expertise and competence will remainstagnant. It is, therefore, strongly recommended that a separate schemefor the employees and officers of the DPE should be formulated fortheir training within India and abroad.19. Apart from skill development, there must be in place a propersuccession planning to fill managerial post in different PSEs. TheCommittee is aware of the fact that 23 posts of Chief Executives arepresently lying vacant in several Central Public Sector Enterprises. TheDepartment of Public Enterprises, in replying to the question of theCommittee concerning the number of vacancies of CMDs existing indifferent public sector enterprises, replied that the selection and appointmentof CMDs and Directors in the Central Public Sector Enterprises is done bythe Public Enterprises Selection Board after the proposals to this effect aremade by the administrative Ministry to Public Enterprises Selection Board.20. The Committee is given to understand that the Public EnterprisesSelection Board (PESB) is part of the Department of Personnel and

Training. The Committee is surprised to note that it is the DoPT whichis the administrative Ministry for the PESB. Possibly the PESB wasmade part of the DoPT when there was no Department of PublicEnterprises. Now, that the DPE is in existence for several years, itwould be prudent to bring the PESB under the control of the DPE. TheCommittee strongly recommends that such a change must take place forthe purpose of streamlining and quickening the process of successionplanning in the PSEs. Apart from the PSEs and their administrativeMinistry, the domain knowledge concerning the functioning of the PSEsis with the DPE. It finalises their MoUs and sets their targets both inthe financial and non-financial sectors. It is, therefore, appropriate thatPESB must function under the jurisdiction of DPE. At a time when theGovernment of India is emphasizing on the need to reform thefunctioning the Central Public Sector Enterprises, it is extremelyimportant to include within the reform process the decision to transferthe PESB from the control of DoPT to DPE. Realising the importance ofthe recommendation it must be done irrespective of any resistance fromany quarter.Counselling, Retraining and Redeployment Scheme for SeparatedEmployees of CPSEs (CRR).

21. Following the economic reforms introduced in 1991, the Governmenttook a bold decision to restructure the CPSEs by rationalizing theirfunctioning and rightsizing the manpower employed. It resulted in giving afresh look at the number of people in the rolls of the PSEs. It was found thatmany of the employees would have to be separated. To meet the expensesarising out of the adoption of the Voluntary Retirement Scheme and the needto rehabilitate those employees by retraining them, the Government set up aNational Renewal Fund in 1992. Later in 2001-02 it was replaced with ascheme called CRR. It aims at achieving the following objectives:• Reorient separated employees through short durationprogrammes.• Equip them for new vocations.• Engage them in income generating wage/self-employment.• Help them rejoin the productive process for the growth ofeconomy.22. To further improve the effectiveness of the scheme some majormodifications were made in 2007. The most important was to widen itsscope and coverage by including dependent of each VRS optee, if the VRSoptee himself/herself is not interested.23. During the course of examination of demands, the Committee wasinformed that the CRR Scheme was being further restructured by the year2012-13. When the details of the same were sought the Departmentsubmitted that during the modification of the scheme in 2007, the

Expenditure Finance Committee (EFC) wanted DPE to consider the mergerof the scheme with the Skill Development Programmes of the Ministry ofLabour & Employment. However, when this was attempted it was notedthat convergence is difficult since CRR is a Central Scheme whereas SkillDevelopment Mission is a Centrally Sponsored Scheme implemented by thestates. Nevertheless, in the 12 th Five Year Plan, it was proposed to furtherrestructure the existing CRR Scheme to make it more efficacious and marketoriented through necessary changes. This would better equip the trainedVoluntary Retirement Scheme (VRS)/Voluntary Separation Scheme (VSS)optees or their dependents with ‘Minimum Skill Set/MinimumEntrepreneurship Set’ to start their own business or get suitable employment.24. The Committee takes note of the fact that the DPE is periodicallyreviewing the CRR scheme to make it useful to the beneficiaries. Ascheme like CRR becomes more meaningful when the targetedbeneficiaries are made employable through training imparted to them.The skills they acquire need to be certified by an accredited agency sothat the training they received is recognized and valued.25. In reply to a query of the Committee, the Department furnished theyear-wise budget allocations (BE&RE) for CRR scheme during the EleventhPlan period and percentage of utilization of funds as below.Table -1

Year2007-082008-092009-102010-112011-12Fundsallocated (Rs.In crore)Percentageof utilization(%)TargetforTrainingTraining ImpartedActual %10.00 85.70 9000 9728 108.18.70 91.95 8000 9772 122.17.45 95.03 8000 7400 92.58.90 96.97 8000 9265 115.88.90 91.80 9000 9400 104.426. As per the Budget Documents, the allocations for the CRR scheme duringthe last 3 years has been as below:Table -2(Rs. In crore)Year BE RE Actuals2010-11 7.85 7.58 8.032011-12 7.80 7.80 -2012-13 8.60 - -27. The figures in the Budget Documents at Table 2 shows that theallocation (RE) for the Scheme of CRR for 2010-11 was Rs.7.58 crore,but the Actuals for the year is shown as Rs.8.03 crore. The Committeefails to understand as to how the utilization figures for 2010-11 werehigher than the allocation made for the year. Furthermore, if the Table1 figures for allocation (Rs.8.90 crore) is taken in face value, the Actualsfor 2010-11 in the Budget Document should have been Rs.8.63 crore

(96.97% of Rs.8.90 crore) instead of Rs.8.03 crore. Similarly, whileconsidering the figures of Table-1, the allocation for 2011-12 asfurnished by DPE is Rs.8.90 crore whereas in the Budget Documentputs it at Rs.7.80 crore.28. The Committee observes that such variation in figures presentedbefore a Parliamentary Committee, engaged in scrutinizing the Demandfor Grants is totally unacceptable. The Committee expects a clear cutexplanation in this regard. It is imperative that the Department shalltake note of this and ensure strict compliance in future.Scheme of Research, Development and Consultancy (RDC) on Genericissues relates to CPSEs & SLPEs29. With the opening of our economy and adoption of reforms forensuring greater role to the private sector in the development and growth ofeconomy, the public sector enterprises faced stiff competition to cope withthe new challenges emanating from market. It required overhauling of theirfunctioning and a new outlook to innovate and adopt new strategies based onmodern management practices. It is a matter of satisfaction to note that theDPE by organizing series of workshops and seminars sensitized the PSEfunctionaries to make them more competitive and market oriented. A newscheme entitled ‘Research, Development and Consultancies on Generic

Issues of CPSE’ was formulated by the Planning Commission in 2008-09and made operational under the jurisdiction of the DPE. One of the majoractivities to be covered under the Scheme was to bring out annual survey onthe performance of State Level Public Sector Enterprises (SLPEs), onsimilar lines as in the Public Enterprises Survey for CPSEs.30. Coming to the Budget allocation of the scheme, it was noted that Rs.1.50 crore was allocated (BE) for the year 2011-12. However, at the RevisedEstimates (RE) Stage, this was reduced to Rs.0.66 crore. Replying to thequery of the Committee on the reasons for reduction in funds and the extentto which the objectives of the scheme were affected by the reduction, theDepartment submitted that Rs.1.50 crore approved as B.E. was reduced toRs.0.66 crore at RE stage in view of the lower expenditure incurred by thethird quarter of 2011-12 on this plan scheme. The reduction in expenditurewas mainly on account of (a) savings arising from three workshops atOdisha, Assam and Madhya Pradesh that were organised by the respectivestates and DPE did not have to incur any expenditure from RDC, (b)postponement of the proposed workshop for the North-East Zone andPerformance Monitoring System (PMS) Workshop at Mumbai on accountof unavoidable reasons, which will be held in the current financial year and

(c) approvals of expenditures incurred on the workshops conducted at Jaipurand Chandigarh that could not materialise quickly.31. The Actual expenditure for Research, Development and Consultancies(RDC) was Rs.23 lakhs as against the RE of 66 lakhs. However, theDepartment informed that they plan to improve the utilization of funds byusing the amount separately for publication, other administrative expensesand professional services.32. The Committee is not happy to note that the reduction inexpenditure took place because some States organized their workshopson their own due to delayed approvals of the workshops to be conductedby the DPE. It also established the point that there was a lack ofcoordination between the DPE and the States concerned. Even earlierthe Committee has observed that lack of coordination among Ministriesand several Departments of Governments have resulted in policyparalysis and adversely affecting the functioning of PSEs. TheCommittee recommends that funds allocated for such importantschemes should be fully utilized.Allocation for North Eastern Areas33. From the Budget figures of DPE for 2012-13, it is found that theactual expenditure for the North Eastern Areas for the year 2010-11 was

‘nil’. The Committee wanted an explanation in this respect and desired toknow as to how the Department proposed to spend the current allocation ofRs. 1.30 crore in a prudent manner.34. While giving answer to the Committee, the Department submitted thatduring 2010-11, against a target of training 1100 VRS optees under CRRscheme in NE region, 700 VRS optees were trained and Rs. 6 crore utilized.Besides, approval for training 400 more VRS optees in NE region wereaccorded towards the end of the financial year 2010-11. As such sometraining programs scheduled for 2010-11 spilled over to the next year andwere completed in 2011-12. In 2011-12, 900 VRS optees have been trainedin NE Region with fund utilization of Rs. 77.40 lakhs.35. The Committee was further informed that in 2012-13 the DPE plansto utilize funds, earmarked for North Eastern Region to cover the backlog ofVRS optees, if any, under CRR scheme. Besides, some state specificproposals involving CPSEs and SLPEs would also be considered andimplemented.36. The Committee has persistently noted that funds allocated toNorth Eastern Areas and are taken forward to next financial years. Ofcourse, the Committee appreciates the fact that in case of North EasternRegion, the funds allocated would not lapse. The North Eastern Areasof the country do always get the special attention of the Union

Government. Fund earmarked for this region has to be utilizedproperly for the cause of improving that region and accelerating theprocess of industrialization. It is important, therefore, to accelerate theprocess of utilization of funds for training VRS optees. The Committeealso finds it difficult to fathom as to why the Budget Document reflectsthe Actual expenditure for the North Eastern Areas for 2010-11 as ‘nil’,when the Department claims to have utilized Rs. 6 crore. This sort ofanomalies in figure may lead to misunderstanding and, therefore, theCommittee demands an explanation from the Departments concerned.The Committee firmly recommends that the Department should ironout such incongruities and improve their performance in the NorthEastern Areas.MoU System37. The MoU system has proved to be a robust mechanism to make ourPSEs competitive, performance oriented and dynamic in the globalisedmarket economy. It has helped to evaluate the performance of theenterprises by setting the targets and adopting both financial and nonfinancialparameters. Introduced in 1997-98, the MoU system now has beenaccepted as a major determinant for overall improvement of the public sectorenterprises.

38. The MoU rating for the year 2010-11 in respect of 160 CPSEs whoseMoU performance were evaluated vis-a-vis MoU targets is as shown below :Sl. MoU Ratings No. of CPSEsNo.1 Excellent 672 Very Good 433 Good 244 Fair 245 Poor 0239 It may be seen that 110 CPSEs (67 Excellent + 43 Very Good) havesuccessfully achieved their MoU targets for the year 2010-11. 197 CPSEssigned MoU in 2011-12. Performance evaluation of MoUs for the year2011-12 will be carried out after finalization of audited data, balance sheetby CPSE and submission to DPE in September-October 2012.40. During the discussion on Demand for Grants for 2012-13 theCommittee wanted to know the reasonableness in continuing with the equalweights of 50% to financial and non- financial parameters for performanceevaluation of CPSEs which was recommended by NCAER way back in2003. The Committee also wanted to know the extent to which the feedbackfrom CPSEs influenced the finalization of MoU targets. Departmentsubmitted before the Committee that the MoU involved three wayparticipation, i.e, the administrative ministry, the CPSE and the DPE,assisted by the Task Force. Hence, it was put forth that after duedeliberation and discussion targets were set by incorporating the views of the

administrative Ministry and the concerned PSEs. The DPE maintained thatit is never done unilaterally by the Department. It was informed to theCommittee that the Department is open to review the MoU system.41. The Committee takes note that the MoU System as it exists todayis broadly based on the recommendation of NCAER made in the year2003. It is the considered opinion of the Committee that the MoUsystem, which has an overarching influence on the performance of theCPSEs has to be in tune with the latest trends for successful operationof the PSEs. Accordingly, it is recommended that DPE may engage anaccredited organization to revisit the MoU system and assess it for thepurpose of revitalizing it and making it more effective. The systemshould be more flexible and receptive to the feedback received from theCPSEs. It is worthwhile to note that certain profit making organizationsmust not be allowed to opt for soft targets solely on the ground that theyhave performed better. In fact, in a highly competitive environmentsuch organizations need to set better targets for themselves for fullflowering of their potentialities. The Prime Minister of our countrywhile giving away the MoU and SCOPE Awards to best performingCentral Public Sector Enterprises referred to the MoU system and saidthat, “We cannot be satisfied with the status quo”. He made thatobservation in the context of the determination of the Government to

make CPSEs stronger and competitive. An overhauled MoU systemmust serve this cause.42. The Committee was constrained to note that there are certainCentral Public Sector Enterprises which do not subscribe to the MoUdiscipline and protocol. It has noted that such departure from MoUdiscipline has taken place in spite of the intervention of the CabinetSecretary. It is a sad commentary on the functioning of our system.The Committee finds it unacceptable that certain PSEs are notamenable to MoU regime. The Committee is sad to note that certainCPSEs do not submit certain documents at the time of evaluation oftheir functioning. The Committee was informed that 36 CPSEs failed tosubmit the required documents to the DPE for evaluation. TheCommittee feels that action must be initiated against such organizationswhich remain out of the ambit of the MoU. The Committee notes thatincentives are there for CPSEs to submit to the MoU system. TheCommittee strongly recommends that there must be stringent actionand disincentives as well to enforce the MoU system.43. Further, the Committee is strongly in favour of introducingdisincentives and punitive measures against those PSEs which desistfrom entering into MoU discipline and those which do not comply withthe MoU agreements already signed.

Annual Compliance Reports44. As per DPE guidelines of 20 July 2010 all CPSEs were to submit theirAnnual Compliance Reports regarding implementation of their guidelineswithin 30 days from the end of the preceding financial year to theirrespective Administrative Ministries. The administrative Ministries in turn,would consolidate the same for all CPSEs under their control and forward itto DPE by 30 thJune every year. When asked about the status ofimplementation of this guideline and the highlights of the compliancereports filed till date, the Department responded that it has not receivedAnnual Compliance Reports from any Ministry/Department in the formatprescribed and a reminder had been sent to AdministrativeMinistries/Departments to expedite submission Annual Compliance Reportsof CPSEs under their administrative control.45. The Committee is surprised to note that there is failure on thepart of the DPE to secure the Annual Compliance Reports from theCPSEs. An appropriate strategy has to be devised to receive suchReports from the concerned PSEs. It is important that Committee mustbe informed about the action taken in this regard.Board for Reconstruction of Public Sector Enterprises (BRPSE)

46. The Government constituted BRPSE vide Resolution dated 6 thDecember, 2004 as an advisory body to address the task of strengthening,modernization, reviving, and restructuring of CPSEs and to advise theGovernment on strategies, measures and schemes related to them. Proposalsare sent to them; they appraise them and make recommendation. Therecommendation then, through the Department, goes to the Cabinet. Cabinetapproves a package to be presented before the BIFR. It is the BIFR awardwhich has statutory force for all sick companies. So, BIFR is the final bodyas far as sick companies are concerned.47. During the discussion on Demands for Grants 2012-13, it was broughtto the notice of the Committee that BRPSE was only the first step for a sickCPSE seeking restructuring / revival. It was also submitted that BIFR whichhad a mandatory role similar to that of BRPSE cut into the latter’sfunctioning in a negative way, sometimes. The functioning of BRPSE isadversely impacted by the fact that for every small thing the sick companieshave to approach BIFR, which had the final say in matters concerningrestructuring / revival of CPSEs. In nutshell, the involvement of Board ofIndustrial & Financial Reconstruction (BIFR) retards the pace of revival/restructuring of PSEs as the entire process becomes quite laborious anddraconian. Further, it was informed that the BIFR was to be soon replacedby another body the National Company Law Tribunal in the near future.

48. The Committee finds that the time taken to process the proposalfor revival and restructuring of a PSU is too long. The delay caused inthis regard compounds the problem. The Committee was given tounderstand that BRPSE cannot take punitive action or even a strongview if its recommendations are not followed. In contrast, the views ofBIFR are given importance due to the fact that it has a statutorybacking. The Committee is given to understand that the BIFR is soon tobe replaced by the National Company Law Tribunal (NCLT). In thisscenario, the Committee recommends that when NCLT is put in place,its mandate should avoid any duplication of work with BRPSE. TheCommittee also strongly feels that the revival proposal of sick PSEsmust be disposed of within a specified time avoiding unnecessary delay.Boards of PSEs49. The issue of Professionalization of Boards was first enunciated in theIndustrial Policy Statement of 1991, wherein it was, inter alia, mentionedthat “Boards of public sector companies would be made more professionaland given greater powers”. In line with above policy statement, Departmentof Public Enterprises (DPE) had issued the guidelines vide OM dated16.3.1992 which provided for appointment of requisite number offunctional, Government and non-official Directors. The Government has laid

down the specific criteria for persons who can be considered forappointment as non-official Directors on the Boards of CPSEs.50. It is deplorable that there are 300 vacant positions of non-officialDirectors on the Boards of more than 100 scheduled CPSEs. However,the recommendations of Search Committee for filling up 100 of thesevacant positions have already been conveyed to the concernedMinistries for obtaining approval of competent authority. This must bedone expeditiously.51. The Committee is of the view that professionalization of Boards ofCPSEs is an indispensable necessity for making them more competitiveand viable in the emerging market economy. The good corporategovernance can be ensured by professionalization of board of directors.The existing vacancies of 300 posts of non-functional directors must befilled up urgently without which the effective performance of CPSEswould be adversely affected. These vacancies indicate lack of vision,planning and non responsive attitude to vital issues concerning thefunctions of PSEs. The Committee would like to reiterate the point thatDPE has to be the nodal Department under the jurisdiction of whichmust function the Public Enterprises Selection Board. The Committeestrongly recommends for the filling up of vacancies of non-officialsDirectors in CPSEs within a minimum period of one month and also to

ensure that such vacancies do not exist beyond the period of a financialquarter in any case.**********

Details of surrender of saving for the year 2010-2011.Appendix- I(Rs. in thousands)SN Head of A/c AmountREVENUE SECTIONMajor Head 3451-Secretariat Economic Services00.090 Secretariat ( Minor Head )34-Department of Public Enterprises34.01 – Establishment1. 34.01.06 Medical Treatment -- 250 2502 34.01.12 Foreign TA -- 902 90260 Board for Reconstruction of Public Sector Enterprises (BRPSE)6 60.00.06 Medical Treatment 69 6934.99 Information Technology10 34.99.50 -Other charges 1000 A ---- 1000Total Major Head 3451 1000 1221 2221BMajor Head 2552-North Eastern Areas317 – Others(Other Expenditure- Industries (Minor Head)1 01-Counseling/retraining/Redeployment, setting up of newCentres/Addition of Nodal Agencies, etc.01.00.31-Grants-in-aid 4480 C ---- 4480Total MH 2552 4480 4480Major Head 2852 Industries1 80 Gen. (Sub Major Head)80.798 International Cooperation (minor Head)03 International Centre for Promotion of Enterprises03.00.32 Contribution 55 D 5580.800 Other Expenditure (Minor Head)1. 13 Counseling/retraining/Redeployment, setting up of newCentres/Addition of Nodal Agencies, etc.13.00.31-Grants-in-aid 1563 E --- 156327 Research, Development and Consultancy on Generic issuesrelated to CPSEs and SLPEs27.00.31 Grants-in-aidReasons for savingsA. IFW have concurred in the proposal in March, 2011. However, due to shortage of time, the proposalcould not be moved to the Department of Administrative Reforms and Public Grievances for getting75% grant from their plan scheme of modernization of Government offices.B. Due to non receipt of Medical bills as being the nature of head and non receipt of bills from Ministry ofExternal Affairs on account of Secretary, PE Foreign Visit.C. The numbers of PSEs and VRS optees are comparatively less in the NE Region. Hence CRRprogramme could not be implemented.D. Due to appreciation of INR as against US $.E. Nodal Agency failed to identify target in newly selected Cochin EAC (Employees AssistanceCentre)F. Due to non receipt of proper and complete bills from the parties.PlanNon-PlanTotal1804 F - 1804Total 2852-Industries 3367 55 3422Grand Total 8847 1276 10123

Appendix- IIReasons for differences during Year 2011-12PlanAt the revised estimate (RE) stage, the budget estimate has been reducedto Rs. 10.16 Crore i.e. under the scheme Research, Development andConsultancy (RDC)the budget estimate reduced to Rs. 0.66 crore from Rs. 1.50crore due to less expenditure incurred then anticipated under the scheme RDCas some states like Odisha, Assam and Madhya Pradesh organized the State LevelPublic Enterprises(SLPEs) workshop in their states on their own, and due to nonreceipt complete bills of SLPEs workshops held. Rs. 0.60 crore has been reappropriatedto Non-plan to meet the expenditure on account of salary, OfficeExpenses, / Printing of Public Enterprises Survey / SLPEs Survey and TA/DASitting fees of members of Task force MOU and BRPSE. Hence, the actualExpenditure is lower at Rs. 7.79 crore due to reasons as above.

Appendix- IIINon-PlanThe Department porposed Rs. 9.35 Crore in RE 2011-12. Ministry ofFinance provided Rs. 8.29 Crore in RE 2011-12.BE 2011-12 was Rs. 7.69 Crore. It was increased to Rs. 8.29 Crore at REstage because payments due in 2010-11 Amounting to Rs. 0.60 Crore on accountof sitting fees, TA/DA to Members of TF, MOU, and BRPSE and SearchCommittee, Printing of PE Survey 2009-10, salary of officials of DPE, essentialservices bills like Telephone, Petrol, Hiring of Taxi, AMC, Computer stationaryetc. and Payment to wages to daily Wagers (through out-sourcing) has to madefrom the allocation of 2011-12. The escalation in the cost of goods to bepurchased and the services to be hired from outsource have also added to theexpenditure. Hence, Rs. 0.60 Crore re-appropriated from Plan to Non-Plan tomeet the excess expenditure in Non-Plan.

Appendix – IVReasons for differences during Year 2012-13PlanIncrease in plan BE-2012-13 is due to introduction of New Scheme “SkillDevelopment / Training programmes of Executives of State Level Public SectorEnterprises (SLPEs)” for which a sum of Rs. 1 Crore has been made. Budget forthe Scheme Counselling, Retraining and Redeployment (CRR) increase to 8.60crore from 7.80 crore to further restructure the existing CRR scheme.

Appendix – VNon-PlanThe Department proposed Rs. 11.65 Crore in BE 2012-13. Ministry ofFinance provided Rs. 8.93 Crore in BE-2012-13. Rs. 11.65 Crore were proposedkeeping in view the trend of expenditure in the past year and anticipatedexpenditure for 2012-13. Pending bills of GOI press, price escalation in the costof the goods to be purchased and the services to be hired outsourced, activitieslike Corporate Social Responsibility (CSR), SLPEs, Maharatna Scheme etc. andexpansion and widening of existing activities under MOU (bringing all CPSEsunder its ambit, mid- year review of MOU performance, etc.), Survey of SLPEs(Survey like PE Survey), Management Policy (autonomy and accountabilitythrough compliance of guidelines on corporate governance) etc., has resulted inincreased expenditure in the hiring of vehicles, incidental, purchase of essentialitems, stationery etc. and TA/DA and sitting fees of the members of Task ForceMoU, BRPSE and Search Committee. The escalation in the cost of the goods to bepurchased and the services to be hired from outsource have also added to theexpenditure. The Department have to meet the expenditure for hiring of space,office expenditure and sitting fees to Consultants for setting up and running aseparate cell in DPE as based on the approval of the cabinet , DPE has notifiedthe Policy for Acquisition of Raw Material overseas by CPSEs.”……………………………….

RECOMMENDATIONS/OBSERVATIONS OF THE COMMITTEE-AT A GLANCEThe Committee strongly feels that the vision and mission of the DPE must befurther expanded to include issues like research & development capabilities andmanpower planning in the absence of which the CPSEs quite often do not generategreater productivity and incur loss leading to their sickness and closure. The issueof research & development is of course the responsibility of the concerned publicsector enterprises. But if the DPE is guided by vision and mission to enhance theresearch & development capability and other critical factors which are essential formaking our PSEs technologically advanced and competitive, then it would betterhelp the DPE to take the cause of public sector enterprises forward. TheCommittee feels that the vision and mission of the DPE incorporating such factorswould be more impactful on the CPSEs for making them competitive and resultoriented. It would also make the CPSEs more aware of the fact that for theirsurvival and growth these have to stand on their own and prove their worth in theexpanding market and global economy. Such a modified vision and missionstatement would also enable the DPE officials to emphasise on the issue during theirinteractions with CPSE representatives. (Para 6)The Committee is given to understand that normally money earmarked forspending under the plan head is not transferred to the non-plan head. Of course,the Department must have re-appropriated the money under the explicit approvalof the Finance Ministry. However, it is to be borne in mind that the lack of funds tomeet the non-plan expenditure is indicative of absence of sound planning by theDPE. It must foresee and anticipate such spending and approach the FinanceMinistry for allocation of funds for the purpose of meeting non-plan expenditure. Itstrongly recommends that the DPE must not divert funds from the plan to non-planhead. The officials of the DPE must foresee the non-plan expenditure andaccordingly submit their estimates to the Ministry of Finance for adequateallocation of funds. The Committee hopes that the Department will adopt a properstrategy so that it does not divert the plan fund for the non-plan expenditure. TheCommittee strongly feels that the Department must spend the money put under theplan head to achieve the desired results. (Para 14)

The Committee takes note of the fact that the DPE intends to focus attentionon the deficiencies and weaknesses of the employees of the SLPES so that it couldtake measures to mitigate or rectify them and improve their capabilities. But, whiledoing so, it would be self-defeating to ignore the strengths of the employees whoseskills are to be developed. In the syllabus of the modern management disciplineSWOT (Strength, Weakness, Opportunity and Threats) has been adopted to get abroad view of the dark and brighter sides of the human resources deployed in anenterprise. In ignoring the strengths the positive aspects would be completely lostsight of. The concept of ‘Core Competence’ has been increasingly emphasized in themodern organization to highlight the inherent resilience and capabilities of theemployees. It would be appropriate for the Department to stress on ‘CoreCompetence’ while adopting the SWOT analysis. This would enable theDepartment and the concerned enterprises to have a better grasp of the talent poolavailable at their disposal and their plus and minus dimensions. The Committeerecommends that the good performance of the SLPEs may be factored into anydecision to allocate funds for skill development. Besides, the weightage also shouldbe given to the enterprises which function in core areas of our economy which arecritical to economic growth and expansion. The Committee also hastens to add thatthe SLPEs utilizing locally available resources and creating job opportunities maybe accorded priority. (Para 17)The Committee, while taking note of the programme for skill development ofSLPEs, is constrained to observe that the Department of Public Enterprises has noscheme for training its own officers both at the national level institutes and in thereputed training establishments located in some of the world class universities andinstitutes. The officials of the DPE are quite often engaged in imparting trainingfacilities. They are also engaged in finalizing the MoUs where weightage is given toseveral parameters which are indispensable for enhancing growth, productivity andcompetitiveness of the PSEs. If these officers are not adequately trained, both at thenational and international levels, their expertise and competence will remainstagnant. It is, therefore, strongly recommended that a separate scheme for theemployees and officers of the DPE should be formulated for their training withinIndia and abroad. (Para 18)

The Committee is given to understand that the Public Enterprises Selection Board(PESB) is part of the Department of Personnel and Training. The Committee issurprised to note that it is the DoPT which is the administrative Ministry for thePESB. Possibly the PESB was made part of the DoPT when there was noDepartment of Public Enterprises. Now, that the DPE is in existence for severalyears, it would be prudent to bring the PESB under the control of the DPE. TheCommittee strongly recommends that such a change must take place for thepurpose of streamlining and quickening the process of succession planning in thePSEs. Apart from the PSEs and their administrative Ministry, the domainknowledge concerning the functioning of the PSEs is with the DPE. It finalises theirMoUs and sets their targets both in the financial and non-financial sectors. It is,therefore, appropriate that PESB must function under the jurisdiction of DPE. At atime when the Government of India is emphasizing on the need to reform thefunctioning the Central Public Sector Enterprises, it is extremely important toinclude within the reform process the decision to transfer the PESB from the controlof DoPT to DPE. Realising the importance of the recommendation it must be doneirrespective of any resistance from any quarter.(Para 20)The Committee takes note of the fact that the DPE is periodically reviewingthe CRR scheme to make it useful to the beneficiaries. A scheme like CRR becomesmore meaningful when the targeted beneficiaries are made employable throughtraining imparted to them. The skills they acquire need to be certified by anaccredited agency so that the training they received is recognized and valued.(Para 24)The figures in the Budget Documents at Table 2 shows that the allocation(RE) for the Scheme of CRR for 2010-11 was Rs.7.58 crore, but the Actuals for theyear is shown as Rs.8.03 crore. The Committee fails to understand as to how theutilization figures for 2010-11 were higher than the allocation made for the year.Furthermore, if the Table 1 figures for allocation (Rs.8.90 crore) is taken in facevalue, the Actuals for 2010-11 in the Budget Document should have been Rs.8.63

crore (96.97% of Rs.8.90 crore) instead of Rs.8.03 crore. Similarly, whileconsidering the figures of Table-1, the allocation for 2011-12 as furnished by DPE isRs.8.90 crore whereas in the Budget Document puts it at Rs.7.80 crore.(Para 27)The Committee observes that such variation in figures presented before aParliamentary Committee, engaged in scrutinizing the Demand for Grants is totallyunacceptable. The Committee expects a clear cut explanation in this regard. It isimperative that the Department shall take note of this and ensure strict compliancein future. (Para 28)The Committee is not happy to note that the reduction in expenditure tookplace because some States organized their workshops on their own due to delayedapprovals of the workshops to be conducted by the DPE. It also established thepoint that there was a lack of coordination between the DPE and the Statesconcerned. Even earlier the Committee has observed that lack of coordinationamong Ministries and several Departments of Governments have resulted in policyparalysis and adversely affecting the functioning of PSEs. The Committeerecommends that funds allocated for such important schemes should be fullyutilized. (Para 32)The Committee has persistently noted that funds allocated to North EasternAreas and are taken forward to next financial years. Of course, the Committeeappreciates the fact that in case of North Eastern Region, the funds allocated wouldnot lapse. The North Eastern Areas of the country do always get the specialattention of the Union Government. Fund earmarked for this region has to beutilized properly for the cause of improving that region and accelerating the processof industrialization. It is important, therefore, to accelerate the process ofutilization of funds for training VRS optees. The Committee also finds it difficult tofathom as to why the Budget Document reflects the Actual expenditure for theNorth Eastern Areas for 2010-11 as ‘nil’, when the Department claims to haveutilized Rs. 6 crore. This sort of anomalies in figure may lead to misunderstandingand, therefore, the Committee demands an explanation from the Departments

concerned. The Committee firmly recommends that the Department should iron outsuch incongruities and improve their performance in the North Eastern Areas.(Para 36)The Committee takes note that the MoU System as it exists today is broadlybased on the recommendation of NCAER made in the year 2003. It is theconsidered opinion of the Committee that the MoU system, which has anoverarching influence on the performance of the CPSEs has to be in tune with thelatest trends for successful operation of the PSEs. Accordingly, it is recommendedthat DPE may engage an accredited organization to revisit the MoU system andassess it for the purpose of revitalizing it and making it more effective. The systemshould be more flexible and receptive to the feedback received from the CPSEs. It isworthwhile to note that certain profit making organizations must not be allowed toopt for soft targets solely on the ground that they have performed better. In fact, ina highly competitive environment such organizations need to set better targets forthemselves for full flowering of their potentialities. The Prime Minister of ourcountry while giving away the MoU and SCOPE Awards to best performing CentralPublic Sector Enterprises referred to the MoU system and said that, “We cannot besatisfied with the status quo”. He made that observation in the context of thedetermination of the Government to make CPSEs stronger and competitive. Anoverhauled MoU system must serve this cause. (Para 41)The Committee was constrained to note that there are certain Central PublicSector Enterprises which do not subscribe to the MoU discipline and protocol. Ithas noted that such departure from MoU discipline has taken place in spite of theintervention of the Cabinet Secretary. It is a sad commentary on the functioning ofour system. The Committee finds it unacceptable that certain PSEs are notamenable to MoU regime. The Committee is sad to note that certain CPSEs do notsubmit certain documents at the time of evaluation of their functioning. TheCommittee was informed that 36 CPSEs failed to submit the required documents tothe DPE for evaluation. The Committee feels that action must be initiated againstsuch organizations which remain out of the ambit of the MoU. The Committeenotes that incentives are there for CPSEs to submit to the MoU system. The

Committee strongly recommends that there must be stringent action anddisincentives as well to enforce the MoU system.(Para 42)Further, the Committee is strongly in favour of introducing disincentives andpunitive measures against those PSEs which desist from entering into MoUdiscipline and those which do not comply with the MoU agreements already signed.(Para 43)The Committee is surprised to note that there is failure on the part of theDPE to secure the Annual Compliance Reports from the CPSEs. An appropriatestrategy has to be devised to receive such Reports from the concerned PSEs. It isimportant that Committee must be informed about the action taken in this regard.48. The Committee finds that the time taken to process the proposal for revivaland restructuring of a PSU is too long. The delay caused in this regard compoundsthe problem. The Committee was given to understand that BRPSE cannot takepunitive action or even a strong view if its recommendations are not followed. Incontrast, the views of BIFR are given importance due to the fact that it has astatutory backing. The Committee is given to understand that the BIFR is soon tobe replaced by the National Company Law Tribunal (NCLT). In this scenario, theCommittee recommends that when NCLT is put in place, its mandate should avoidany duplication of work with BRPSE. The Committee also strongly feels that therevival proposal of sick PSEs must be disposed of within a specified time avoidingunnecessary delay. (Para 45)It is deplorable that there are 300 vacant positions of non-official Directorson the Boards of more than 100 scheduled CPSEs. However, the recommendationsof Search Committee for filling up 100 of these vacant positions have already beenconveyed to the concerned Ministries for obtaining approval of competentauthority. This must be done expeditiously.(Para 50)

The Committee is of the view that professionalization of Boards of CPSEs isan indispensable necessity for making them more competitive and viable in theemerging market economy. The good corporate governance can be ensured byprofessionalization of board of directors. The existing vacancies of 300 posts of nonfunctionaldirectors must be filled up urgently without which the effectiveperformance of CPSEs would be adversely affected. These vacancies indicate lackof vision, planning and non responsive attitude to vital issues concerning thefunctions of PSEs. The Committee would like to reiterate the point that DPE has tobe the nodal Department under the jurisdiction of which must function the PublicEnterprises Selection Board. The Committee strongly recommends for the filling upof vacancies of non-officials Directors in CPSEs within a minimum period of onemonth and also to ensure that such vacancies do not exist beyond the period of afinancial quarter in any case. (Para 51)………………………..