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Indian Public Sector Enterprises can be Globally Competitive: CII
Nov 16, 2019

“India’s Public Sector Enterprises can become globally competitive,” said Mr Chandrajit Banerjee, Director-General, Confederation of Indian Industry (CII), referring to the CII Research report ‘The Rise of the Elephant: Enhancing Competitiveness of Central Public Sector Enterprises’ due for formal release on 18 November. “Our research, encompassed in this report, identifies specific actions to boost the competitiveness of public sector enterprises,” he added.  
 
The report highlights that there are examples internationally and a few in India to demonstrate that efficient operations and fulfilment of social obligations are not contradictory. Drawing from these CII Research has developed a Competitiveness Model, comprising six key elements, to enable Central Public Sector Enterprises (CPSEs) to compete successfully in the global marketplace.

At the core of the Competitiveness Model is clarity on the roadmap for CPSEs and the objectives. Given the current environment of divestment uncertainty, it is critical to appraise the CPSE top management, in advance, about a decision on this. Further, CPSEs are sometimes faced with multiple and often contradictory objectives. The priority of objectives for each CPSE should be clearly laid out to enable them to operate effectively.

The other key element is clear role demarcation. A well-documented policy, defining and separating the roles of the owner (government), management and Board is essential. This will help avoid either passive ownership or excessive interference.

Related to this are the elements of operational independence and instituting an independent and empowered board. Operational independence comprises independence in operational decision-making and in personnel related matters such as recruitment, promotion, compensation and other terms of employment. An independent and empowered board will transform CPSEs from being ministry-driven to Board-driven. The intent is that the board, comprising independent experts, would take all strategic decisions, thereby increasing the speed and efficacy of decision-making.

The fifth element of the Competitiveness Model is ensuring a level playing field between CPSEs and private players. CPSEs must be subject to the same governance standards as private players. Excessive scrutiny from the Central Vigilance Commission and the Comptroller Auditor General, coupled with the threat of Central Bureau of Investigations often leads to stalled or over-cautious decision-making in CPSEs. Further, distinction must be made between mala-fide action and taking a business risk.

Becoming future ready is the last element of the Competitiveness Model. CPSEs must develop internal competencies in technologies such as Artificial Intelligence, Internet of Things, blockchain, and big data analytics amongst others. Appropriate adoption of these technologies is the key to future competitiveness. 
 
Despite popular discourse, select CPSEs are required to further national strategic interest. This is in line with the global practice, where even developed economies operate a few state-owned enterprises. However, it is imperative that India enhance the competitiveness of its CPSEs by actioning the recommendations inherent in CII’s Competitiveness Model.

16 November 2019
New Delhi

 

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