Transcript SLOVENIA_2010_FINAL_on_11.6.10

World Class Management of Public
Enterprises in India
BHASKAR CHATTERJEE
SECRETARY
Department of Public Enterprises
Government of India
15 June, 2010, Ljubljana
ROLE OF DPE IN GOVERNMENT OF INDIA
• Public Sector Enterprises in India are under the
administrative
control
of
38
different
ministries/departments.
• Department of Public Enterprises acts as the nodal
agency for all PSEs and formulates overall policy.
• It lays down guidelines on performance evaluation,
autonomy and financial delegation, personnel
management and related sectors.
• It collects, evaluates and maintains information on
key areas.
• It coordinates with other Ministries, PSEs and
concerned organisations.
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CURRENT PROFILE OF PSEs
No. of PSEs (as on 31.3.2010)
246
Operating PSEs
213
Total Investment in PSEs
105.8 (US $ Billions)
Total Turnover
252.7
(- do -)
Total Net Profit
16.8
(- do -)
Total Dividend Declared
5.1
(- do -)
Contribution to Government
30.3
(- do -)
No. of Employees
1.6 Million
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PSE SCORECARD
• 242 PSEs, 41 listed, 22 sectors
• 41= 20% of market cap of Bombay Stock
Exchange(BSE)
• Dominates in utilities, transportation, coal, oil, gas
• Significant in steel, fertilizer, aluminium, copper
and electricity machinery
• Produces 8% of GDP on value added basis
• 25% of GDP in gross sales
• 2% of GDP in profit terms
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STORY OF GROWTH
Started with 5 PSEs with investment of Rs. 290
million ($ 6.3 million) in1956.
Has grown to 246 PSEs with an investment of
Rs. 5,289 billion ($117 billion) as on
31.3.2009.
Impressive expansion in last decade - Capital
employed grew from Rs. 2,500 billion ($ 55
billion) in 1997-98 to Rs. 7,930 billion ($ 176
billion) in 2008-09,
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So, 13% annually
THE GROWTH STORY CONTD…
• Internal generation of resources by Indian
PSEs grew from Rs. 321 billion ($ 7 billion) in
1997-98 to Rs. 1,108 billion ($ 24 billion) in
2008-09, on annual growth of 12.2%
• Contribution of PSEs to Indian Exchequer
(besides proceeds from disinvestment)
increased from Rs. 482 billion ($ 10.7 billion)
in 1997-98 to Rs. 1,852 billion ($ 41 billion) in
2008-09 - annual growth rate over 14%
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GROWTH STORY CONTD……
• PSEs, forming less than 1% of all listed
companies, are currently estimated to
contribute over 26% of the total Bombay
Stock Exchange market capitalisation. In 200708 when BSE sensex increased by 20%, the
market cap of quoted PSES increased in value
by 65%.
• The 2009 Forbes Global list of 2000
companies included 47 Indian companies
which included 25 PSEs.
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GROWTH STORY CONTD …
• Value added by PSEs, direct contribution
to GDP, has been increasing substantially.
During the period 2004-05 to 2008-09
the increase was of the order of 34%.
• The PSEs have made investment overseas
on their own besides expanding
operations and have succeeded in
meeting global challenges.
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PSEs AS WEALTH CREATORS
(1990-91 TO 2008-09)
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Equity capital
Gross block**
Manpower
Net worth
Turnover
Net profit
Contribution to exchequer
Forex earning*
(*) Earnings only from exports
(**) Original cost of assets
Expansion in Multiples
2.21
8.17
0.69
9.69
10.65
37.07
7.77
9.96
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SECTOR-WISE INVESTMENT IN PSEs
Sector
Share of the Total (%)
Services
Power/Electricity
Manufacturing
Mining
Agriculture
Enterprises yet to start operation
Total
46.12
26.19
18.07
08.76
00.05
00.81
100.00
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POLICY LANDMARKS
1956 Industrial Policy Resolution – The
Planning process initiated.
• New strategies for the Public Sector
outlined in the Policy Statements in
the years 1973, 1977 and 1980.
• 1991 - a watershed year heralded
liberalization of Indian economy
by
Industrial Policy of 1991.
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CURRENT POLICY FRAMEWORK
• Chronically loss-making
companies will either be
sold-off or closed - after all workers have got their
legitimate
dues and compensation.
• Private industry will be inducted to
turn-around
companies that
have potential for revival.
• Privatization revenues will be
used for designated
social
sector schemes.
• While the Government will retain majority
shareholding and control, it will develop a roadmap for
listing and people-ownership of public sector
undertakings while ensuring that Government equity
does not fall below 51%.
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DISINVESTMENT OF PSEs IN 2009-10
• In implementation of its disinvestment policy the
Indian Government raised about Rs. 315 billion ($7
billion) through disinvestment in the following
PSEs:– National Thermal Power Corporation
– National Mineral Development Corporation
– Oil India Ltd.
– National Hydroelectric Power Corporation
– UCO Bank
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DISINVESTMENT - LATEST POLICY THRUST
• Securities contracts (Regulation) Rules 1957 of
India amended to make minimum publicholding at 25% for listed companies
mandatory (in line with practice followed in
countries like UK, Singapore, Hongkong).
• Out of 4500 listed companies in India about
234 companies would have to offload stake (in
phases) to meet the new norms. Out of 234
companies, 35 are Public Sector Enterprises
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(PSEs).
DISINVESTMENT - LATEST POLICY THRUST
• Entire exercise could necessitate sale of shares
worth Rs. 2,000 billion ($44.44 billion). PSE
shares on offer alone could account for half of
this amount (at current prices)
• In the first year itself (2010-11) the exercise
could result in sale of shares worth Rs. 600
billion out of which PSE shares to account for
Rs. 400 billion ($8.9 billion) on listed
companies.
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BIG TICKET OFFERINGS IN PIPELINE
– Minerals and Metals Trading Corporation
(MMTC)
– Hindustan Copper Limited (HCL)
– Neyveli Lignite Corporation(NLC)
– National Mineral Development Corporation
(NMDC)
– Steel Authority of India (SAIL)
– National Thermal Power Corporation (NTPC)
– Indian Oil Corporation (IOC)
– National Aluminum Corporation (NALCO) 16
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MEMORANDUM OF UNDERSTANDING
(MOU) SYSTEM
Negotiated document between Government
and PSEs for performance targets.
Task Force, a body of Independent Experts
finalizes the targets for PSEs and evaluates
their performance
All PSEs brought under the ambit of MoU
System
Performance Related Pay (PRP) comes into
force .
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CLASSIFICATION OF PSEs - MINIRATNA
• For qualifying as Miniratna the PSE:
– should be profit making for the last 3 years
continuously and should have positive net
worth,
– should not have defaulted in repayment of
loans/interest payment on loans due to
government,
– should not depend upon budgetary support or
government guarantee, and
– Board is restructured by inducting at least 3 nonofficial Directors.
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MINIRATNA PSEs – Nos. and POWERS
• There are 62 Miniratna PSEs
• Miniratna PSEs have powers for
capital expenditure, investment in
Joint Ventures / Subsidiaries in India,
HRD, Mergers and acquisitions, etc.
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NAVARATNA AND MAHARATNA
• Two categories introduced for greater
autonomy and more efficient functioning:
• NAVARATNA – Should have obtained three
excellent or V. Good MOU ratings in the last 5
years
- Minimum 4 independent Directors
- At least 60% score on financial parameters
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MAHARATNAS
• Must be a Navaratna Company
• Average Turnover of Last 3 Years – $ 5 Billion
• Average Net Worth over Last 3 Years - $ 3
Billion
• Average Net Profit over Last 3 Years - $ 1
Billion
• Significant Global Operations
• Listing on National Stock Exchange
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NAVARATNA / MAHARATNA CONTD.
• Grant of ‘Navaratna/ Maharatna status’ to PSEs is
also an extension of the MoU system. Consistently
good performance in the MoU rating is essential .
• While the MoU system provides ‘operational
autonomy’, the Navaratna/ Maharatna status gives
‘strategic autonomy’
for
making
investment
decisions, decisions for diversification and for joint
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PUBLIC ENTERPRISES SURVEY ON PSEs
• Published by DPE Every Year and placed
before Parliament;
• Contains macro-appraisal of PSEs in
terms of broad physical and financial
parameters.
• Contains performance analysis of PSEs in
different sectoral groups and of individual
enterprises.
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NEW INITIATIVES - CORPORATE
GOVERNANCE
• Applicable to both listed and unlisted PSEs
• Covers issues such as composition and role of
Board of Directors, Audit Committee, Disclosures,
Subsidiary companies, code of conduct, etc.
• It also provisions dealing with issues such as right
to information, model code of business conduct
and ethics for board members and senior
management and risk management
• Provides for grading of PSEs on the basis of their
compliance of guidelines.
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NEW INITIATIVES – CORPORATE SOCIAL
RESPONSIBILITY (CSR)
• Comprehensive guidelines issued in 2010
• A specified % of previous years’ profit to be spent
mandatorily by profit making PSEs on CSR activities;
• CSR activities aim at sustainable development
involving people, planet and profits;
• CSR activities to be in line with the long term business
plan of the PSE;
• Documentation, research, monitoring to be the
integral part of the CSR project;
• CSR to be in the project mode with a definite
developmental goal - no adhoc approach.
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INDIAN PSEs IN THE INTERNATIONAL
ARENA
• ONGC Videsh Ltd.
– Recently acquired Oil fields including that of
Imperial Energy, Russia and San Cristobal,
Venezuela;
– Has presence in countries such as Columbia,
Brazil, Egypt, Sudan, Vietnam Syria, etc.
• Bharat Heavy Electronic Ltd.
– Has 50-50 Joint Ventures with GE Pacific,
Mauritius and Siemens AG, Germany
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INDIAN PSEs IN THE INTERNATIONAL
ARENA
• IRCON International Ltd.
– Has project offices in Afghanistan, Bangladesh,
Ethiopia, Malaysia, Mozambique, Nepal and Sharjah
– Has Joint Venture with Companhia Dos Caminhos De
Ferro Da Beira of Mozambique
• Engineers India Ltd.
– Has Engineering office in Abu Dabi
– Has an inspection office in London
– Has a wholly owned subsidiary EIL Asia Pacific in
Malaysia.
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INDIAN PSEs IN THE INTERNATIONAL
ARENA
• Telecommunications Consultants India Ltd.
– Has 12 overseas based offices/branches
– Has JVs like TCIL Saudi Company Ltd and United
Telecom Ltd. Nepal.
– Has one foreign subsidiary namely TCIL Oman LLC with
an equity holding of 70%
• GAIL India Ltd.
– Has a subsidiary GAIL Global (Singapore) Pvt. Ltd.
– Has established its CNG and city gas presence in Egypt
through equity participation
– Has acquired stake in China Gas Holdings for CNG
opportunities in mainland China.
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INDIAN PSEs IN INTERNATIONAL ARENA
• National Thermal Power Corporation
Ltd. (NTPC Ltd)
– Has
undertaken
consultancy
projects in Dubai, Nepal, Tanzania,
Kuwait and UAE
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