Maran's Last Hurrah

IN what is being termed as the 'third wave' of public sector undertaking (PSU) reforms, the industry ministry last week downsized PSU guidelines—from the existing 892 to a lowly 196—by chopping off a majority of deadwood laws and procedures that were restraining the development of the public sector. A whopping 696 pieces of regulations have been scrapped and another 25 have been modified drastically. Besides, an expert committee under the guidance of retired Justice Mohan Singh has been entrusted with the job of examining the remaining 196 to see if their continuance is justified. If found unnecessary, these too can be considered for abolition. The committee is expected to submit its report by the end of March 1998 (by which time, of course, it could be an altogether different government).

But, like so many other measures taken by the Inder Gujral government, the question remains: how much real-world significance does this decision have? Has the government gone to the heart of the problem, or is it a lot of sound and fury that steers clear of the fundamental issues?

Industry minister Murasoli Maran's announcement took everyone by surprise because no one had expected any major policy decisions from a government reduced to a caretaker status following the announcement of mid-term polls. Maran's liberalisation gesture has left observers wondering whether the Election Commission (EC) will have something to say about this.

Says a Commission official: "The model code conduct issued by us before every election lists the dos and don'ts. If any action of the government violates any of its clauses, then the EC has the right to take necessary action. In this case, the key issue is whether the decision was taken before the elections were announced. If so, it's perfectly valid, even if the policy announcement came after mid-term polls were declared." This is possibly the government's last attempt to prove that liberalisation will remain at the heart of the national agenda. PSU reforms have been a particularly contentious area, but the Gujral government has given nine well-performing PSUS Navratna (nine jewels) status, implying some autonomy, and then extended that freedom to another 90-odd PSUs. The third wave attempts to slash through the mesh of rules that bind PSUs hand and foot.

The scrapped rules cover a whole range of areas, including general finance, construction and personnel management, wages and salaries, advertising, dispute settlement and product management. "We do not want to be backseat drivers anymore," says Maran. "It is time that the PSUs sat on the driving seat themselves. That is why we are removing the stifling influence of bureaucratic controls and breaking the shackles to enable the PSUs to run in freedom." He points out that the current initiative was long overdue: "Some of these rules and guidelines were very old and have either lost their relevance or have been superceded by subsequent guidelines." Consider only some of the outdated  regulations:

Maran says the government was motivated by the guidelines followed by Swiss-Swedish multinational ABB Asea Brown Boveri. ABB calls itself a federation of 1,200 companies spread all around the world, with each operating with near-total autonomy in a diverse range of industries (see box).

The pruning exercise began earlier this year when the government appointed a committee under Public Enterprises Selection Board chairman N. Vittal to identify archaic rules. The committee submitted its report on August 20. The committee came to the conclusion that, out of the 892 pieces of regulations that the PSUs were forced to follow religiously, 762 could be deleted outright, 25 needed drastic modification and only about 105 warranted continuance. The government has followed these recommendations to a large extent.

Vittal himself is a bit surprised that the government took such prompt action on his recommendations. "Usually, as Parkinson says," he quips, "if the government does not want to commit, it committees." Among the new proposals are a scheme for employee shareholdings in PSUs. The ministry is also working on a system to protect top officials from being troubled by investigating authorities for what may be bonafide commercial decisions taken. Among the options being contemplated is a pre-investigation body to look into cases before outside agencies step in. This exercise started two months ago and is expected to be completed soon.

However, private industry has mixed feelings about the impact of such exercises. "It will bring in autonomy and improve the work culture in PSUs, but the government needed to remove more rules," says a spokesperson of the Confederation of Indian Industry (CII). Agreeing with the CII's contention, Assocham president L. Lakshman says that while the current junking of rules will help procedurally, PSUs are still far away from real freedom: "Today, the PSUs have to run to the government to get every action approved and answer for every action. Till freedom from this comes in, mere pruning of rules will be just a cosmetic change." According to him, the accountability should shift from the president of India to the people of India.

Lakshman feels that the retention of over 190 rules also indicates that the government has kept the option of controlling PSU operations open: "If the government is talking of Navratnas, it should be ready to give full autonomy to the PSUs and let them decide their fate."

Even Vittal is unsure whether the government's decision will finally lead to the establishment of autonomous PSUs. Says he: "On April 8, 1991, the government issued a notification to all PSU boards, asking them to list all the rules that they thought had lost their utility. But in six years, none of the 640 PSUs have done anything in this respect. So there's no guarantee that this exercise will result in something. There are five areas PSUs are always scared of: the secretary, the joint secretary, the CAG, the Vigilance Commission and the CBI, who spread their arms even after they retire."

The problem may thus run deeper than the regulations.