The Centre Wednesday approved a proposal to empower the boards of public sector enterprises to decide on the divestment and closure of their subsidiaries, a move that will give functional autonomy to the Board of Directors and enable them to monetise their investment or close their loss-making subsidiaries at the right time and save wasteful expenditure.
The proposal, which was cleared by the Union Cabinet in its meeting, also includes strategic disinvestment and minority stake sale.
Until now, only Maharatna companies had certain limited powers but none had the power to disinvest or close down. This will ensure minimum presence of the government in public.
"The proposal intends to reform the functioning of PSEs, by allowing greater autonomy to the Board of Directors of the holding PSEs for taking decisions and recommend for timely existing from their investment in subsidiaries/units or joint ventures, which will enable them to monetize their investment in such subsidiaries/units/JVs at an opportune time or close their loss-making and inefficient subsidiary/unit/JV at right time," according to the cabinet decision.
At present, the Board of Directors of Holding/Parent PSEs have been delegated certain powers under the Maharatna, Navratna and Miniratna categories to make equity investments to establish financial joint ventures and wholly-owned subsidiaries and undertake mergers/acquisitions subject to certain ceilings of net worth.
However, the Boards do not have powers for disinvestment, closure of their subsidiaries, units, stake in JVs, except some limited powers given to Maharatna PSEs for minority stake disinvestment of shareholding in their subsidiaries.
This is in line with the new PSE policy, 2021 to minimize presence of government PSEs and for functional requirements, further delegation in this matter have been provided through this decision.
(Published 18 May 2022, 08:29 IST)
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