Prime Minister of India - Dr. Manmohan Singh

PM's address to the Conference of Chief Executives of Public Enterprises

"I am delighted once again to have this opportunity to interact with some of the captains of our public sector industry. Public sector enterprises constitute even today a bulwark of our industrial economy. At one time it was said that the public sector occupied the "commanding heights" of our economy. Today you share this space with a very dynamic entrepreneurial class and, in some sectors, with global multinationals. It is a testimony to the competitiveness of our public enterprises that in many of these sectors you have been able to stand your ground against fierce competition both internal competition as well as competition from abroad. This is a tribute to your managerial competence, to the dedication of your workers and employees and management to our joint national commitment to the revitalization of public enterprises as a major engine of India's economic growth.

I am happy to say that in these past two years you have done a creditable job in turning around many of our public enterprises. There has been an improvement in their financial and physical performance. I compliment you all for this solid achievement.

The revitalization of our public sector is an integral part of our strategy of promoting 'inclusive growth'. We regard the public sector truly as an engine of growth, a source of employment generation and as an important source of R&D in our industrial sector. Our Government's policy has been to remove all irritants coming in the way of the healthy functioning of our public enterprises. The National Common Minimum Programme (NCMP) outlines our commitment in this regard in unambiguous terms.

We recognize that the basic environment in which PSEs operate now has undergone tremendous and rapid change. I am glad that despite apprehensions on their survival, public sector enterprises have valiantly accepted the challenge of competition, the challenge of rapid economic and social change, the challenge of rapid and often unpredictable technological change. This has helped them emerge stronger and more competitive.

The latest Annual Report of the Public Enterprises Survey for 2005-06 highlights growing importance and significance of the public sector in our economy. It also highlights the changing dynamics of their functioning. The management of change is the greater challenge facing our economy and the manner in which we meet this challenge will determine our responses to the challenges of change that Indian economy must learn to cope with in the years that lie ahead.

I am happy to see that many PSEs have registered handsome growth in their net profit, turnover, as well as contribution to national exchequer, and foreign exchange earnings. I am also happy to learn that the total number of loss making PSEs has fallen from 79 to 58 last year. I hope the Board for Reconstruction of PSEs (BRPSEs), will come forward with time bound programmes for revival of sick PSEs. It must help the Government take an early decision on all pending proposals.

Our commitment towards a stronger and vibrant public sector means we are committed to empowering the management of PSEs with full managerial and financial autonomy. Our Government has taken several initiatives to revitalize public enterprises and offer them greater financial and managerial autonomy. Autonomy is, of course, directly co-related to the issue of accountability. I am, therefore, happy to note that SCOPE has been emphasizing the need for improved corporate governance in our PSEs.

It may be useful for more public enterprises to be listed on the stock exchange, as this would enhance professionalization of the Board of Directors and empower Independent Directors. Induction of Independent Directors on the boards of PSEs would, I believe, ensure greater efficiency and effectiveness in decision-making processes as well. We must therefore pay greater attention to how we identify "independent" directors and ensure that they are indeed truly independent "professionals" who bring with them both expertise and a reputation for good governance and high professional conduct and also a faith in the continuing growth of the public sector in the service of our people.

It is wrong to assume that entrepreneurship is to be found only in the private sector. Public enterprises too can and must foster entrepreneurship. But this requires an environment that encourages risk taking, empowers professionalism and offers adequate freedom to the chief executive and his or her senior management to take quick and difficult decisions. Excessive regulation restricts entrepreneurial drive and makes management risk averse. That is not the way to go forward in the fast changing world full of uncertainity - the overall environment in which our enterprises operate.

Public enterprises should also evolve their own code of corporate ethics and conduct and ensure adherence to such codes. Our Government is working towards limiting the administrative ministries' role in the day-to-day management of public enterprises. I hope the steps we intend to take will help our public enterprises to become more globally competitive. That should be the ambition of all PSEs.

Going beyond organizational issues, public enterprises also need a new strategic vision. In the increasingly globalised world that they operate in now, they must learn from the private sector and seize opportunities for mergers, acquisitions, amalgamations, takeovers and creating new joint ventures. This should be an integral part of their business strategy to create value for their shareholder, become cost effective, reduce the cost of finance and increase their market share. I believe that many joint ventures and alliances both between public enterprises and between public and private enterprises are being worked out. That truly is a healthy development. Such joint ventures and public-private partnerships can help the public sector benefit from the private sector's competitive advantages wherever it might exist.

Apart from central public enterprises, there are hundreds of state level public enterprises with vast sums of public money invested in them. They must also change and adapt to the needs of times. Given the state of State Government finances, many State governments are unable to afford luxury of large number of loss making enterprises. We must therefore find viable means to revive and sustain such enterprises and ensure that the interests of workers and employees are not hurt due to political interference and bad management.

I am very happy to have given away the MoU Excellence Awards and SCOPE Awards to some of our best central public sector enterprises and their top management. These awards should encourage our public enterprises to do better and aim higher. I congratulate all the Award winners."