Glossary:

1. CAG: Comptroller and Auditor General is the supreme auditor for auditing the public finances of the Government of India. He is
empowered to audit the finances of the public sector enterprises as well.
2. PAC: Public Accounts Committee is the body comprising of the members of Loksabha and Rajyasabha and is entrusted with the
responsibility of ensuring that the funds allocated for various programmes are spent according to the estimates submitted to the
Parliament.
3. Public Corporation: An autonomous legal entity established by an Act of the legislature to management certain commercial or
non-commercial activity. The corporation form of public enterprise is headed by a board which looks into the overall activities of
the organization.
4. Company: The entity established by the government under the Companies Act to undertake certain activities which are commercial
in nature. The company form of public enterprise is headed by a board which looks into the overall activities of the organization.
5. Departmental Undertaking: The form of public enterprise which is a part of the government department and is entrusted with
some commercial activity. Such a form of enterprise is headed by the regular minister who provides policy direction to the entity.
6. MoU Negotiation meetings: Meetings between the PEs and their respective administrative ministries to finalise MoU
7. High Power Committee: Apex Committee responsible for overseeing the MoU implementation process
8. Ad-hoc Task Force: The expert group which handholds the process of MoU from the draft stage till the evaluation stage.
9. Annual Performance Targets: Financial and Non financial annual milestones for enterprises
10. Memorandum of Understanding: Performance contracting system in India for CPSEs
11. MoU grading: Grades assigned to CPSEs based on their MoU performance
12. Public enterprise PE is an activity of a business character, managed and owned, 51 per cent or more, by the Government, - Central, State or
Local, providing goods/services for a price. The definition has two dimensions, namely, public ownership, and business enterprise.
13. Performance Contracting
14. With the beginning of reforms in public sector, performance contracting system got introduced as a mechanism for enhancing efficiency and
effectiveness of an enterprise. Performance contracting is a management tool for ensuring accountability for results by public officials, because
it measures the extent to which they achieve targeted results.
15. Memorandum of Understanding
16. MoU is a mutually negotiated agreement between the management of the Central Public Sector Enterprises (CPSEs) and the Government of
India. Under this agreement, the CPSE undertakes to achieve the targets set in the agreement at the beginning of the year.
17. Board for Industrial and Financial Reconstruction (BIFR)
18. Public enterprises which are chronically sick and which are unlikely to be turned around are to be referred to the Board for Industrial and
Financial Reconstruction (BIFR), or other similar high level institutions created for the purpose for the formulation of revival/rehabilitation of
the enterprise.
19. Rating Scale
20. The performance of CPSEs are evaluated on a 5-point scale to show the ranges from Excellent, Very Good, Good, fair, Poor performance.
21. MoU guidelines
22. Framework for developing an MoU released by Department of Public Enterprises annually
23. Financial and Non-financial Parameters
24. As per the current MoU guidelines, equal weights are given to financial (50%) and non-financial (50%) parameters. This is done according to
the Balanced Scorecard approach to performance management. The financial parameters are presented in absolute values as well as in
ratios. The non-financial parameters are further divided into dynamic parameters, enterprise-specific parameters and sector-specific
parameters.
 COMMITTEE ON PUBLIC UNDERTAKINGS IN INDIA: CHALLENGES AND THE WAY AHEAD

R K Mishra & P Geeta

Constitution of the CoPU

CoPU came into being on the 1st May 1964, comprising of 15 members, 10 from the Lok Sabha and 5 from the Rajya Sabha. With effect
from 1st April 1974, the membership was raised to 22 members, 15 from the Lok Sabha and 7 from the Rajya Sabha. These are elected
every year in accordance with the principle of proportional representation from various parties by means of the single transferable vote.

Functions
The functions of the committee are:
(i) to examine the reports and account of PEs,
(ii) to examine the reports of the Comptroller and Auditor General of India on PEs,
(iii) to examine, in the context of autonomy and efficiency of PEs, “whether their affairs are being managed in accordance with
sound business principles and prudent commercial practices”, and
(iv) such other functions which vested earlier in the Public Accounts Committee in relation to PEs, as are not covered by (i), (ii) and
(iii) above, and as may be allotted by the Speaker from time to time.

There are certain areas which are restricted for the involvement of CoPU. CoPU is expected not to examine the following:
(i) matters of major government policy as distinct from business or commercial functions of PEs,
(ii) matters of day-to-day administration, and
(iii) matters for the consideration of which machinery is established by any special statute under which a particular PE is established.

Modalities of CoPU
(i) The term of the committee does not exceed one year, though the chairman, who is a appointed by the Speaker from amongst the
members of the committee, in practice, is re-appointed for another term of one year.
(ii) The committee selects from time to time specific PEs or such subjects as it deems fit, and constitutes study groups from amongst
its members for an intensive study of the subject’s selected.
(iii) The committee asks the ministry/enterprise to furnish necessary material relating to the subjects chosen.


Senior Professor and Director, Institute of Public Enterprise, Hyderabad, Telangana, India, E-mail: rkmishra@ipeindia.org

Assistant Professor, Institute of Public Enterprise, Hyderabad, Telangana, India
(iv) The committee often visits the enterprise chosen for informal discussions. After the study tours, and after receiving formal
memoranda and other information from concerned parties, non-official and official witnesses are invited to give evidence at
formal sittings of the committee held at Parliament House, New Delhi.
(v) All evidence given before the committee is treated as confidential.

Broadly, CoPU reports fall in two categories:

(i) main reports, and
(ii) action-taken reports.

Till the end of Fourteenth Lok Sabha the Committee has so far presented 552 reports. Of these 278 are original reports, and 274 are
reports on Action Taken by the Government, on original reports of the Committee. Out of 278 original reports, 38 are in the nature of
horizontal studies on various aspects of working of the public sector undertakings

About 50 individual PEs covered by CoPU during 50 years of its existence, some large enterprises like SAIL and IOC have been covered
many times over. Though most of the important PEs have been covered at least once, a large number of PEs remained uncovered by
CoPU. It seems necessary for the committee to increase its coverage so that every enterprise is covered at least once in ten years.

CoPU: Its Scope and Functions

1. The functions of the Committee are to examine the reports and Accounts of the Public Undertakings specified in the Fourth Schedule
of the Rules of Procedure and Conduct of Business in Lok Sabha.
2. It also reviews the Reports of the Comptroller and Auditor General thereon, if any, and to examine, in the context of the autonomy
and efficiency of the public undertakings, whether the affairs of the public undertakings are being managed in accordance with sound
business principles and prudent commercial practices.
3. The Committee also examines such subjects or matters which may be specifically referred to it by the House or by the Speaker.
4. The Committee is, however, barred from examining and investigating matters of major Government policy as distinct from business
or commercial functions of public undertakings, matters of day-to-day administration or matters for the consideration of which
machinery is established by any special statute under which a particular undertaking is established.
5. The Committee selects for examination such undertakings/subjects whose comprehensive appraisal appears in the Audit Report
(Commercial) presented to Parliament by the Comptroller and Auditor General. In fact the Comptroller and Auditor General assists
the Committee in the examination of Public Undertakings selected by the Committee on the basis of audit reports.
6. The Committee also selects on its own certain other Undertakings/subjects for independent examination. The Committee also selects
one or more aspects of working of various Public Undertakings for comprehensive horizontal study.
7. A number of Study Groups are constituted by the Chairman from amongst members of the Committee for carrying out detailed study
of various subjects selected by the Committee and for considering procedural and general matters.
8. A Sub-Committee is also constituted for scrutiny of Action Taken replies furnished by the Government on the recommendations
contained in the earlier reports and to consider the draft ‘Action Taken’ Report.
9. The Committee can call for information from the Ministries/Public Undertakings in regard to the working of the public undertakings
selected for examination. Subsequently, detailed information covering various aspects of the working of the public undertaking
under examination is called for by the Committee from the Government/ Undertaking.
10. The Committee can also call upon individual experts/ representatives of non-official organisations who have submitted memoranda
on the subjects under examination to appear before it to give evidence.
11. The conclusions of the Committee on a subject are contained in its report, which, after its adoption by the Committee, is presented
in the Lok Sabha by the Chairman but if he is unable to do so then by any other Member of the Committee who has been authorised
by the Chairman to present it on his behalf. Minutes of the sittings of the Committee are annexed to the Report to which these relate.
A copy of the Report is also laid on the Table of Rajya Sabha by a member of the Committee who has been authorised by the
Chairman to do so.
12. The reports of the Committee are adopted by consensus among the members. Accordingly there is no system of appending minute
of dissent to the report.
13. After presentation to the Lok Sabha the report is forwarded to the Ministry or the Department concerned which is required to take
action on the recommendations and conclusions contained in the report and furnish action taken replies thereon within six months.
Action taken notes received from the Ministries/ Departments are examined by the Action Taken
14. The Action Taken Report consists of five chapters:
a. Report I- comprising inter-alia the observations and recommendations meriting comments from the Committee;
b. Report II- recommendations which have been accepted by the Government;
c. Report III- recommendations which the Committee do not desire to pursue in view of Government’s reply;
d. Report IV- recommendations in respect of which replies of the Government have not been accepted by the Committee; and
e. Report V- recommendations in respect of which final replies of the Government have not been received. The Report, after
its adoption by Committee, is presented to the House in the usual manner.

Special features of CoPU

The CoPU does a detailed study of various aspects of public enterprise operations and provides relevant material to the parliament. The
recommendations submitted by the committee are to be replied to by the government, which indicates the government’s viewpoint about
various matters of policy about the working of PEs.
The Members’ of Parliament are the members of CoPU which gives them insights into the problems and operations of PEs. And this
being a yearly committee, many MPs get informed about PEs and it raises the level of discussions on the floor of the House.

Another advantage of the committee is that it gives the top PE managers an opportunity of put their case or of explaining their difficulties
directly to MPs. This is important because autonomous PEs not only need sufficient freedom in their operations, but also requires
insulation against the government pressures.

CoPU works on key issues of PEs like the working of the Boards, system of MoU, Corporate governance issues which is a critical
element for the success of PEs.

Limitations and Challenges for CoPU

1. CoPU yet another PE review mechanism: PEs are accountable for their performance to multiple agencies like the administrative
ministries, DPE, CAG, Vigilance, media and others. CoPU is yet another review mechanism which is used as a tool for reviewing
PE performance.

2. Lack of adequate time for Parliament: As we have earlier discussed the parliament has a number of transactions to complete in
the short time it has during the sessions and to get into the details of the recommendations from CoPU may not find sufficient time
and interest in the members

3. Inadequate time and resources for CoPU: CoPU is expected to study the issues raised by CAG in terms of enterprise functioning.
The time required by a body to sudy the operations of a technically specialized organizations is very high and it may not be possible
for the committee to study in detail the issues raised by CAG.

4. Lack of Professional Expertise: CoPU comprises of representatives from the parliament and their mandate is to study the
functioning of public enterprises. As we are aware, PE’s are highly technology and process intensive organizations and the members
not being subject expert’s leads to the parliamentary review not being sufficiently detailed and precise. Enrolling subject specific
experts in the committee will go a long way in improving the utility of the recommendations. Establishing cells/centers to
 continuously analyse the data generated from enterprises on a continuous basis will go a long way in getting a right solution to the
problem.

5. Lack of participation from users: Accountability is the key for the functioning of PEs. Through CoPU, PEs are made accountable
for their performance in terms of its processes and finances. Though the system of accountability exists in the form of financial
audits in these organizations, they are primarily based on the information available in the records in the custody of these
organizations. It is found that most of the times audits in these organizations have absolutely no element of audit by the
users/customers/citizens who are the real beneficiaries. There is no way to check if the consumer has used the product developed by
the agency and if they are satisfied with the products and services from these organizations.

6. Ineffective implementation of CoPU recommendations: The recommendations submitted by CoPU over the period of time have
not helped PEs much, because they are often not accepted, or only partially accepted and even if accepted may not get implemented.
CoPU has no mechanism to pursue its recommendations to their logical conclusion. The main focus of these reports is to pass
judgments on certain events, decisions or situations in PEs based on audit paras by CAG. In most cases, CoPU recommends to the
government to hold an inquiry or refer the case to CBI and fix responsibility. The outcome of the inquiry is not sent to the committee.

7. Commercial Nature of Enterprises- In the changing policy environment, top management of PEs which are meant to run as
commercial business units, take decisions on par with their commercial counterparts in terms of financial investments and technology
upgradation. It is also not very easy to judge decisions of managers as they need to take decisions which are commercially viable.

8. CoPU: Additional Mechanism of Accountability: there are multiple points of accountability for PEs. CoPU becomes an additional
point of control on the PEs.

CoPU over the past 50 years has been involved in the review of PE functioning and has been giving recommendations for its
improvements. In the current scenario when the PE operations have become complex and when private competitors are playing a major
role in economy and growth it is necessary for CoPU to have more expertise with it to sift the enormous data available to it, and not to
be unduly influenced by CAG in its approach and work.

Categorization of Public Sector

Category of CPSEs Capital Expenditure Joint Ventures & Subsidiaries
Maharatna No cap on capital Can establish financial joint ventures,
investments wholly owned subsidiaries and
undertake M&A in India or abroad,
with the condition that equity should
be limited to
i) INR 5,000 cr. in any single
project,
ii) ii) 15 percent of the net
worth of the CPSE in one
project, and
iii) iii) 30 percent of the net
worth of the CPSE in all joint
ventures/ subsidiaries put
together communication
does not stop at level 1
customers.
Navratna No cap on capital Can establish financial joint ventures
investments and wholly owned subsidiaries in India
or abroad, with the condition that
equity should be limited to i) INR 1,000
cr. in any single project, ii) 15 percent
of the net worth of the CPSE in one
project, and iii) 30 percent of the net
worth of the CPSE in all joint ventures/
subsidiaries put together
Miniratna I Incur investments up to Can establish joint ventures and wholly
INR 500 cr. or equal to owned subsidiaries in India, with the
net worth, whichever is condition that equity should be limited
lower to i) INR 500 cr. in any single project, ii)
15 percent of the net worth of the
CPSE in one project, and iii) 30 percent
of the net worth of the CPSE in all joint
ventures/ subsidiaries put together
Organizational Restructuring & Human
Resource Management
Empowered to undertake organizational
restructuring including creation of profit
centers, opening of offices in India and
abroad, establishing new activity centers,
etc. Can create and make appointments for
all positions up to E-9 level. Also empowered
to delegate Human Resource Management
related powers (appointments, transfer,
posting, etc.) to below board level executives
Empowered to undertake organizational
restructuring including creation of profit
centers, opening of offices in India and
abroad, establishing new activity centers,
etc. Can create and make appointments for
all positions up to E-6 level. Also empowered
to delegate Human Resource Management
related powers (appointments, transfer,
posting, etc.) to below board level executives
The Board can delegate the powers
pertaining Human Resource Management
(appointments, transfer, posting, etc.) of
below Board level executives to
subcommittees of the Board or to executives
of the CPSE
Resource Mobilization
Can raise debt from domestic
capital and international
market, post approval of RBI/
Department of Economic
Affairs, (as may be required);
will be obtained through the
administrative Ministry for the
latter
Can raise debt from domestic
capital and international
market, post approval of RBI/
Department of Economic
Affairs, (as may be required),
will be obtained through the
administrative Ministry
NA
Mergers & Acquisitions
Can undertake M&As subject to
i) it should be in
accordance with the
growth plan & in the
core functioning area
of the CPSE,
ii) (ii) the Cabinet
Committee on
Economic Affairs
(CCEA) to be kept
informed in case of
investments abroad
Can undertake M&As subject to
i) it should be in accordance
with the growth plan & in the
core functioning area of the
CPSE, (ii) conditions/ limits
would be as in the case of
establishing joint ventures/
subsidiaries, and (iii) CCEA to be
kept informed in case of
investments abroad
Can undertake M&As subject to
i) it should be in accordance
with the growth plan & in the
core functioning area of the
CPSE, (ii) conditions/ limits
would be as in the case of
establishing joint ventures/
subsidiaries, and (iii) CCEA to be
kept informed in case of
investments abroad
Miniratna II Incur investments up to Can establish joint ventures and wholly
INR 250 cr. or 50 owned subsidiaries in India, with the
percent of net worth, condition that equity should be limited
whichever is lower to i) INR 250 cr. in any single project, ii)
15 percent of the net worth of the
CPSE in one project, and iii) 30 percent
of the net worth of the CPSE in all joint
ventures/ subsidiaries put together
The Board can delegate the powers
pertaining Human Resource Management
(appointments, transfer, posting, etc.) of
below Board level executives to
subcommittees of the Board or to executives
of the CPSE
NA Can undertake M&As subject to
i) it should be in accordance
with the growth plan & in the
core functioning area of the
CPSE, (ii) conditions/ limits
would be as in the case of
establishing joint ventures/
subsidiaries, and (iii) CCEA to be
kept informed in case of
investments abroad