The intent of setting up a holding company for CPSEs (HoldCo) is to mitigate excessive interference of the concerned ministry. This is in line with the global trend of governments relinquishing their ownership rights and control by administrative ministries. The HoldCo would then take critical decisions relating to formation or dissolution of partnerships / joint ventures, mergers / acquisitions, appointment of CEO, appointment of Board of Directors, etc., thereby minimizing the need for the CPSE to interact directly with the Ministry.

This report’s recommendation, though, is that operational independence be accorded to the professional management team of each individual CPSE. Further, a sufficiently empowered and autonomous Board (for each CPSE), comprising independent experts, be given the authority to take nearly all strategic decisions such as formation or dissolution of partnerships / joint ventures, mergers / acquisitions, appointment of CEO, creation of below-board level positions, etc.

Under such circumstances, a HoldCo will have limited utility and may not be required. An important aspect of the proposed holding company for CPSEs (HoldCo) is to mitigate excessive interference of the concerned ministry. According operational independence to the management team and creating an empowered independent Board for each CPSE will make the HoldCo redundant.

While private players often complain of lack of level playing field, on account of some CPSEs being awarded business on nomination basis, CPSEs, too, suffer from certain disadvantages: over-scrutiny and inaccurate performance evaluation, observes the Report.

All organizations – CPSEs or private players – must operate under the highest standards of governance. However, excessive scrutiny from the Central Vigilance Commission and the Comptroller Auditor General, coupled with the threat of Central Bureau of Investigations often leads to stalled or over-cautious decision-making in CPSEs. Consequently, the CPSE management operates under an aura of ‘fear’ when taking decisions, reducing the organisation’s business risk taking appetite. The private sector, while subject to statutory audits, is not faced with these levels of scrutiny, and thus can afford to take higher business risks.


This report recommends that CPSEs be subject to the same governance standards as private players to help create a level-playing field. Naturally, the governance standards, themselves, as applicable to all companies, may undergo change from time to time. In addition, distinction must be made between mala-fide action and taking a business risk. The former needs to be punished, while the latter, protected. Further, fraudulent and mischievous complaints (complaints with mala-fide intent) against CPSE management personnel should be penalised to send a strong message against such complaints.

Given the social obligations CPSEs are expected to undertake, the same parameters and benchmarks as used for private players cannot be applied to CPSEs. A different evaluation system, taking cognizance of their social objectives, needs to be developed.

So the Report says that any competitive organisation must be prepared for the future. Today’s world of rapid technology advancement has led to business models evolving speedily, across sectors. The rapid pace of change has resulted in erstwhile dominant firms losing their top positions to new-age companies within a matter of years.

This makes it imperative for CPSEs – whether in the manufacturing or services’ sector – to stay abreast of and leverage technology to remain competitive. Disruptive technologies include Industry 4.0 (3D printing, Artificial Intelligence, IoT, etc.), blockchain, immersive experiences (AR, VR) and big data analytics amongst others. CPSEs must enhance knowledge, build skills and drive adoption of these technologies. Sharing case studies of actual usage, particularly by CPSEs, would be a powerful way to encourage adoption.

The Summit has recommended the setting up of an independent and empowered board. CPSEs, currently, are typically ministry-driven instead of board-driven. This issue is further exacerbated by a weak (non-empowered) board and government officials being appointed as board members.

Another outcome of Role Demarcation is the transformation of CPSEs from being ministry- driven to Board-driven. CPSE Boards must be accorded independence, authority and autonomy. Empowered CPSE boards, comprising independent experts, will enhance the quality of decisions, overall management supervision and governance, while ensuring that nearly all strategic decisions are taken at the Board level and not passed on to the respective Ministry thereby increasing the speed of decision-making.

The Board must be sufficiently empowered to take nearly all strategic decisions such as formation or dissolution of partnerships / joint ventures, mergers / acquisitions, appointment of CEO, creation of below-board level positions, etc. The Board must also be permitted to appoint new directors to replace retiring Board directors, as is the case with private organizations.

In keeping with the tenets of separation of the owner - manager roles and granting autonomy to CPSEs, the Board must necessarily comprise independent experts, who do not represent any constituency. This typically implies that government officials should be excluded from consideration as Board members.

Attracting independent experts to join CPSE Boards is critical to ensure best-in-class input to the management team and high standards of governance. To this end, the report recommends that the Government focus on three aspects, compensation, independence and board powers.

It is likely that the recommendations will be further discussed but the PSEs, are increasingly emphasising the urgent importance of being competitive and high performer. That is the grand signal to the national economy. (IPA Service)