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Public sector firms under austerity lens

An anxious government, struggling to keep prices under control, has asked state-owned companies to adopt strict austerity measures, reports Gaurav Choudhury.

business Updated: Jul 18, 2008 20:42 IST
Gaurav Choudhury
Gaurav Choudhury
Hindustan Times

An anxious government, struggling to keep prices under control, has asked state-owned companies to adopt strict austerity measures. They are also asked to make expenditure control initiatives a regular board-review exercise.

“It has been felt that central public sector enterprises (CPSEs) have also an important role in controlling the expenditure, particularly on foreign travel, office expenses, publicity, seminar, etc.,” the ministry of heavy industries and public enterprises, said in a communication to all chief executives of these companies. “Accordingly, it has been decided that CPSEs may take guidance from directions, and on economy and austerity measures issued by the government.”

There are 217 operational companies that are wholly or majority owned by the central government. Of these, 59 are loss making and 156 are profit making, while the other two are not making any profits or loss.

“Agenda for austerity measures/ economy measures should be placed before the board and review of such measures should be made in a board meeting on a quarterly basis,” the communication issued last month said.

Early last month, the financial ministry had announced a 10 per cent cut in non-plan expenditure falling under a range of heads, including travel expenses, advertising and publicity and overtime allowances among others.

A top executive of a leading public sector company, who did not wish to be identified, said PSUs have begun adopting austerity measures in line with the government communication, although Navaratna and mini-ratna companies enjoy managerial autonomy.

Private sector companies have begun adopting several cost-cutting measures including pruning of hefty bonuses, family foreign trips as fringe benefits, greater use of video-conferencing to cut travel costs. Some companies have also asked their executives to use budget airlines and return the same day from tours to cut costs of overnight stay.

There are 16 Navaratna and 54 mini-ratna companies. A navratna or mini-ratna classification is given to a well-performing firm and allows greater functional and financial autonomy.

The government has also made it clear that “no amount shall be released to any entity (including state governments, autonomous bodies and public sector undertakings), that has defaulted in furnishing utilisation certificates for grants-in-aid released by the Central Government in the past without prior approval of the ministry of finance.”

Also in a missive to senior bureaucrats, Cabinet Secretary K.M.Chandrashekhar has asked them to be “ruthlessly strict in approving foreign travel at all levels”.