Journal of Advances and Scholarly Researches in Allied Education

Vol. XV, Issue No. 1, April-2018, ISSN 2230-7540

Autonomy and Accountability of Public

Enterprises in India

Dr. B. K. Agarwal1* Dr. Neeraj Manchanda2

1
Assistant Professor, Faculty of Commerce, Agra College
2
Assistant Professor, Faculty of Commerce, Agra College

Abstract – The hidden suspicion in this paper is that autonomy and accountability are both principal
essentials for the compelling working of state ‐owned enterprises. The paper initially looks at the
customary, dichotomous way to deal with the autonomy ‐accountability problem. This approach sets the
relationship as process arranged, inescapable, quantitative and in view of from the earlier controls.

This thorough paper is an endeavor to give an outline of the plan, development and usage of and the
instrument set up to guarantee the satisfaction of the goal set down in the plan of the concede of
Autonomy versus the Status of Autonomy in India. This paper features exceptionally late activities
relating to the concede of Autonomy versus the Status of Autonomy in India.

-----------------------------------X----------------------------------

INTRODUCTION Public enterprises possess a vital position in the

national economy of most countries, regardless of
Public enterprises have an indispensable part to play political association. The reasons for prominence of
in the socio-economic development of India. these enterprises were not the same all over the
Regarding the measure of assets they use, the scope place. In the created western economies, the rise of
of aptitudes they utilize, and the commitments which public enterprises (PEs) was the aftereffect of across
they make, or are fit for making, to the gross national the board social strain made by capitalism in its
item, these public enterprises constitute vital sectors of unbridled shape. In addition, these countries held
national economies. In any case, their execution has their essential capitalistic character and utilized PEs
recently come in for sharp feedback. Not exclusively just to change and supplement however not to
are they viewed as endless pits eating up rare national supplant the private venture system*. As against this,
assets, yet a large number of them have been blamed in the comrade countries, PEs were the
for being unequipped for releasing the administrations consequence of an ideological responsibility
and the commitments which were viewed as crucial at regarding sell capitalist framework and private
the season of their foundation. Besides, in light of the enterprises. The proprietorship control and
immense capital investments and repetitive costs management of creation were exchanged to the
attempted by these enterprises, they could be held State. Moreover, in socialism likewise, the methods
somewhat obligated for the expanding outside for generation are possessed by the general
obligation loads that are backing off the advance in population on the whole through their government.
India today. In this paper, it is contended that the fate There are no private proprietor, plant proprietors and
of the public enterprises in India lies in keeping up an business magnets.
appropriate harmony amongst autonomy and control.
Business is directed by the State and all benefits go
The paper begins with a typology of public enterprises to the State Treasury. Again in blended economy,
in the expectation of giving an applied system to both the private and the public enterprises are
assessing arrangements on control and autonomy. In worked at the same time. private enterprises are not
the second segment, we assess the different control allowed to work unreservedly. Since autonomy our
measures that have been founded by governments country has taken after socialistic example of society
throughout the years. In the third segment, the paper under blended economy and consequently more
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centers around the kind of auxiliary and association prominent pressure was given for development and
changes required to advance administrative autonomy development of public sector endeavors at the focal
and adequacy. and at the state level.

Dr. B. K. Agarwal1* Dr. Neeraj Manchanda2

128
 Autonomy and Accountability of Public Enterprises in India

INDIA’S PUBLIC SECTOR UNDERTAKINGS: all keep running by arcane bureaucratic methods. The
BHARAT’S OTHER RATNAS permit raj joined with wasteful public enterprises
sustained wastefulness and debasement, delivering a
We as a whole think about Bharat Ratna's. They are gathering of mediators, whose fundamental capacity
our legends - those well known people like a was to get these licenses and auction them to the
significant number of our freedom warriors and later most elevated bidder. Prof Raj Krishna called the
awardees like the immense cricketer Sachin permit raj, "Socialist allotment in the first round took
Tendulakar and the renowned vocalist Lata after by advertise portion in the second round". Now
Mangeshkar who have gotten India's most noteworthy and again vast organizations would get the permit to
non military personnel grant" the Bharat Ratna". In any grow creation however postpone its execution with a
case, there is shockingly little level headed discussion specific end goal to profit by the deficiencies, or simply
on India's different Ratnas — the 235 public sector keep the permit unutilized to fight off a contender from
endeavors that were at one time the instructing passage into the business.
statures of India's socialistic economy and still record
for around 20 for every penny of the GDP and 15 for In the wake of seeking after state-drove capitalism
each penny of securities exchange capitalization for four decades after Independence, India presented
through 50 recorded firms? another industrial arrangement in the 1990s that
accentuated delicensing, more prominent freedom
Head administrator Modi made a promise to the US for productive PSUs and, rebuilding of misfortune
financial specialists just about two years prior, which making firms through the Bureau of Industrial
he rehashed to German speculators as of late, that Financing and Restructuring. Different components
"the government has no business to work together". of the advancement included: I) Free passage to
Be that as it may, India still has 235 Central public- private sector firms in ventures saved solely for
sector endeavors (PSUs), of which seven are PSUs; ii) Disinvestment of a little piece of the
Maharatnas, 17 are Navratnas and more than 70 are government's shareholding (while as yet holding
Miniratnas — the royal gems of India's socialist greater part stocks) and posting PSUs on the stock
heritage. There are likewise more than 1,000 PSUs in trades. The most critical of businesses influenced by
state and city hands. The time has come to tidy up this the previous arrangement were broadcast
costly heritage. However, how to do this and what way communications, oil (from extraction to refining and
to deal with take towards them isn't so direct given the advertising), power age and dispersion, a few
tremendous system of personal stakes that are fundamental products ventures like steel, aluminum,
enthused about their propagation. To see better how mining and air transportation. Furthermore, for the
to gain ground on this issue let us perceive how we last mentioned, guaranteeing that the recorded PSUs
arrived. take after the stock trades' posting prerequisites
required revelation and administration controls,
India took a sharp turn towards socialism with the arrangement of free chiefs, autonomous
Industrial Policy Resolution of 1956 whose key compensation and review boards. Withholding or
objectives were: pulling back budgetary help to misfortune making
('wiped out') PSUs. Thusly, debilitated PSUs were
i. To build infrastructure and promote denied consent to overhaul wages and
industrialization, compensations. Misfortune making PSUs were to be
urged to lay off specialists to look for business
ii. To promote employment and balanced practicality, falling flat which, they were to be shut
regional development, down or privatized. The PSUs meeting the
accompanying qualification criteria were considered
iii. To create a self-reliant economy through for Maharatna Status 2. Recorded on Indian stock
import substitution and promote exports, trade with least endorsed public shareholding under
SEBI controls, Have a normal yearly turnover of
more than Rs.25, 000 crores amid the most recent 3
iv. To generate surpluses for development,
years, Have a normal yearly total assets of more
than Rs.15, 000 crore amid the most recent 3 years.
v. To prevent concentration of economic power.
Have a normal yearly net benefit after expense of
more than Rs.5, 000 crore amid the most recent 3
Amid this period, public sector investment came to
years, and ought to have critical worldwide
more than 50 % of aggregate investment. Numerous
nearness/international activities. The Boards of
new public sector organizations were built up and an
Maharatna PSUs will have forces to I) make value
expansive number of organizations in sectors, for
investment to build up financial joint endeavors and
example, coal, aircrafts, managing an account and
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entirely possessed auxiliaries in India or abroad, ii)

protection were nationalized. Industrial permitting was
attempt mergers and acquisitions, in India or abroad,
presented emulating the Soviet Union – endorsing
subject to a roof of 15% of the total assets of the
what the private sector could deliver. A whole device –
concerned PSU in one anticipate, restricted to a flat
frequently alluded to as the "permit raj" was built up to
out roof of Rs.5, 000 crore (Rs. 1,000 crore for
settle on choices on the number and sorts of licenses,

Dr. B. K. Agarwal1* Dr. Neeraj Manchanda2

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 Journal of Advances and Scholarly Researches in Allied Education
Vol. XV, Issue No. 1, April-2018, ISSN 2230-7540

Navratna PSUs). The general roof on such value xvi. Container Corporation of India
investments and mergers and acquisitions in all tasks
set up together won't surpass 30% of the total assets xvii. National Buildings Construction Corporation
of the concerned PSU. Moreover, the Boards of Limited
Maharatna PSUs have forces to make beneath Board
level presents up on E-9 level. Eligibility Conditions for allow of Navratna status: The
PSUs, which are Miniratna I, Schedule 'An' and have
In view of these criteria, 7 PSUs were conceded acquired 'magnificent' or 'great' MOU rating in three of
Maharatna status. the most recent five years, are qualified. 'Composite
Score' of execution must be 60 or above. So as to
i. Bharat Heavy Electricals (BHEL) audit the execution of the PSU, a composite score in
view of its execution throughout the previous three
ii. Coal India years would be ascertained.

iii. Gas Authority of India Limited (GAIL)

iv. Indian Oil Corporation (IOC)

v. Oil and Natural Gas Company (ONGC)

vi. National Thermal Power Company (NTPC)

vii. Steel Authority of India Limited (SAIL)

The next category was the Navratnas of which there

were originally 14 and the last three were made
Navratnas in 2014-15. Figure 1: Growth of Public Sector Undertakings
and Performance Contracts.
i. Bharat Electronics Limited
Below the Navratnas are two categories of
ii. Bharat Petroleum Corporation Limited Miniratna‘s. There are 56 companies in the Miniratna
I category and 17 companies in Miniratna II category.
iii. Hindustan Aeronautics Limited The eligibility conditions and criteria for grant of
Miniratna status are as under:
iv. Hindustan Petroleum Corporation Limited
i. Category-I PSUs should have made profit in
v. Mahanagar Telephone Nigam Limited the last three years continuously, the pre-tax
profit should have been Rs.30 crore or more
vi. National Aluminum Company Limited in at least one of the three years andshould
have a positive net worth.
vii. Neyveli Lignite Corporation Limited
ii. Category-II PSUs should have made profit
viii. NMDC Limited for the last three years continuously
andshould have a positive net worth.
ix. Oil India Limited
iii. These PSUs shall be eligible for the
x. Power Finance Corporation Limited enhanced delegated powers provided they
havenot defaulted in the repayment of
xi. Power Grid Corporation of India Limited loans/interest payment on any loans due to
theGovernment.
xii. Rashtriya Ispat Nigam Limited
iv. These PSUs shall not depend upon
xiii. Rural Electrification Corporation Limited budgetary support or Government
guarantees.
xiv. Shipping Corporation of India Limited
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v. The Boards of these PSUs should be

xv. Engineers India Limited restructured by inducting at least three non-

Dr. B. K. Agarwal1* Dr. Neeraj Manchanda2

130
 Autonomy and Accountability of Public Enterprises in India

official Directors as the first step before the plainly, "We are a coalition government, and that
exercise of enhanced delegation ofauthority. confines our choices in some ways. Privatization
happens to be one such zone." UPA 2 conveyed back
vi. The administrative Ministry concerned shall disinvestment with the plan to raise income, and the
decide whether a Public Sector Firmsfulfilled offer of private value in all out value in all PSUs joined
the requirements of a Category-I/Category-II bounced from around 4% out of 2008-09 to more than
company before the exercise ofenhanced 9% by 2013-14 (Table 2). More than 33% of the PSUs
powers. had some private value in them. The UPA government
likewise supported rebuilding of state-possessed firms
It ought to be noticed that notwithstanding focal level by making the Bureau for Restructuring of Public
PSUs, there are over a 1000 state level PSUs and city Firms. A National Investment Fund was likewise made
public organizations also. to gather disinvestment receipts, with the possibility
that it would be deliberately sent instead of utilized as
This was the detailed structure of PSUs and systems a major aspect of spending receipts. Following
that the NDA government under PM Vajpayee monetary weights after the 2009 emergency, the
acquired. It took after a forceful privatization strategy measure was progressively casual until the store, for
however confronted political and bureaucratic every single down to earth reason, turned out to be a
obstacles. The Ministry of Disinvestment was made in piece of the financial plan. With the entry of the NDA
1999 and the target of disinvestment under it was to government again in 2014 there was a desire that
raise income as well as enhance proficiency. More the disinvestment sought after forcefully by NDA1
than 30 organizations were either completely would be taken up again and keeping in mind that
privatized or 50 for every penny of their stock very little has occurred in the initial two years so far
divested3, including one of India's best privatization there are signals that more exertion will be made in
activities — the offer of Maruti to Suzuki was finished the rest of its term.
amid this period. Arun Shourie the then Minister for
Disinvestment portrayed it well when he expressed There are shockingly couple of good investigations
"these are not the royal gems (Ratnas) of India's on the execution of PSUs. The accompanying
economy but rather draining ulcers". Under him, patterns can be gathered from those accessible.
privatization which is indirectly called "key
disinvestment" was sought after with assurance yet
resistance was confronted particularly from worker's
parties who had removed numerous concessions from
the government. Be that as it may, restriction came
even from inside the NDA government and the
administration as the control over PSUs implied
employments, support and the capacity to profit
through PSU contracts.

Is shocking that while the NDA government was

forcefully seeking after privatization, some new PSUs
were additionally made.
Figure 3: Cumulative Overall Performance of the
PSUs 1990-91 to 2014-15.

Half the PSUs were making misfortunes in the

1990's , however with the time of high development
from 2002-3 onwards and better MOU's (execution
contracts) connected to numerous a greater amount
of them, and more prominent private value, the
quantity of misfortune making PSUs declined to
about a fourth of the aggregate (Figure 3). In any
case, from that point forward and particularly once
development backed off after 2012 the offer of
misfortune creators has expanded again to just about
33% of the aggregate. Productivity of the PSUs –
estimated here by benefits over aggregate deals has
Figure 2: Progress on Dis-investment (Partial
likewise expanded from a horrifying level of 2% out
Privatization) 1990-2015
of 1990-91 to around 3% by 2000-01, at that point
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crested at just about 9 % between 2003-4 and 2006-

The UPA 1 government which came to control in 2004,
7 and has since tumbled to between 5-6%. The
reliant on the communists, did not attempt to privatize
amount of the enhanced execution is because of
PSUs – in spite of the fact that, a couple were closed
MOU's and what amount is because of fractional
down. PM Manmohan Singh clarified his imperatives
privatization will be investigated promote in the later

Dr. B. K. Agarwal1* Dr. Neeraj Manchanda2

131
 Journal of Advances and Scholarly Researches in Allied Education
Vol. XV, Issue No. 1, April-2018, ISSN 2230-7540

areas of the paper. We will likewise investigate So expressed, it is part of the general problem of
whether there are contrasts in execution because of amenability of PEs to parliamentary control and calls
hard spending limitations and in addition the level of for a compromise between the democratic rights of
aggressiveness in the business in which the PSU is parliament and the autonomy of the enterprises. The
working. other aspect of financial accountability is that the
maximum good results ought to be secured from the
CONCEPT OF FINANCIAL AUTONOMY AND PEs. So expressed, it borders on the concept of
ACCOUNTABILITY IN PUBLIC ENTERPRISES efficiency in financial terms. The maximization is not
tantamount to an insistence on the highest possible
Public Enterprises (PEs) as we all know are set up profit from every public enterprise. The concept
wholly or substantially owned by the government for suggests that, subject to any set criterion of profit and
the purpose of undertaking activities of industrial, social benefit, the enterprise ought to record the best
manufacturing, trading or allied nature. They are possible results.
government owned enterprises functioning under both
central and state governments. The PEs are corporate FINANCIAL AUTONOMY AND
bodies, set up either under specific acts of Parliament ACCOUNTABILITY OF PUBLIC
or under Companies Act. The PEs since they are ENTERPRISES: RECENT TRENDS
established with public funds, are accountable to the
public i.e. through the parliament. The PEs in India have been set up to speeded up
the process of industrial development. It goes
Autonomy in simple terms means freedom to take without saying that, they will be able to achieve
decisions and function accordingly while accountability efficiency, contribute towards maximum production
refers to rendering of accounts to some higher of goods and services with minimum wastage of
authority. The financial autonomy given to PEs means resources, only if sufficient functional autonomy is
empowering them to take decisions on their own in the provided. They should have freedom of decision-
areas of investment management, financing of making within broad guidelines or policies. A suitable
investments and monitoring the financial performance balance needs to be struck between autonomy and
of respective enterprises based on sound business accountability. There has of late, been a lot of
principles and the wisdom of the financial discussion about the question of autonomy and
administrators. Insofar as investments are concerned, accountability of PEs, its relationship with the
other things remaining the same, PEs should have government. The Arjun Sengupta Committee set up
freedom in identifying the projects, preparing the by the Government of India in 1984, went into
detailed feasibility project reports, appraising the various aspects of public enterprise management
projects, making investment choices, and like relations between government and PEs,
implementing and monitoring them. They should also managerial autonomy of PEs, financial powers in
be free to decide the optimal level of investments in regard to their investments and capital budget and
the various items of inventory book debts and floating so on. It recommended that the government should
stock of cash. By the same principle they should be be primarily concerned with overall strategic planning
free to peg the level of current liabilities to any and policy rather than day-to-day functioning of PEs
proportion of the current assets. The financial which should be left to the enterprises concerned.
decisions in the normal run may be made by these The responsibility of the government is to ensure that
enterprises as guided by the cost of capital. They public money invested in the enterprises earns an
should possess the freedom to choose among the appropriate rate of return and that their functioning is
various debt-equity propositions. They should be at consistent ,with plan objectives including those
liberty to select bankers, financial institutions and the related to employment, fair pricing, efficient use of
channels of money and capital markets for financing scarce resources etc. The Committee was of the
their working fund requirements. Subject to the social opinion that enterprises functioning in the core
constraints imposed on them by the government, sectors like power, steel coal and lignite etc. have to
these enterprises should be vested with the autonomy interact with the ministries with regard to matters like
to develop their own costing and pricing systems, investment planning, price fixation and financial
norms of profitability .and monitoring mechanism to management. Their plans will have to be integrated
ensure the desired financial status alike any business with the national plans. But financially viable non-
firm in the private sector. core public enterprises can finance their
requirements, by raising funds from the public
Prof. V. V. Ramanadham in his treatise entitled "The through deposits or debentures or borrowing from
Control of PEs in India" discusses the concept of ,the financial institutions, without being subjected to
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financial accountability. Primarily it implies the any process of governmental clearance.

accountability of PEs to parliament in financial matters.

Dr. B. K. Agarwal1* Dr. Neeraj Manchanda2

132
 Autonomy and Accountability of Public Enterprises in India

Regarding accountability of PEs to Parliament, the One of the strategies received in grouping public
Committee recommended that Parliament questions enterprises (particularly in the provincial, and prompt
on day-to-day operation and management may be post-pilgrim period, yielded a fourfold order plot, viz:
avoided. The debate on the Demands for Grants of the
concerned Administrative Ministry could be used for (i) government offices and administrative
the purpose of a debate on the performance of PEs agencies (only somewhat expelled from
under the control of the Ministry. unadulterated common administration
associations);
The Economic Administration Reforms Commission
which was set up in 1981 headed by late L.K. Jha, (ii) statutory organizations (body corporates set
also went into this aspect of autonomy and up by particular empowering acts);
accountability of PEs. According to the Committee, in
the name of public accountability numerous checks (iii) state-claimed organizations (constrained
and controls are introduced at every stage which obligation organizations possessed completely
hinder executive action, concentrates decision-making or to some extent by government and
powers in the Ministry and infact dilutes the subject to constraints forced by apropos
accountability of the management. The accountability organization acts); and
concepts and ,instrumentalities which have come to
prevail over the years are in need of careful (iv) management agencies and joint endeavors
reconsideration with a view to ensuring that (a) they do (perpetually, possession lives in government,
not erode the autonomy of PEs and thus hamper the while management is provided by remote
very objectives and purposes for which they ought to accomplices).
be accountable and (b) that what is sought to be
secured is accountability in the wider sense of As the quantity of public enterprises expanded, and
answerability for the performance of tasks and the with the extension in their extent of exercises, the
achievement of results, rather than in the narrow fourfold characterization depicted above ended up
sense of responsibility for the correctness and lacking. Other than neglecting to demonstrate the
propriety or individual actions or decisions or sort of results which enterprises in every
conformity to rules and procedures. classification were relied upon to accomplish, the
plan gave no guide with respect to how the different
The Committee recommended, apart from certain enterprises ought to be overseen inside and
statutory controls which apply to both public and controlled remotely. In short, the plan demonstrated
private sector units, they should not be subject to any minimum valuable if the goal was to strike a harmony
other constraints on their autonomy. Also once the between administrative autonomy and accountability
investment decisions of PEs have been approved and to outer bodies.
necessary funding provided for, the management
should be allowed to go ahead without seeking any With an end goal to conquer the restrictions forced
further clearances except those which I apply to all by the former framework to arrangement, another
undertakings like those relating to industrial licensing, technique – i.e. order by significant zone of
foreign exchange releases etc. Also the number, movement – is at times received. With this
scope and coverage of the governmental guidelines' technique, it is conceivable to recognize three perfect
and instructions to PEs should be thoroughly reviewed composes viz:
and drastically reduced and only those concerned with
major objectives and/or performance parameters can (i) regulatory agencies (e.g. Agency of
be retained. Standards, National Standards
Organizations, Securities and Exchange
CLASSIFICATION OF PUBLIC ENTERPRISES Boards/Commissions, National Universities
Commissions, National Manpower Boards);
What constitutes a fitting harmony amongst autonomy
and control in public venture management relies upon (ii) public utilities (e.g. railroads, water sheets,
the idea of every undertaking. Sadly, there is up 'til power endeavors and civil transport
now no all around acknowledged strategy for administrations); and
characterizing public enterprises. There are the same
number of grouping plans as there are governments (iii) profit-production enterprises (banks,
and public venture survey commissions/boards of insurance agencies, manufacturing and
trustees. Also, heap order frameworks are every now business associations).
and again embraced for pay and reviewing purposes
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as opposed to as a component of the general Despite the fact that characterization by territory of
procedure of choosing what every venture remains for action speaks to a change over the past strategy, it
and how its issues should be coordinated. too is of restricted application to the extent the issues
of autonomy and control are concerned. This is likely
the purpose behind the prominence appreciated by

Dr. B. K. Agarwal1* Dr. Neeraj Manchanda2

133
 Journal of Advances and Scholarly Researches in Allied Education
Vol. XV, Issue No. 1, April-2018, ISSN 2230-7540

yet another technique for arrangement, i.e. distinctive tunes at the same time. In the resulting
characterization by 'proprietorship'. The rationale in perplexity, public enterprises concerned may play their
this arrangement of characterization is clear, i.e. on own particular most loved tune. At the end of the day,
the off chance that the wellspring of back can be any endeavor to force an excessive number of controls
distinguished, the issue of how to administer and in the meantime may leave the enterprises without
control a public venture is effortlessly settled. Is it appropriate control. At the other extraordinary, a plenty
accurate to say that it isn't every now and again of controls might be counter-beneficial from the
contended that he who bites the bullet calls the tune? perspective of administrative viability and proficiency.
The technique for arranging public enterprises by In this manner, when without the advantage of
possession is probably going to create the specialized skill and up and coming data, the
accompanying perfect composes: enterprises 'proprietors' meddle in everyday administration or
completely claimed and financed by the government always veto the chief's choices, the eventual fate of
(e.g. public utilities, statutory companies, instructive the endeavor might be endangered. This isn't to
foundations, innovative work agencies); organizations contend that all control measures are negative or
and joint endeavors (e.g. oil refineries, petro-synthetic useless. As the following segment appears, there are
organizations, vendor groups); and overseeing changed methods for controlling public enterprises and
agencies, financed completely or to a great extent, by ensuring that they are responsible to their 'proprietors'.
government however swung over to management
specialists or advisors (e.g. national carriers or BALANCING CONTROL WITH AUTONOMY
railroads contracted out to remote organizations). IN PUBLIC ENTERPRISES
That the 'proprietors' of a venture should try to control Whatever problems there are in balancing control
it isn't the question. The inquiry is the thing that frame with autonomy in public enterprises are simplified by
the control should take. How does the proprietor of an the fact that the weapons of control are also potential
endeavor share the strategies of the undertaking facilitators of autonomy and ‗self-government'.
without interfering in everyday administration and Legislative control for instance, can be preceded by,
without sending clashing signs to the management and combined with, a clear articulation of objectives.
staff? Valuable as it might be, the idea of Ministerial control can go hand in hand with careful
proprietorship is equipped for being twisted in the attention to the selection of boards and management
management of public enterprises. Truth be told, teams. Treasury controls are not antithetical to
unbelievable choices – choices that are probably going efforts designed to install sound management and
to influence the survival and long haul development of financial control systems. External audits can
an endeavor – might be taken by the simple certainty proceed alongside internal audits. There would be no
of possession. The hands of the 'proprietors' may be need to second-guess enterprise boards and
tied by earlier authoritative concurrences with managements (or take unilateral decisions which
management specialists. Predominant management conflict with theirs) if government were to increase
aptitudes and a total dominance of complex innovation the opportunities for dialogue on policy decisions and
may likewise fill in as viable weapons in the hands of the criteria for arriving at them. Let us examine these
outside accomplices looking to keep meddling proposals one by one.
politicians and civil servants under control. Be that as it
may, when the enterprises concerned are completely Almost invariably, enabling laws fail to specify the
claimed and financed by government – and especially, main reason for creating parastatal organisations,
when the enterprises are overseen by 'indigens' – the and rarely do these laws provide a guide for
'proprietors' on the government side are inclined to evaluating the performance of the organisations. It is
toss alert to the breezes, if just to demonstrate who is not surprising that individuals within the
in control. organisations and without have taken advantage of
this lacuna in statutes.
The issues confronting public enterprises have a
tendency to be exacerbated by the way that few Various organisation members frequently define
'proprietors' as well as their agents look to practice objectives in ways which conform with their
control in the meantime. The political class and their backgrounds and preconceived ideas. Outsiders –
supporters most regularly take their cases first as the particularly, political elements – mostly view
'proprietors'. The common administration organization, parastatal organisations as ‗fruits' to be reaped by
with its own particular personal stakes, may show up in persons with power and/or influence. Others see the
the appearance of 'proprietors' agents', or in some organisations as dumping grounds for out-of-work
other shape. Also, inside a similar administration, it relatives, dead-woods, or political militants.
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isn't feasible for the Treasury, the 'parent' ministries,

the 'intrigued' ministries and different arms of
government to approach a public undertaking to play

Dr. B. K. Agarwal1* Dr. Neeraj Manchanda2

134
 Autonomy and Accountability of Public Enterprises in India

Clear articulation (by legislatures or those performing managements, to it supreme authority and be
legislative functions) of the objectives and ‗line of answerable to it for any discrepancies. Since all
business' of each and every parastatal organisation investments in PEs are made from public funds, it is
would go a long way in resolving the identify crisis quite natural that management should be accountable
facing organisations. It is not too late: the various to the Parliament for their performance in terms of the
corporation statutes may still be reviewed to reflect the objectives for which the enterprises 'are established. In
new emphasis on results, achievement and a democratic country it has impossible to deny
innovativeness. rationality of accountability, but some problems
regarding public accountability has arisen.
SOCIAL RESPONSIBILITY OF PE
Balance of Autonomy - Accountability : Autonomy
The idea of social responsibility stems from the and accountabi1ity is mast conflicting problems o-f
concern for the ethical consequences of one's acts as F'Es. PEs should run efficiently on commercial lines
they might affect the interest of others. The Gandhi an and they should be granted sufficient autonomy in their
principle of Trusteeship expresses the inherent operation. As public money is invested in PEs, the
responsibility of business enterprise towards the question of complete autonomy doesnot arise.
mutual responsibilities of these to one another. In its Likewise we have seen that controlling authority
simplest sense, corporate social responsiveness should not be conscious for its day to day operation
means knowing how to manage a company's relation but for major business policy guidelines, etc., for
with external force like, social, political and management. There is a need for exact definition of
Governmental reputation that can affect the company. autonomy and accountability but no such definition
have been developed. It has been remarked in an
Bowen'1"‘ defines the concept as "the obligation of U.N. Report that "the balance between financial
managers to pursue those policies to make those freedom of an enterprise and central control is a
decisions or to follow those lines of actions which are delicate one and few countries could claim a
desirable in terms of the objectives and values of our paramount solution. But recommendation of COPU
society'. As we consider the PEs as business units so ‘appreciate the concept of the Memorandum of
they have some responsibility towards the society. The Understanding (MoU) as it would result in better
responsibility does not end within the tour walls of their efficiency of the concerned undertaking. MoU is an
factories and their own business etc. They owe a debt agreed document entered for three to five year
to the society which is a means to an end. they build period between the Government and Company. The
their empire by using the resources extracted from the Moll would be drawn up on the basis of agreed plans
mines and materials collected from the fields, which -for investment, production, profits etc. The
belongs to the society at large. When these factories performance plan is prepared to evaluate the
omit dangerous fumes and smokes, damage the objectives of MoU at the end of the year, within the
natural surroundings, they cannot just say that they purview of this document, PEs are free to operate
are responsible only for running the organization and because government will not interfere in these
they do not have any obligation to the society and the matter. But in default, the PEs will be answerable to
people at large. the Government. So we conclude that the idea of
MoU is suitable to maintain a balance between
ACCOUNTABILITY OF PUBLIC SECTOR autonomy and accountability.
UNDERTAKING
PROBLEMS PERTAINING TO FINANCIAL
As has been mentioned earlier, the concept of public AUTONOMY AND ACCOUNTABILITY IN
enterprises comprises of two terms 'Public‘ and PUBLIC ENTERPRISES
‘Enterprise‘. Enterprises which are owned and
managed by public authority is called public enterprise. The financial autonomy and accountability of PEs
Alternatively, public enterprises are social enterprises occupy an important place in a democratic country
owned by society. In a democracy, the Government such as ours. However, as things stand, these are
and the Parliament are the true representative of the treated as two separate facets of the personality of
people. So a PE has to account for its activities and PEs and often the perceptions of the government
performance to its owners through the Parliament and and PEs on the issues relating to autonomy and
the other agencies. In this paper, it will be our accountability differ. An important problem in this
Endeavour to explain the definitions of accountability context is the government's insistence to get matters
together with autonomy, government policy regarding referred to it on the various financial issues and the
accountability and autonomy, control of parliament . aversion of PEs to disclose the requisite financial
Functions of Comptroller & Auditor General (CAG) and information to their principals i.e. the respective
www.ignited.in

different functions of Committee on public administrative ministries. Whereas the government

undertakings in controlling the F'SUs in so far as its continues to treat these enterprises as its extensions,
role in ensuring accountability. The term accountability the PEs do not or cannot make concerted efforts to
implies rendering of the detail activities or giving detail come out of the gravitational pull of the government.
account of the performance of the PEs by its The parliament, the administrative ministry, the CAG

Dr. B. K. Agarwal1* Dr. Neeraj Manchanda2

135
 Journal of Advances and Scholarly Researches in Allied Education
Vol. XV, Issue No. 1, April-2018, ISSN 2230-7540

and the Courts are considered as the trustees of public Iyer, Ramaswamy R. (2001). A Grammar of Public
funds and are prompted, therefore, to impose a variety Enterprises, Exercises in Clarification, Rawat
of controls on these enterprises. They do not want to Publications: Jaipur.
take any risk with the public money, but prefer safety
and security. Khanna, K.K. (2008). Management of PEs in India
Himalaya Publishing House 2008, p.3
Prof. Ramaswamy Iyer in his book "A Grammar of
Public Enterprises Exercises in Clarification" has Mallya, N. N. (2001). Public Enterprise in India. The
identified some frequently heard complaints regarding Institute of Constitutional and Parlimentary
government's interference in public enterprise Studies, New Delhi 2001, p. 1.
managements. The circulars issued by the Bureau of
Public Enterprises at times relate to certain Mathur, B.P. (1990). Accountability of Public
unimportant and even trivial matters. Excessive Enterprises, Article published in Charted
monitoring by the government is also another problem. Secretary Jan 1990 p.16
Also during the course of the annual plan discussions,
the entire investment programme of a PE comes under Sankar, T.L., R.K. Mishra, S. Ravisankar (2003).
review and questions are raised about investment Public Enterprises in India, Himalaya:
decisions which are within the corporate powers of the Bombay.
public enterprise. And the economy instructions which
are issued from time to time by the government applies Sankar, T.L., R.K. Mishra, S. Ravisankar (2004).
to PEs abridging their powers. There is a gap between Leading Issues in Public Enrrpnst's
the powers that are formally possessed by PEs and Management, Himalaya: Bombay.
those that are actually exercised by them.
Singh Dr. V.S. (2006). PEs in India Deep h. Deep
CONCLUSION Publication, 2006. p. 1 Delhi.

As the main source of investible fund of the PEs Srivastava & Srivastava (1991). PEs and Economic
comes from the public exchequer, there must be some Development, Published in Issues in PEs
control on the functioning of the enterprises at national compiled by VKL Srivastava, RBSA
or state level. However, the control aspect has been Publishers, Jaipur 1991, p. I.5. 25. 0pp.
conveniently over looted between autonomy and
accountability of the enterprises. The different
Committees constituted by the State Assembly did not
exercise their full control on the enterprises. It may Corresponding Author
however be said that the mechanism of ensuring
accountabi1ity has been duly provided for, but the Dr. B. K. Agarwal*
lacunae associated with the functioning of the
Committees has to be overcome to make the PEs Assistant Professor, Faculty of Commerce, Agra
useful to the society. College
Adequate financial autonomy is a necessary condition E-Mail – [email protected]
for the successful working of PEs. This autonomy
should not only flow from the government but it should
further percolate from the top to the bottom in the PEs
themselves. The financial controls are an important
phenomenon in a democratic set up. These controls
should not, however, be regressive. Whereas there is
an over emphasis on financial accountability, PEs
have failed in using whatever little leverage they have
in respect of the financial autonomy.

REFERENCES

Ali El Mir (2002). "Government Control over Public

Enterprises: Current and Relevant Forms",
Public Enterprise, Vol 2, No 4, 2002
www.ignited.in

Dr. B. K. Agarwal1* Dr. Neeraj Manchanda2

136