INDIA BUSINESS WORLD - MARCH 2006
THE MONTH THAT WAS

PROFITABLE PSUS MAY GET TO BYPASS PIB

Profit making PSUs may no longer require the Public Investment Board's (PIB) approval while taking an investment decision. The move will allow public sector companies like ONGC, IOC, Bhel and GAIL to take investment decisions without any limit.

Prime minister Manmohan Singh has in principle approved a proposal that would exempt profit-making public enterprises from waiting for PIB approval before undertaking any expansion. The decision would help all profit-making PSUs, including navratnas and mini-ratnas, sources in the government said.

The exemption would, however, be conditional. Only those profit-making PSUs will be allowed to bypass PIB that have low budgetary support from the government and that would not seek sovereign guarantee (except for multilateral loans) for their expansion plans, sources said. It is also stipulated that such projects must be approved by leading financial institutions (FIs) and they would agree to fund “specified” percentage of the entire project cost. is learnt that the Prime Minister's Office has asked the expenditure secretary and the Planning Commission to work on the issue urgently and frame regulations in this regard.A notification to this effect is expected soon.

PIB takes up investment proposals of PSUs. “Under the existing guidelines, central sector projects costing Rs 100 crore and above are considered by PIB,” a source in the finance ministry said. Secretary (expenditure) in the finance ministry is the chairman of PIB and joint secretary (plan finance-II) acts as the secretary to the board. In respect to navratnas and miniratnas, the government had recently enhanced investment ceilings. Navratnas' investment in one project is limited to Rs 1,000 crore, while the same is Rs 500 crore and Rs 250 crore for mini-ratnas I and II, respectively.

The PM's decision is in tune with the pledge made in the National Common Minimum Programme, which promises full managerial and commercial autonomy to successful profit-making companies so that they grow fast in a competitive environment .