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Defaulting PSU chiefs face the stick - Views on News from Equitymaster
 
 
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  • Dec 20, 1999

    Defaulting PSU chiefs face the stick

    The Centre has initiated measures to incorporate certain accountability clauses in the Memorandum of Understanding (MoU) entered into with defaulting public sector units (PSUs) at the time of giving assistance. Under these clauses the chiefs and directors of PSUs that fail to meet the projections specified at the time of taking the assistance are liable for prosecution.

    The move marks a step forward in the restructuring of the central public sector units that have been continuously defaulting on their targets. These clauses will enable the government to take the harsh measure of prosecuting the chiefs and directors. It is likely that these authorities will now be more realistic at the time of setting targets and will ensure that efforts are made to achieve them.

    The step is a much needed one given the history of defaults by PSUs that have sought financial assistance. The government will now be in a position to demand the repayment of loans failing which legal action would be initiated. Moreover, with the continuously defaulting PSUs no longer eligible for financial assistance, the burden on the government is likely to reduce.

    However, given that the legal process is usually slow and the arbitrariness involved in the entire process, it is likely that this clause will fail to deliver on many of its promises. The government should consider measures like privatisation rather than an internal change in the management to lift the fortunes of the defaulting PSUs.

     

     

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