The Ad-hoc Group of Experts (AGE) under the chairmanship of Dr. Arjun Senguptasubmitted their report on issues related to public sector enterprises in April, 2005. The recommendations of AGE were processed by the Government in two stages. Initially, the recommendations of AGE relating to enhancing the powers delegated to Navratna, Miniratnaand other profit making Central Public Sector Enterprises were considered and orders were issued in August, 2005. Thereafter, remaining recommendations of AGE were considered and orders were issued in May, 2007 and August, 2007 respectively.

Significant recommendations made by the AGE in their report, include :

1.         For effective governance of Central Public Sector Enterprises (CPSEs), their ownership functions, the powers and operational procedures of the Board of Directors and their responsibilities together with suitable checks and balances for exercising control over the Management should be properly designed and implemented.

2.         Any decision to reduce Government share holding to a level less than 51% in case of Category I CPSEs i.e. Navratna, Miniratnas and consistently profit making CPSEs, should be taken only with the consent of the Parliament.  The Board of Directors should have all the powers to raise equity capital from the market so long as the Government’s share of the overall equity remains above 51%.  However, in case of Category II CPSEs i.e., other than those mentioned above, Government should have full flexibility of owning or disinvesting their shares.

3.         Governance of CPSEs, especially the Navratnas and  Miniratnas and other profit making companies, should continue to be supervised by the three tier system, namely, the Ministry concerned representing the Government, the Board of Directors and the Management, with the role, powers and functions of each of them clearly defined and codified.

4.         An institutional arrangement is required in order to ensure harmonious relations and interactions among the three tiers and to provide for the redressal of grievances of the stakeholders.  To fulfill this requirement, the establishment of six overarching Supervisory Bodies, each consisting of ten members (three Ministers, five independent distinguished experts of the relevant sector and Secretary of the Ministry / Department and CMD concerned) is considered essential.

5.         If the Ministry considers it necessary to issue mandatory instruction to a CPSE, the same must be given in the form of a Presidential Directive.  The issuance of such Presidential Directives should have the approval of the Cabinet.

6.         The current restrictions regarding capital expenditures, joint ventures, etc. need to be done away with.  Such decisions should be left entirely to the Board of Directors.  However, if that is not possible at

one stroke, as the first step towards this desirable goal, enhanced powers should be given toNavratna / Miniratna and other profit making companies in respect of Capital expenditure, setting up of Joint Ventures (JVs) / Subsidiaries, subsequent investment in JVs, JVs betweenNavratnas, merger and acquisition, appointment of Directors in subsidiaries and JVs etc.  The Chief Executive of CPSE concerned should be a member of Search Committee for selection of non-official Directors.

7.         The Board of Directors should be fully responsible for the supervision and control over the Management of the company.

8.         Subject to statutory requirements, Government policy and regulatory guidelines issued by the RBI, the Board of Directors should have full powers of pursuing new lines of business, deciding on suitable Acquisitions and Mergers, setting up Subsidiaries and exiting from any line of business, as also of making Capital expenditure  without any prior clearance from the Government.