The Acting Chairman

The Coal India case shows why the recruitment process in PSUs needs overhauling

This can happen only in India, or more precisely, in India’s public sector companies (PSU). Gopal Singh, chief of Central Coalfields, has been holding additional charge of chairman and managing director of Coal India Ltd (CIL), one of the largest PSUs in India, since September 1 last year. Nothing unusual, except that Singh’s candidature for the top job was rejected by the Public Enterprises Selection Board less than three months earlier —in June last year, according to a report in the Indian Express on Wednesday.

This means the stewardship of the world’s largest coal producer rests on somebody who knows he has no chance of getting the top job and who has been found “not suitable” for that position. So, Singh remains Active Chairman even six months later (the earlier chairman Sutirtha Bhattacharya retired on August 31, 2017).

CIL has not been doing badly of late. Production has risen to over 567 million tonnes (mt), from 554 mt in 2016-17. Though short of the original target, it’s a significant milestone. But dispatch and inventory management still remain a problem at a time when the coal stock position in thermal power stations is at a critical level of less than seven days. And even now, India imports 140 million tonnes of non-coking coal, leave aside coking coal imports. This is strange in a country that has 315 billion tonnes of reserves. This means the CIL chairman must have the vision to meet this challenge and the time to implement it.

In that context, can an organisation like the CIL afford uncertainty at the helm for such a long time? The answer should be obvious, but this conventional wisdom seems to have few takers.  

This strange way of dealing with PSU chiefs comes just a few months after the petroleum ministry’s proposal to appoint Shashi Shanker as chairman of ONGC with just a year’s validity. The ministry wanted to conduct quarterly appraisal of his performance before seeking a fresh mandate for further employment. This meant putting the CMD of India’s biggest oil and gas producer on trial from the very first day by subjecting him to quarterly report cards. Thankfully, the Appointments Committee of the Cabinet named Shanker as CMD till his superannuation in 2021.

At a time when there is a clamour for giving longer tenures to heads of public sector companies so that they can make a meaningful contribution, there is surely a better way of treating the PSU chiefs.  

The result is no different in other areas as well. Consider the fate of the Banks Board Bureau. Announced in February 2016 on the recommendations of the RBI-appointed P J Nayak Committee, its broad agenda was to improve governance at state-owned lenders and its mandate also involved advising the government on top-level bank appointments.

It’s ironic that two years later, no one knows whether Vinod Rai continues to head the committee as his term expired on March 31, and no successor has been appointed as yet. In any case, BBB can only recommend names for the position of managing directors in banks. They are all scrutinised by the finance ministry. There have also been cases where the services of board members were terminated without consulting the BBB.

Last year, one of the BBB members put in his papers within days of sudden changes in the top management of Punjab National Bank and Bank of India as the BBB, he felt, had been completely bypassed. The board’s proposal to empower the non-official directors to play the role of independent directors on the same lines as provided in the Companies Act, 2013 has also been gathering dust.

The desire on the part of governments to interfere in the functioning of PSUs has been a long-standing tradition in India. In 2005, for example, then ONGC chairman Subir Raha objected to the petroleum ministry’s proposal to beef up its presence in the board by nominating two new directors. Finally, when the ministry threatened to move the resolution at the annual general meeting, Raha informed that a “consequential resolution will be tabled by the management to request the members to consider the resignation of the chairman”. Raha’s ploy worked as the minister, Mani Shankar Aiyar capped the ruckus with a salutary “I have no intention of making a competent man resign”.

It is unrealistic to expect all PSU chiefs to do what Raha did. And hence, the tradition of interference continues.