FinMin revokes 8-year-old circular: CPSEs no longer need NITI nod for JVs

The DPE in a notification said it has been done to make the process easy and less time consuming

In a move to delegate more autonomy to key central public sector enterprises (CPSEs), the Ministry of Finance (FinMin) has revoked an eight-year-old circular, which required Maharatna, Navratna, and Miniratna CPSEs to take prior permission of NITI Aayog before forming financial joint ventures (JVs) and wholly owned subsidiaries (WoS). 

 

The Department of Public Enterprises (DPE) in a notification said it has been done to make the process easier and less time-consuming. 

“At present, all proposals… by Maharatna, Navratna, and Miniratna CPSEs for investments in setting up JVs/WoS, etc. require clearance both from Niti Aayog and DIPAM (Department of Investment and Public Asset Management) before exercising their delegated powers. A need has been felt to rationalise and simplify the process for establishing JVs/WoS with a view to making the process easier and less time-consuming,” DPE said in a notification on September 17, 2024. 

However, the requirement to refer the proposals to DIPAM for establishing JV/WoS as well as capital restructuring and capital management of CPSEs has been retained. 

In the earlier notification issued on August 10, 2016, the DPE, which was then part of the Ministry of Heavy Industries and Public Enterprises, had said that given the proliferation of JVs/WoS, proposals for establishing financial JVs and subsidiary entities will be presented to the Board of the CPSE concerned and the administrative ministry/department concerned will obtain concurrence of NITI Aayog for such proposals. 

“It is desirable that such investment in public fund is made after due scrutiny and adequate justification to ensure that the decision for investment to set up such joint ventures or subsidiary entities is in sync with policy considerations and strategic needs of the government and in conformity with the norms of fiscal prudence,” it had maintained. 

A government official, requesting anonymity, said the shifting of the DPE to the Finance Ministry starting 2021 has done away with the requirement for Niti Aayog’s intervention. 

Currently, there are 14 Maharatna, 24 Navratna, and 69 Miniratnas in India. Finance Ministry in its Annual Report for FY24 said the endeavour of the government is to make CPSEs autonomous Board-managed companies. “Under Articles of Association, the Board of Directors of CPSEs enjoys autonomy in respect of recruitment, promotion and other service conditions of below Board-level employees. The Board of Directors of a CPSE exercises delegated powers subject to broad policy guidelines issued by the government from time to time,” it added. 

In a report on PSEs for FY19, a parliamentary committee recommended that empowered PSE Boards, comprising independent experts, will enhance the quality of decisions, overall management supervision, and governance while ensuring that nearly all strategic decisions are taken at the Board-level and not passed on to respective ministries, thereby increasing the speed of decision-making. 

“For instance, the Board must be sufficiently empowered to take nearly all strategic decisions such as formation or dissolution of partnerships/JVs, mergers/acquisitions, appointment of CEO, creation of below Board-level positions, etc. The Board must also be permitted to appoint new directors to replace retiring directors, as is the case with private organisations,” the report said.   

What it means   

> Revocation grants more autonomy to Maharatna, Navratna, and Miniratna CPSEs, simplifying the process of establishing JVs and wholly owned subsidiaries 

> Aims to streamline and expedite the investment process for CPSEs, removing the need for additional approvals from NITI Aayog 

> Proposals related to capital restructuring and management still require clearance from the DIPAM