Honorable Finance Minister of India Shri Pranab Mukherjee, Chairman Board for Reconstruction of Public Sector Enterprises,Shri Nitish Sengupta, MD and CEO of ICICI Bank Sushri ChandaKochhar, Shri Anup Baghchi, MD & CEO, ICICI Securities Limited, the CMDs, Director (finance) and other senior representatives from the select Central Public Sector Undertakings, the colleagues from the Government of India ministries and all the distinguished personalities who have assembled here to make this event a success I extend my heartfelt welcome. I am especially grateful to ICICI Securities Limited for convening this seminar at such a short notice. This seminar could not have come at a more opportune time as the bearish capital market makes the otherwise revenue centric rationale forlisting much less appealing. Sir, I had my baptism with the PSUs and that too with a financial sector PSU almost at the beginning of my service- sometimes in early 1981. Being with the PSUs for me is just like being at home. Today,however, I am finding myself beset by two contradictory emotions. While the lure of opportunity to talk about and interact with the PSU representatives on issues of Corporate Governance and its evolution in the context of listing is particularly enticing to me.Today, however,when I realize that I am speaking in front of the august personality of our Finance Minister who entered the Rajya Sabha as early as 1969 when I was happy rejoicing over my admission in Allahabad University for my Bachelors degree- just a 10+2 pass, it gives me jitters. Shri Mukherjee was the Cabinet Minister when I joined UP State Financial Corporation -one of the topmost SFC in those days.To put policy evolution in perspective before a personality who has been in the thick of the evolution of the same public policy through 1974 onwards is a daunting task.

How so ever onerous it may seem, a responsibility undertaken, however, will have to be taken to its logical end. I propose to flag issues in an anecdotal mode. I vividly remember that in early eighties even funds for working capital were released to PSUs from Government budget. The finance department used to be described difficult, as it had by then started asking well performing PSUs to go to banks for their working capital needs. Some of the discussions of those days are still fresh in my memory. It was really hard to explain a well performing PSU that it should not be construed an adverse response to their good performance that they are singularly being pushed to go to banks but a recognition that they are the bankable ones. Those PSUs that were not doing so well and were not bankable, however, had to be supported by state budget as they were to be kept running because of their socio economic importance. It was pathetic to see PSU representatives emerging out of the discussion rooms fuming and whining that it is no use being a good performer. Since you do well you must be encumbered with extra running around banks, answering their numerous questions, filling lengthy forms at the time of sanction as well as on a recurring basis. Some even painted an ironical Kafkaesque scenario and quipped: it was probably better not to have done so well.

Apparently, the consequential extra layer of oversight by the banks that enhanced answerability and accountability was not much appreciated. It was lost in the superficial and simplistic generalization that finance department in the government oddly wants to penalize good performers by forcing them to go to banks and waste time and effort in organizing working capital rather than actually working on the shop floor. Finance Department was thus found to be behaving irrationally and rewarding inefficient performers by making their life easy.

By late eighties another difference was noteworthy. Now, the PSUs were being encouraged to go to term lending institutions to meet their capital expenditure needs. The budgetary support was now being limited to the extent of margin money and the same came by way of fresh equity or soft loans. This added a new layer to the due diligence in the form of appraisal by a term lending institution looking into the whole gamut of assumptions- right from – the unmet need of the market to machine balancing, bill of material including process waste, business cycle and inventories etc. It also added the dimension of need based release of funds rather than budget timelines related releases and the sensitivity towards interest during construction etc. To me it appeared another quantum jump in the level of enhancement of corporate governance.

With the maturing of capital markets it was a natural corollary that the PSUs were encouraged to plug into the larger scheme of financial things. From the circuitous route of ‘taxes’ to ‘consolidated fund of India’ to ‘investments in a PSU’ or the other option, namely, ‘savings of the people’ to ‘banks’ to ‘investment in a PSU’ we have reached the third stage where ‘investible surplus with the people’ goes directly to the ‘investment worthy enterprise’- the single transaction cutting the cost of multiple transactions. Listing makes this possible for PSUs. Listing also makes oversight mechanism multilayered. We have Securities and Exchange Board of India; we have stock exchanges to demand compliance to their norms and guidelines. Also diverse sets of shareholders inducted in the process demand performance. The day to day trading on the exchange imparts both a sustained tension for performance and prompt appreciation for a day’s work well done. Behind the scene a large number of professionals, investors get busy researching the company. Thus listing introduces multiple layers of oversight mechanism.

I shall conclude by another anecdotal mention of a different texture. During my encounters with people curious about Indian economy I have often been asked: whether Indian economy is still at a take off stage or it has acquired maturity. My response has always been: I am not very keen to declare that Indian economy has matured but I am certainly keen to declare that Indian democracy is matured. Indian psyche has been to assimilate the best from wherever it comes. It has always eschewed dogma whether it be of left of centre or the right of centre. Even in the heydays of centralized planning India had centres of excellence blooming in the private sector. Similarly the post 1990s liberalization could not establish ‘the Market as the God’. The genius of our people lies in picking up the best practice irrespective of its place of origin or philosophical denomination. So rest assured my friends from the PSUs, the listing will give you the best of the packaging that your good performance deserves and will provide an institutional wherewithal to motivate you to do better on a day to day basis. I understand some research papers have been circulated in the seminar that brings forth that exposure to capital markets have marked positive influence on the motivation of people working with you as well as helps you in realization of better market penetration of your goods and services along with the goodwill. Let us not look it with apprehension or suspicion just because in the process the majority shareholder is able to redeploy its resources from areas where market is willing to put in money to areas where either the market is not able to reach or finds it less attractive.