India’s Jewels Need Temasek-Style Buffer From State Contr

India’s state-run companies need greater autonomy and less political interference, according to the head of its second-biggest steelmaker, speaking ahead of elections that could deliver a change in government.

Twenty-one companies, dubbed Navratna and Maharatna -- or nine jewels and large jewels -- should operate under a holding company that would act as a buffer between them and their majority shareholder, C.S. Verma, chairman of Steel Authority of India Ltd., said April 9, a day before polling in New Delhi. The government holds 80 percent of Steel Authority, one of the Maharatna.

“We should have something like Temasek in Singapore as a holding company,” said Verma. Temasek Holdings Pte Ltd., Singapore’s state-owned investment company, was incorporated in 1974 to own assets previously held by the government. Its founding mandate was to manage them on a commercial basis and leave government to focus on policy making.

“Every company in India is working in a highly competitive environment,” said Verma, speaking at the company’s headquarters in India’s capital. “Let every public sector company be run and judged like the private sector. This model has worked well in many other countries.”

Verma’s proposal comes as the nation and its state companies prepare for the possibility of new leadership. The Bharatiya Janata Party, out of power for a decade and the frontrunner in elections that will conclude next month, has pledged spending on India’s infrastructure that would amount to billions of dollars. Accelerating the sale of state assets could help foot that bill.

Policy Considerations

India’s government is represented on the boards of state-run companies, which can lead to policy considerations -- controlling inflation, for example -- trumping commercial needs. Oil retailers, such as Indian Oil Corp., and monopoly coal miner Coal India Ltd. must seek government consent before raising prices.

Verma’s proposal, which he said is one of many before India’s government, would only apply to those companies that have already partially divested to private shareholders. Verma is also chairman of India’s largest iron ore miner, NMDC Ltd., again 80 percent owned by the state and a Navratna.

“Corporate governance is the biggest handicap of the state companies,” Deven Choksey, managing director at KR Choksey Shares & Securities Pvt., said by phone from Mumbai. “Their managements don’t take decisions. They just follow decisions of their political masters.”

Steel Authority’s Verma chairs the Standing Conference of Public Enterprises, an association of government-owned companies. “There’s a lot of interference in the working of state companies,” he told a seminar in New Delhi last month during a panel discussion. “The government has no business to be in business. Ownership and management of these companies must be separated.”

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