By Rohit Singh
Analysis of PSE Sector
India has been able to maintain a decent, if not spectacular, economic growth during a slowdown in the globaleconomy primarily riding on government stimulus packages, which included large social expenditure programmesfocussing on providing infrastructure and subsidies. The thrust was supported by the growth, production, large scale employment and resources made available by the enormous government owned enterprises, known as the Central Public Sector Enterprises (CPSEs).
Being the largest commercial enterprises in the country, CPSEs provide a huge leverage to the government (their controlling shareholder) to intervene in the economy directly or indirectly to achieve the desired socio-economic objectives. These PSEs ensure their business decisions disregard the short-term commercial interest to invest in local assets and resources so as to maximise the long-term socio-economic gains. Even the rural growth story, which has recently caught the attention of private sector, could not have been possible without the number of basic infrastructure services offered by public sector in this area.
The important indicators to measure the performance of PSES are their share in India’s GDP, in gross domestic capital formation, total employment in PSEs and prices deflator for the sector. In the beginning of the seventies, this share was just 10%, which grew rapidly in the following two decades and more than doubled to 25% by 1990-91. It still accounts for one fifth of the total GDP during FY11.
Giving Trends & Government Guidelines
Despite the considerable positive impact on the socio-economic landscape of India, the PSEs seldom shy away from investing heavily in community development programmes. The social initiatives of PSEs in the last six decades have considerably uplifted the quality of life of the communities.They’ve worked in remote rural or tribal locations, where most private corporations have seldom thought of or tried reaching.In addition to spending gigantic amount of funds on employee benefits and their skills development, CPSEs have been working towards disbursing the benefits of development among the communities they operate within.
These welfare activities include educational support through scholarships; health programs and medical camps; infrastructure development like construction of roads, buildings, and community centres;promotion of sports and games; vocational training and capacity building;building skill development centres;improving access to water, food, health, education and electricity; support for agricultural activities through Kisan Seva Kendras (KSKs); and large-scale tree plantation drives.
However, there is much more that is being planned at the national level, to ensure the holistic, long-term and sustainable development of the disadvantaged communities, and to maximize the utilization of the philanthropic rupee. The recent guidelines issued by the Department of Public Enterprises (DPE), Ministry of Heavy Industries and Public Enterprises instruct CPSEs to earmark a certain percentage of their profit after tax for the community development programmes. Talking about the Guidelines, FICCI’s Addl. Director (CSR) Dr. K.K.Upadhyay said, “The recently released DPE guidelines on the CSR shall encourageCPSEs to mainstream CSR into their cores business processes and divert to quality of CSR rather than quantity. This would create intended social, economic and environmental impact, which should in turn help to meet the national goal of inclusive growth”.
Focussing on inclusive impact at the grassroots level, the guidelines urge the companies to conduct a baseline survey, to understand the most pressing needs of the target audience, and design a CSR programme accordingly. Another encouraging factor is the approach of DPE, in dovetailing the CSR activities of the CPSEs with the social welfare initiatives of the government, ensuring that the existing structures are empowered, instead of multiple parallel structures being created.
In spite of these developments, there are gaps (real or perceived) to be addressed at the grassroots level. In the words of Mr. Rusen Kumar, Editor & Director, INDIACSR News Network, “Most of the NGOs complain that PSEs are not taking CSR seriously and they are not getting funds from PSEs for their social cause. Public Sector Enterprises are an essential part of the economy and a major driver of socio-economic growth. We should respect the CPSE systems and culture. We must understand their priorities in CSR. Most of NGOs are contacting PSEs to join hands with their own on-going social cause. The support to the existing work of NGO might not fit the CSR agenda of the PSEs. The need is to bring these kinds of issues to the discussion table.”
Support from Expert Implementation Agencies
With the combined profit after tax (PAT) of all profit-making CPSEs being more than rupees one lakh crore, the earmarked budget for CSR activities comes to more than rupees 3000 crore. This significant non-lapsable sum, coming into the CSR pool every year, can be most effectively utilized by bridging the gap between CPSEs and the non-profit sector and by streamlining the process of designing, implementing and monitoring large scale CSR programs for CPSEs. Fortunately, such support is available to CPSEs. Expert non-profit agencies, working in the development sector for decades, specialise in providing on-ground expertise and acting as a bridge between these two very diverse sectors.
Chief Executive of Charities Aid Foundation (CAF) India, Ms. Meenakshi Batra says, “We specialize in designing, implementing, monitoring and reporting large scale CSR programs, undertaken in partnership with companies, foundations and HNIs. With more than a decade long experience of working on the due-diligence of NGOs, CAF India has a strong network of partner NGOs across the country. We offer the perfect set of services to CPSEs, meeting their needs of dovetailing their CSR approach with the guidelines from the Department of Public Enterprises (DPE), and showcasing the positive impact that their work has created within the community.”
The prospect of such effective partnerships is a silver lining for India’s growth story. How much it can be leveraged by the stakeholders is yet to be seen.
Rohit Singh is the Head – Business Development (PSUs & Other Donors) at Charities Aid Foundation India