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PSEThe Bi-Monthly Newsletter July 2010 • Vol 1 No 4

Dear Friends / Colleagues,

It gives me immense pleasure to bepersonally involved in the initiativesof the CII Apex Council on PublicSector Enterprises and I am gladto apprise all of you, through thisnewsletter, some of the results ofour initiatives.

The latest and most noteworthyinitiative has been, as you know, the1st ever Public Sector Enterprises

Summit that has been very successfully held in Delhi on9th June, 2010. The full day Summit comprised discussionson issues of far reaching proportions for PSEs; like Listingof PSEs, Value Creation in the Economy, the GovernancePerspectives and Sustainable Development. With the highprofile speakers and panelists from the Ministries, the PSEs,Government Departments, banks, SCOPE and the PrivateSector on the same platform the rich discussion thatensued, and the question and answer sessions that followedhad brought out huge clarities on the complex issues anddispelled many popular perceptions on issues related notjust to the PSEs but the government and entire businessand industry at large.

The discussions, as we witnessed, had strongly underscoredthe strength of divestment through greater visibility,widening of the circle of wealth sharing and accountabilityto a larger stakeholder base. While the governance in PSEshas been exemplary, it was discussed that it neededoptimization so that they do not become a case of over-governance. The deliberations highlighted the perspectivesof various expectations of PSE managements, justifyingmore autonomy for investments and fund raising decisions.It also stressed upon that in the present context of dynamiceconomic environment, where any inordinate delay meanslast opportunity, the importance of greater freedom fordecision making process is immense.

To strengthen corporate governance and hasten the decisionmaking process one idea was mooted that there could beseparate posts for ‘Chairman’ and ‘Managing Director’.

RS Sharma

While the Chairman could head the Board of Directorswith non-executive powers, the MD would have theexecutive powers. This would ensure a neutral reviewingof the performance of the Board by the Chairmanwithout any conflict of interest.

The government has identified 60 PSEs for disinvestmentand targets about Rs.1.5 lakh crore in 5 years period. Theunlocking of the dormant wealth of our PSEs and theirchannelization for capital expenditure in social sectorschemes, will stimulate economic growth with benefitspercolating to the masses. Apprehensions were also raisedabout the too many equity issues within short span oftime may crowd the market and may cause overlong ofexcess PSE stocks.

Looking at the success of the 1st PSE Summit, let me, onbehalf of the PSE fraternity, compliment CII and DPE(particularly the dynamic Secretary, Mr. Bhasker Chatterjee)for helping us organizing such a professional meet. Theencouraging outcome has already provoked us to thinkabout the next one. We should do it for the interest ofthe industry in general and PSEs in particular, in duecourse of time.

The CII Apex Council on PSEs is indeed supplementingthe efforts of SCOPE to promote the cause of PSEs ina highly commendable and admirable manner.

Please send your feedback and suggestions to the Secretariatof CII Apex Council on PSEs and join the journey ofPSEs in becoming global leaders in their respective areaswith exemplary management practices.

Yours sincerely,

RS SharmaCMD, ONGC

& Chairman, CII Apex Council on PSEs

NewsletterFrom the Chairman’s Desk . . .

UPDATE

1st Summit of PublicSector EnterprisesCII Apex Council on Public SectorEnterprises in association with theDepartment of Public Enterprisesorganized the first Public SectorEnterprises Summit in New Delhi,on June 9, 2010. Mr Arun Yadav,Minister of State for HeavyIndustries and Public Enterprises,Government of India was the ChiefGuest at the Summit.

Apart from the inaugural session,the full day Summit had sessionson the strategic perspective onListing of PSEs, role of PSEs invalue creation in economy, theGovernance perspective in PSEsand sustainable development as theimperative for the future.

The speakers at the Summit includedGovernment functionaries, heads ofPSEs, private sector and a NGO.Session wise deliberations are givenbelow:

The Inaugural Session

(L to R) Mr Bhaskar Chatterjee, Mr ArunYadav and Mr RS Sharma releasing the CIIHewitt report on Strategies for Attracting andRetaining Talent in PSEs

The Hon’ble Minister of State forHeavy Industries and PublicEnterprises, Government of India,Mr Arun Yadav addressed theInaugural Session of the first PSESummit. He acknowledged the roleof PSEs in realizing the goals setout for them.. Mr Yadav stated,“The first PSEs started with an

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investment of Rs 29 crore, throughfive CPSEs, on the eve of the firstFive Year plan in 1956. It has nowreached a level of 246 CPSEs withan investment of Rs 528,000 croreas on 3rd March 2009. This is animpressive figure and shows theexcellent performance of CPSEs.”He spoke aboutthe fourMaharatnas andhoped manymore of thePSEs will qualifyfor that status inthe near future.

Mr Bhaskar Chatterjee Secretary,Department of Public Enterprises,Ministry of Heavy Industries &Public Enterprises mentioned, “Weallow PSEs to function incompetititively not through abureaucratic structure. We allowthem to evolve, grow and take oncompetition, not just nationally butinternationally too.”

Mr RS Sharma, Chairman, ApexCouncil of PSE, CII acknowledgedthat a Summit such as this wouldsupplement the strength of IndianPSEs, which withstood two majorfinancial crises in the past; one in1998 and another in 2008. Thesound corporate governancepractices, sensible corporateresponsibilities, regards for humanresource development andsustainable development throughoptimal exploration and exploitationof natural resources have beensome of the intrinsic values of PSEsthat came to the fore in the recenteconomic slowdown, he said.

The Minister, along with Mr RSSharma and Mr Chatterjee, releasedthe CII Hewitt report focusing onthe strategies for attracting and

retaining talents in PSEs. (For copiesof the report, please write tonita.karmakar@cii.in)

Session on the strategicperspective on Listing ofPSEs

The speakers, (L to R) Madhabi Puri-Buch,NM Borah, Sumit Bose, Usha Narayanan &Madhu Kannan

Mr Sumit Bose, Secretary,Disinvestment, Ministry of Financecongratulated CII for organizing theSummit to bring together the viewsof the Government, the privatesector, the bourses and the PSEsthemselves to discuss the Listingsof PSEs. He drew attention towardsthe capability of state and regionalPSEs. He gave his strategicperspective on listings anddisinvestment policies. Mr Boserequested CII to look at the subnational level, as the state PSEs alsohad high potential and requested forregional summits to be organized.

Mr NM Borah, CMD, Oil IndiaLimited, talked about the company’sjourney and its growth, subsequentto its IPO in September 2009.Speaking from a corporate entityangle he said, “Oil India was a mostsuccessful IPO and the company’sobjective to have greater awareness,a higher level of corporategovernance, better accountabilitywere achieved.”

UPDATE

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Ms Usha Narayanan, ExecutiveDirector, SEBI focusing on theinherent strengths of PSEs statedthat some PSES had outperformedthe market and investors wereindeed looking forward to listingsby both Central and State PSES.

Mr Madhu Kannan, MD & CEO,Bombay Stock Exchange opinedthat this was the best time fordisinvestment as liquidity in themarket was high and India was thepreferred destination for investment.Ms Madhabi Puri-Buch, MD &CEO, ICICI Securities Ltdmentioned that the retail investorsparticipated in the disinvestmentprocess through Mutual Funds andInsurance companies.

Session on the role ofPSEs in value creation inthe economy

The speakers, (L to R) BP Rao, OP Bhatt,Ashok Chawla, RS Sharma & Supriya Banerji

Mr Ashok Chawla, FinanceSecretary, Government of Indiashared his thoughts on the role PSEsplayed in developing the economiclandscape, while developingthemselves in the process. MrChawla said, “The Indian economyhas seen PSEs playing a pioneeringrole in development and PSEs willplay a far bigger role in the timesto come.”

Mr OP Bhatt, Chairman, SBI statedthat the objective of PSEs was veryclear as they generated employment,supported the growth of the

country and created goods andservices and ensured theirdistribution as well. ONGC beinga good example. He reiterated thatthis was needed to be recognizedbroadly.. He called for creation ofa comprehensive “Index” whichwould measure “value creation”which could be used by PSEs andPrivate Sector alike.

Another aspect that was brought outin the session was the talent poolcreated by PSEs. Mr BP Rao,CMD, BHEL mentioned that PSEsplayed a major role in improvingthe quality of life for theiremployees. PSEs served as abalance in regional development andtheir presence played a major rolein competitive pricing. Mr Rao alsoopined that PSEs could createfurther value if given more powerand independence in day- to-dayoperations.

Mr RS Sharma,Chairman, ApexCouncil ofPSEs, CII said,“PSEs todayhave crossedn a t i o n a lboundaries andhave becomeglobal entities.

PSEs represent the best practicesconstituting transparency,accountability, governance andfinancial disclosures.”

Session on theGovernance perspectivein PSEs

The speakers, (L to R) MK Venu, Sunil Verma,R Bandyopadhyay, Arup Roy Choudhury &Shakeel Ahmed

Mr R Bandyopadhyay, Secretary,Ministry of Corporate Affairs,Government of India gave acomprehensive definition of PSEs.Mr Arup Roy Choudhury,Chairman, Standing Committee onPublic Enterprises & CMD, NBCCmentioned that PSEs had beenunder constant scrutiny and hadproved to be wealth creators.

Mr. Sunil Verma, Chairman, AuditBoard and Deputy CAG(Commercial) Government of Indiaopined that “within the governmentsystem, we needed to see each otheras allies.”

Mr Shakeel Ahmed, CMD,Hindustan Copper Ltd said thatboth “under governance” and “overgovernance” could be corrected inthe PSEs. Mr Ahmed said, “the issueis not what the PSEs have done,they have been undoubtedlyexcellent, but the issue was whatmore could they have done.” Heconcluded by saying that PSEs mustgive due importance to bothperformance and delivery..

Mr MK Venu, Editor, The FinancialExpress began byd e f i n i n gcapitalism ascreation ofcapital, which wascommon to boththe public sectorand the private

sector – “the only difference beingone created more than the other at

ONGC – Beyond HydrocarbonsWe resolve to strive forEnergy Independence

UPDATE

a given point in time.” “The stockof PSEs has increased 68% on thebourses since the global economiccrisis,” stated Mr Venu. Hesuggested that the governmentshould have a holding companyfor profitable PSEs for a cleardemarcation between “Ownership& Management”.

Session on sustainabledevelopment as the

imperative for the futureThe speakers, (L to R) GK Pillai, DC Garg,Arun Maira, AK Purwaha & Chandra Bhushan

Mr Arun Maira, Member PlanningCommission, Government ofIndia, emphasized upon the finitenature of the energy reserves likecoal, and the importance ofrenewable sources of energy. Heopined that individuals should takethe responsibility for energyconsumption, and there should betrust in individual initiative inconserving our environment.”

Mr DC Garg, CMD, WesternCoalfields Ltd mentioned that CoalIndia while raising coal production,was also making substantial plansfor investments in sustainable energysources keeping in mind the benefitsof preserving the natural habitat.

Mr AK Purwaha, CMD, EngineersIndia Ltd said that technologiesadopted should be energy efficient.Mr GK Pillai, CMD, HeavyEngineering Corporation mentioned

about PSEs having plants at farflung areas, which preserved thelocal habitat. It was imperative forPSEs to earn a profit, to fulfill theirsocial responsibility. Hence vision forthe future should encompass bothgrowth and sustainabledevelopment, he mentioned.

Mr Chandra Bhushan, AssociateDirector, Centre for Science &Environment stated that there was

a need tocommunicatethe benefits ofs u s t a i n a b l edevelopmentto the peopleat large. AsPSEs wereseen to becontributors to

the community in a big way, PSEsshould take the lead in having“green” in its design and operations,he suggested.

PSE News UpdatePSEs likely to fund govtwelfare schemesThe government has chalked-outplans to have profit making PSEsfinance some of its social welfareprogrammes. The department ofpublic enterprises has estimated thatthrough this plan a sum of aboutRs 2,000 crore could be raised everyyear.

The plan entails asking profitablepublic sector companies to set asidea graded percentage of their profitsto finance the schemes. The plansspecifies that enterprises with profitsunder Rs 100 crore will have toallocate 3-5%; those with profit ofRs 101 crore to Rs 500 crore willhave to allocate 2-3%; those withprofit in over Rs 500 crore willhave to allocate 0.5-2%.

Since many of these PSEs are nowlisted, the decision by thedepartment of public enterpriseswill have to be endorsed byshareholders before it can beadministered. Also, many of thesePSEs pay dividends to thegovernment. If these PSEs set asidefunds to finance social sectorprojects, it will correspondinglyreduce the dividends they can paythe government.

The government has earmarked Rs1,25,372 crore for social sectorwelfare schemes for FY 2010-11.

ONGC, SAIL, NTPC & IOCdeclared MaharatnasOil & Natural Gas Corp (ONGC),SAIL, NTPC and Indian Oil Corp(IOC) have been declared‘Maharatnas’, a status that gives thePSEs greater financial freedom andgreater operational autonomy. Thedecision to name the highperforming PSEs as Maharatnas wastaken at the meeting of the Cabinet,presided over by Prime MinisterManmohan Singh in December2009. A formal notification on thesame was issued recently.

The main objective of accordingthe Maharatna status is to empowerpublic sector companies to expandtheir operations and emerge asglobal corporations. This statusempowers PSEs to makeinvestments upto Rs 5,000 crorewithout the government’s approval.A Navratna on the other hand isempowered to take investmentdecision upto Rs 1,000 crore withoutthe government’s approval.

A PSE must meet the criteria set bythe government to be accorded theMaharatna status, of a three-yeartrack record of annual net profitof over Rs 5,000 crore and net

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UPDATE

worth of over Rs 15,000 crore andannual turnover of over Rs 25,000crore and Listing on the bourses.Of the18 Navratnas ONGC, SAIL,NTPC & IOC meet these criteria.

Govt to fast trackappointment ofindependent directorsThe government would bereforming rules related to selectionand appointment of independentdirectors in PSEs, and make theprocess faster and more transparent.SEBI guidelines require that 50%of a company’s board shouldconsist of independent directors,which becomes significant with thestock sale of several PSEs on theanvil. SEBI also does not recognizea government nominated directoron PSE boards as an independentdirector.

The Maharatnas, viz SAIL, ONGCand IOC have also petitioned theiradministrative ministries to hasten theappointment of independentdirectors on their boards so thatthey can exercise decision makingauthority vested in the Maharatnastatus. The other Maharatna, NTPChas been able to exercise theenhanced authority in financialdecisions as it has the requisitenumber of independent directorson its board.

Cabinet endorses fast-tracking divestmentThe Cabinet0 Committee onEconomic Affairs (CCEA) hasendorsed a significant change in theprocess of stake-sale in PSEs.Merchant banker appointments forGovernment stake sale will now beadvanced to an earlier stage in thedisinvestment process, therebysaving time, which could getoptimally utilised in preparing for

the actual divestment. This will alsohelp in planning and timing of thepublic offerings in a manner thatthey are spread out evenly.

The Government has now made itmandatory for all profit-makingpublic sector enterprises to get listedon the bourses. For current financialyear the Government has set adisinvestment target of Rs 40,000crore. In 2009-10, the disinvestmentreceipts stood at Rs 23,550 crore.

The Cabinet Committee onEconomic Affairs (CCEA) Chairedby Finance Minister PranabMukherjee has now cleared thedisinvestment in Coal India &Hindustan Copper, bringing theGovernment holdings in the twocompanies to 90% & 81.45%respectively. Both Coal India &Hindustan Copper areheadquartered in Kolkatta.

PSEs will create 31,000jobs this fiscalThe employee strength of 246 stateowned companies will reach15,66,000 by the end of the currentfiscal, from the 15,35,000 at present.According to Mr BhaskarChatterjee, Secretary, Department ofPublic Sector Enterprises, PSEs didnot issue any pink slips in the wakeof the global recession last year andinstead registered a profit growthof 8% in the said period. Therewas however a reduction inheadcount due to the employeesavailing of the Voluntary RetirementScheme in this period.

PSEs have also enhanced operationalefficiency, with their net profitestimated to stand at 13% ofturnover this fiscal, up from 11%last year.

PSEs to be benchmarkedagainst private sectorpeersThe government’s plan to accordmore autonomy to PSEs is expectedto be a two-way street. Togetherwith greater operational freedomthe PSEs will be benchmarkedagainst their private sector peers inIndia and firms abroad. The PSEsare also aligning their accountingformat with International FinancialReporting Standards (IFRS), whichis set to come into effect from April2011.

The PSEs are currently measuredagainst the financial and operationalperformance, resource managementand corporate governance targets setby the companies themselves andto introduce the element ofcompetitive benchmarking that thismeasure is being taken.

However, industry analysts feel thatenvironmental conditions bothwithin and outside the organizationsshould be factored-in as currentlyoperational formats of PSEs andprivate firms are vastly different.

Ministries to keepdistance from their PSEsThe government has notified itsofficers and staff to abstain fromusing any infrastructure or facilitiesof the PSEs that fall under theirpurview and to repatriate any PSE

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UPDATE

A Navratna Company

staff working with them. These areamong the measures aimed atproviding greater autonomy to thePSEs by keeping administrativeministries at a professional distance.

Also any overlapping of functionalor financial roles between theministry and PSEs is being doneaway with. There would howeverbe need for professionals fromPSEs to serve their ministry ondeputation, and there are going tobe adequate checks and balances inthe system to keep their roles withinwhat has been mandated.

Norms for PSEs on use ofnatural resourcesThe Department of PublicEnterprises is in the process offormulating guidelines on use ofnatural resources, such as mineralreserves, which will have to befollowed by all PSEs. The guidelineswill likely be finalized by Septemberthis year. An MoU will be signedbetween PSEs and the Governmentfor the PSEs to apprise theGovernment on work done in thisregard. For instance companies likeNMDC mine a huge area, and ifthe land gets properly coveredsubsequently, green zones can becreated.

The Government is alsoformulating guidelines for PSEs toraise investment in research anddevelopment. Mr BhaskarChatterjee, Secretary Department ofPublic Enterprises has observed thatthe PSEs are now in a competitiveenvironment, and hence a strongresearch and development back-upis required. The Government hasalready put in place rules forCorporate Social Responsibility bythe PSEs, under which eachcompany will have to set aside upto 5% of net profits to supportsocial and environmental causes.

Miners could offerflexible compensation tothe displacedThe government is looking to alterthe draft legislation that requiresminers to offer a 26% stake tofamilies whose land will give wayto mining operations. This changewill preempt any complexity arisingout of the current guideline, whoseimplementation can happen only bylegally constituting each miningoperation into a separate companyand then offering shares to theaffected families.

The proposed draft of the Minesand Minerals Development andRegulation Bill 2009, has merged theschemes on annuity payout andequity offering so that companiescan choose between the two incompensating the families displaced.It is felt that allowing allstakeholders, especially the miningcompanies and those displaced, achoice is likely to be more workablethan the compulsory stake-offeringoption.

DisinvestmentEngineers IndiaEngineers India Ltd (EIL) hasreceived approval from the Ministryof Petroleum and Natural Gas fora follow-on public offer involvingsale of 10 % of the paid-up equityshare capital of the company. Thisdivestment, entailing offer for sale33,693,660 equity shares, is expectedto fetch nearly Rs 1,200 crore at thecurrent market price. Thegovernment at present holds 90.4% stake in the company.

EIL offers engineering consultancyservices for petroleum, power andfertilizer companies.

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UPDATE

Hindustan CopperHindustan Copper Ltd (HCL) hasreceived two sets of approvalsfrom the government, one fordivestment of 10 % equity out ofthe government’s presentshareholding of 99.59 % and theother for issuance of 10 % freshequity. Hence, HCL will issue freshequity of 92,521,800 shares of facevalue of Rs.5 each and thegovernment will similarly disinvest92,521,800 shares of the same facevalue.

After the issue the governmentholding will come down to81.45%. HCL will likely raise Rs4,000 crore this way, Rs 2,000 crorethrough divestment and Rs 2,000crore through fresh equity.

Coal IndiaThe government has approved 10% divestment of its shares in CoalIndia (CIL) through an IPO, whichwill likely fetch Rs 10,000 to Rs12,000 crore.

CIL registered a turnover of Rs52,000 crore for fiscal 2009-10. Thedivestment is expected to be madein September this year, and thecompany will qualify to become aMaharatna as soon as it gets listed.

CIL is the world's largest coal-miner.The government holds 100 per centequity in the company at present.

Joint VenturesEIL & GSPC to developgas terminal in AndhraPradeshEngineers India Ltd. (EIL) andGujarat State PetroleumCorporation (GSPC) have signed aMemorandum of Agreement for

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UPDATEdevelopment of an Onshore GasTerminal at Mallavaram, Kakinada,Andhra Pradesh for Deen DayalField Development Project inKrishna-Godavari Basin. A KPurwaha, Chairman & ManagingDirector of EIL and Tapan Ray,Managing Director of GSPC signedthe agreement. The project istargeted to be commissioned bymid 2012.

AK Purwaha (right) & Tapan Ray signing theagreement

Indian Oil & NuclearPower Corp to jointlyset-up nuclear powerplantsIndian Oil Corporation (IOC) andNuclear Power Corporation ofIndia (NPCIL) are going to form ajoint venture to develop greenfieldnuclear power generation projects.NPCIL aims to achieve a 10,000MW power generation capacity inthe 11th Plan period, from the 4,000MW at present. And it is estimatedthat the cost of setting up onemegawatt of nuclear power requiresan outlay of Rs 8 to10 crore.

NPCIL is likely to hold majority 51% stake in the joint venture. IOChas also made a foray into windpower generation and is setting-upa thermal power project in a jointventure with Tata Power.

NPCIL is the only company in Indiapermitted to produce electricityfrom nuclear energy..

IOC, MIC Electronics todevelop renewableenergy solutionsHyderabad based MIC Electronicsand Indian Oil Corporation haveentered into a joint-venture to studyand develop solar energy and LED(light-emitting diode) based energygeneration products, as well as otherprojects in their foray into green andenergy efficient technologies.

The JV entails developing nextgeneration of clean energy solutionsby combining LED with solarpower. LED and solar power arefacets of the same technology andthis collaboration would alsostreamline technology deployed inthese solutions.

To start with, MIC Electronics &IOC have initiated distribution ofsolar-based LED lanterns throughselect few state offices of IOC'smarketing division. Going forward,the JV would cater to the demandfor renewable energy solutions inIndian & abroad.

ONGC Videsh, Indian Oil &Oil India to invest USD 20billion in VenezuelaThe state oil companies ONGCVidesh, Indian Oil Corporation, OilIndia plan to develop a USD 20billion oil project in Venezuela thatwill provide India 3.6 million tonneof crude annually.

The agreement was signed inVenezuela by the Minister forPetroleum & Natural Gas MurliDeora in a ceremony presided overby Venezuela President HugoChavez. The agreement provides theconsortium of ONGC Videsh (11.0%), Indian Oil (3.5 %), Oil India(3.5 %), Repsol of Spain (11.0 %)and Petronas of Malaysia (11.0 %)

a 40% ownership interest in acompany that will develop an oilblock in the Orinoco Oil Belt ofVenezuela.

The agreement provides for licenseof operation for 25 years with thepotential for a 15-year extension.

Kolkata port to partnerSAIL, SCI to starttransloadingKolkata Port Trust is likely to joinhands with Steel Authority of IndiaLimited (SAIL) and the ShippingCorporation of India (SCI) to starttransloading operations in the Bayof Bengal.

Kolkata port has several initiativeson the anvil to step up theperformance of the port.Opportunities are being explored tocreate cargo handling facilities atvarious points along the river andcloser to the sea, given the poornavigability of the Hooghly.river.Kolkata port is looking at thefeasibility of mid-stream containerhandling.

PSE consortium acquiresMAMCA consortium of BEML (BharatEarth Movers Limited), Coal India(CIL) and Damodar ValleyCorporation has acquired the WestBengal-based public sectorenterprise, Mining and Allied

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Machinery Corporation (MAMC).The consortium paid Rs 100 crorefor the acquisition.

MAMC was set up to produceunderground mining equipment. Itis estimated that MAMC has over1,400 machines, of which 800 canbe made operational immediately.Apart from underground miningequipment production plants,MAMC has facilities for oxidation,forging and casting.

BEML will hold 48% in MAMCand Coal India and Damodar Valley26% each. BEML expects togenerate revenues of Rs 500 crorethrough operations of MAMC overthe next five years. MAMC hadceased its operations about twodecades ago.

Company News UpdateONGC to invest USD1billion (over Rs 4,500crore) to revamp oilfieldsONGC, India's biggest oil and gasexplorer, is inviting global bidsaggregating to about USD1 billionto upgrade the offshoreinfrastructure of the existing fieldsoff the Eastern and Western coastof India and to set up newinfrastructure to producehydrocarbons from recent finds.The international competitive bidswould be for the development ofplatforms and for over 100 kmlong undersea pipelines.

Also, ONGC has planned a capitalexpenditure of over Rs 3,240 crorefor first phase of development ofoffshore fields along the Westerncoast. Under the plan, ONGC willinstall four new fixed wellplatforms and drill 20 developmentwells. The cumulative production of

oil and gas from this for 16 yearsis expected to be 9.73 millionmetric tonnes and 4.52 billion cubicmetres (bcm), respectively. Theproject would be completed within3 years and first oil is expected inMarch 2012.

ONGC plans USD1 billionfor rig acquisitionsOil and Natural Gas Corporationhas outlined an investment ofaround Rs 4,580 crore (around $1billion) to buy 14 rigs as it looks tocontrol drilling costs.

ONGC is looking to acquire 10onshore rigs for Rs 900 crore fromBHEL and place a tender for fouroffshore rigs at an investment ofRs 3,680 crore. Off-shore rigs tendto be mobile and can be movedaround on a barge, and ONGC isin the process of finalizing thedesign of the offshore rigs.

SAIL to invest Rs 60,000crore on expansionSAIL has undertaken an ambitiousRs 60,000 crore expansionprogramme, to expand capacity.Initially there will be 50% additionto 23 million tonnes per annum byDecember 2012, which wouldsubsequently be raised to 60 milliontonnes per annum by year 2020.SAIL at present has productioncapacity of 15 million tones perannum.

SAIL currently preparing a blueprintto set-up a 12 million tonne perannum steel plant in the Dhanbaddistrict of Jharkhand. The plan fora greenfield steel plant such as thisis also in line with former fertilisersecretary BK Chaturvedi’ssuggestion that to avoid anyproblems related to land acquisitions,

public as well as private sector firmsshould look at land that belongs toclosed units of PSEs, especially inthe mineral-rich states of Jharkhand,Orissa and Chattisgarh.

SAIL, a Maharatna, registered salesof Rs 40,550 crore in FY 2009-10.

NTPC to invest Rs 55,000croreNTPC is planning to set up twogreenfield plants in Orissa andexpand the existing Talcher plantthere to add 9320MW to its powergeneration capacity. This will entailan investment outlay of Rs 55,000crore. NTPC achieved an average90.47 plant load factor (PLF) during2009-10 at its Orissa plant, andrealized Rs 2,032 crore in billings inthe region.

NTPC is also investing over Rs4,500 crore for setting up renewableenergy projects in India to reduceits dependence on fossil fuels. Onthe anvil are three solar powerprojects with a combined capacityof 300 MW and three wind powerprojects comprising 200 MW.NTPC has targeted generation of1,000 MW through renewableenergy.. The present installedcapacity of NTPC is 31,704 MWfrom all sources of energy. NTPChas targeted generation capacity of50,000 MW by the end of XIthplan period (2007-12).

HPCL to invest Rs 30,000crore on refineryHindustan Petroleum Corporation(HPCL) is planning to invest Rs30,000 crore on a 15 to 16 milliontones a year refinery to be set upalong the Western coast. It ishowever likely that the refinery tobe set up would be of 20 million

UPDATE

PSE Newsletter 9

tonne a year capacity. The refinerywould be completed within 48months of receiving all approvals.The project could be funded witha debt equity ratio of 2:1 or 2.5:1.

HPCL faces a space constraint atits existing 6.5 million tonnes-a-yearMumbai refinery, which may makeit inefficient in about 5 to 10 years.HPCL is also building a 9 milliontones per annum refinery in Punjabin a joint venture with Arcelor Mittal,which will go on steam by June2011. The pipeline to carry fuelfrom Bhatinda to Delhi from whereit can be moved by train to UPand Bihar has been completed.

CPCL plans Rs 20,000crore expansionChennai Petroleum Corporation(CPCL), a group company ofIndian Oil Corporation (IOC), hasfirmed-up expansion plans entailingan outlay of about Rs 20,000 croreover the next 4 to 5 years. Thisexpansion will add 9 million metrictones per annum (MMTPA) to therefining capacity. The expansion willbe by way of additions to existingcapacities, as its proposed greenfield15 MMTPA project is facing landacquisition issues.

CPCL has commenced productionand supply of Euro III and EuroIV compliant petroleum products.

BSNL capex at Rs 14,800croreBharat Sanchar Nigam Ltd plans tospend nearly Rs 14,800 crore in thecurrent fiscal, of which about Rs5,000 crore will be on mobileinfrastructure. BSNL plans to havesimilar investment in the nextfinancial year as well. BSNL willexpand this year its 3G broadband

reach to nearly 750 cities from thecurrent 350.

Of the 29,000 BSNL telephoneexchanges in the rural areas, 24,000currently have broadband capability.BSNL also plans to investsubstantially on mobile connectivityas there are about 580 mobileconnections.

BSNL had revenues of aboutRs 35,800 crore, of which nearlyRs 10,000 crore came from mobilebusiness. In the current fiscal too,revenue will likely be in the sameratio.

IOC plans Rs 10,000 croreLNG terminalIndian Oil is planning to set up a 5million tones per annum LNGreceiving terminal near Ennore portnear Chennai at an estimated outlayof Rs 10,000 crore. The project willbe set up through joint venture withTamil Nadu Industrial DevelopmentCorporation.

The project entails a pipelineinfrastructure for distribution ofnearly 20 million cubic meters ofvaporized gas a day. The demandfor natural gas in Tamil Nadu isestimated at about 48 million cubicmetres per day (mmscmd) by year2015, against 4.2 mmscmd atpresent. The project details will likelybe finalized by this year end.

REC to raise Rs 21,000 crin FY2010-11Rural Electrification Corporation,REC, will likely raise Rs 21,000crore from the market in 2010-11,as part of its resource mobilisationplans. This fund raising wouldinclude USD500 million of externalcommercial borrowings (ECBs).REC had raised Rs 24,000 crore in

the previous financial year (2009-10), and disbursed loans of Rs18,500 crore during the sameperiod. REC has set a loandisbursement target of Rs 19,000crore in the current fiscal.

REC provides finances for powerprojects in the country.

BEML to invest Rs 680crore on expansionBharat Earth Movers Ltd (BEML)has chalked-out plans to invest Rs680 crore over the next two to threeyears on expansion of itsmanufacturing facilities catering tomining & construction, rail & metroand defence sectors. BEML’s orderbook stands at Rs 5,206 crore, ason April 1, 2010. This comprisesRs 3,300 crore for rail & metrocars, Rs 1,100 crore for mining &construction equipment and Rs 700crore for defence equipment.

The company has also earmarkedRs 100 crore for revival ofDurgapur based Mining and AlliedMachinery Corporation (MAMC),which was acquired by BEMLjointly with Coal India Limited andDamodar Valley Corporation(DVC).

The sales revenue for the currentfiscal is expected to touch Rs 4,200crore, an increase of 18 to 20%over last year. BEML expects toreach Rs 5,000 crore in sales revenuesby fiscal 2012, earlier than the initialtarget of fiscal 2013 for the same.

BHEL looks at balancedgrowthBHEL is focusing on balancedgrowth through expansion ofactivities in the segments of industry,transportation, transmission, defense,

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oil and gas, in addition to its corearea of power. Out of the totalorders of Rs 59,000 crore whichBHEL received in FY 2009-10,BHEL's industry business segmentreceived orders for Rs 14,366 crore.

BHEL will be manufacturing 7,000HP and 9,000 HP and going up to12,000 HP locomotives in aboutthree years’ time. BHEL has tiedup with General Electric astechnology partner for diesellocomotives.

In transmission, BHEL is the leaderin the 400kV segment. For highervoltage segment, BHEL has enteredinto a JV with Toshiba tomanufacture 700 kV and 1200 kVequipments. For HVDCtransmission, BHEL is working withABB and is building the first 800kVtransmission line in India, which isonly the second in the world.

HAL’s Light CombatHelicopter debutsHAL has demonstrated theprototype of the Light CombatHelicopter (LCH), the attackhelicopter conceived and developedin India. LCH will be inducted infour years in the defense servicesand will place the country in theselect group of countries that havesimilar dedicated helicopters.

LCH, which weighs 5.5 tonne, isagile and can fire upto 6km atground, air and moving targets, andtake part in counter-insurgency,urban warfare, escort and searchand rescue operations. It is also oneof the few choppers that can fly inreverse.

Bharat Earth Movers Ltd (BEML)has chalked-out plans to invest Rs680 crore over the nexThedevelopment of LCH commenced

in 2006 and has been developed atan investment of Rs 376 crore. HALexpects to get orders for 65 LCHchoppers from the defence in Indiaand other friendly countries.

Goa Shipyard startsdeliveries of high-speedinterceptor boat

SK Srivastava, Chief Secretary, Govt of Goaflagging off the interceptor boats, with VineetBakshi, CMD, GSL (third from left)

In compliance with the Ministry ofHome Affairs (MHA) plan onstrengthening Coast Security, GoaShipyard Ltd (GSL) delivered thefifth High Speed Interceptor boatto the Coastal Police of Goa on 19May 2010.

Shri Sanjay Kumar Srivastava ChiefSecretary Govt of Goa flagged offthe 12 Ton Category boat built byGSL at a brief function held at GoaShipyard Ltd. RAdm (Retd) VineetBakhshi VSM Chairman andManaging Director Goa ShipyardLtd, Senior Officials of Goa Policeand GSL were present on theoccasion.

With this GSL has ensured deliveryof 66 Interceptor Boats to thevarious states and union territoriesof which 32 nos are of 5 TonCategory and 34 nos are of 12 TonCategory. This 12T boat is 13mtrslong capable of operating at 35knots on full load. The boat isfitted with 2 nos Main Engines of500 HP each with water jetpropulsion, echo sounder,

sophisticated GPS, radar, apowerful search light and binoculars.The Wheel House of these boats isfitted with ballistic panels forprotection of patrolling crew towithstand a threat of an AK47assault rifle at 10 meter range.

The boat with its powerfulequipment will make search andchase easier for the marinepolicemen. It can outperform anysmall vessel with its high speed andsuperb maneuverability.

With the successful construction ofthese boats indigenously, GSL hassuccessfully ventured into GRPtechnology construction for meetingthe country’s Coastal security needs.

Goa Shipyard to set-upunique Shore based TestFacility“First Steel Cutting ceremony” tomark the commencement of thestructural work for the state of theart Shore based Test Facility washeld at Goa Shipyard Limited(GSL). Cmde A S Baghel, ChiefStaff Officer (Air) Goa Naval Areadid the honour in presence ofRAdm (Retd) Vineet Bakhshi VSM,Chairman and Managing Director,Goa Shipyard Ltd., senior officialsof GSL and other dignitaries.

The Shore based Test Facility beingset up at Naval Air Station, Goa bythe Aeronautical DevelopmentAgency is a unique Testing Facilityin the South Asia Region. Thefacility will be used to simulate anaircraft carrier for full fledged flighttesting of ship borne attack aircraftas well as for training of pilots. TheTest Facility will have various systemsfor controlled take off and landingas done on aircraft carriers.

The project is the first such facilityin South Asia and only the third inthe world. GSL was selected as theexecution agency in view of its

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excellent design, build and projectmanagement skills. This uniqueproject is scheduled to becommissioned in 2012.

In another development, RearAdmiral Sudhir Pillai NM FlagOfficer Commanding Goa Arealaid the keel for the newly designedNaval Offshore Patrol Vessel.RAdm (Retd) Vineet Bakhshi VSMChairman and Managing DirectorGSL, senior officials from GSL andofficials from Indian Navy andCoast Guard were present on theoccasion. This is the 4th NavalOffshore Petrol Vessel in the seriesof four Vessels designed in-houseby GSL, aimed at meeting theincreasing requirements of IndianNavy for surface warfare operationsand to prevent infiltration andtransgression of maritimesovereignty.

OpinionsIn an editorial on the 14th June2010,The Financial Express has opinedthat the PSEs were over governedand in the competitive globalizedenvironment that exists PSEs mustbe given operational autonomy forthem to perform to their truepotential. The Prime Ministerhimself has lamented recently thatthe chiefs of PSEs have been “largelydisempowered by the government”.Government interference makes thedecision-making process at some ofour best PSEs suboptimal.

Many of the PSEs today are listedon the stock markets and areanswerable to a number ofstakeholders apart from theGovernment. Suboptimal decision-making has a direct and adverseimpact on both shareholder valueand the profitability of the company.Merely designating a companyMaharatna or Navaratna was notenough. PSEs can compete on a

level playing field only if they getgenuine operational autonomy.

So, the Prime Minister’s observationthat PSE managements weredisempowered by the governmentwhich owns these companies isamply supported by empiricalevidence. The Financial Express hasargued that PSEs could be givenreal operational autonomy byseparating ownership from day-to-day management, on the lines ofthe Tata group where Tatacompanies have been givenoperational freedom and aregoverned on their strategic directionthrough the holding company TataSons. On similar lines, the PMOcould act as the administrativeministry, for all profitable PSEsabove a certain size to start with.This must be done in both letterand spirit in order to gauge theefficacy of this model.

Stellar ResultsONGCONGC registered a 13% increasein revenues in Q4 FY 2009-10, toRs 16,002 crore. Revenues for thefull year declined 4% to Rs 61,982crore. Net income for the financialyear increased 4% to Rs 16,768crore.

BHELBHEL registered a 28% increase inrevenues in Q4 FY 2009-10, to Rs14,152 crore. Revenues for the fullyear increased 24% to Rs 34,703crore. Net income for the financialyear stood at Rs 4,326 crore.

SAILSAIL registered a marginal increasein revenues in Q4 FY 2009-10, toRs 12,673 crore. Revenues for thefull year declined 5% to Rs 43,233crore. Net income for the financialyear stood at Rs 6,754 crore.

POWER GRID CORPORATIONPower Grid registered a 22%increase in revenues to Rs 7,504crore for FY 2009-10. Net incomefor the financial year increased 21%to Rs 2,041 crore. The capitalexpenditure of the company stoodat Rs 10,586 crore for the year.

HPCLHPCL registered a 24% increase inrevenues in Q4 FY 2009-10, to Rs31,321 crore. Revenues for the fullyear declined 14% to Rs 1, 07,637crore. Net income for the financialyear stood at Rs 1,301 crore.

NTPCNTPC registered a 8% increase inrevenues in Q4 FY 2009-10, to Rs12,353 crore. Revenues for the fullyear increased 9% to Rs 49,247crore. Net income for the financialyear stood at Rs 8,728 crore. NTPChas power generation capacity of31,000 MW which the companyplans to increase to 75,000 MW by2017.

Neyveli LigniteNeyveli Lignite Corporation (NLC)registered a 18% increase in revenuesfor the full year to Rs 4,121 crore.Net income for the financial yearstood at Rs 1,247 crore.

NLC is a lignite-based powerproducer and has an installedcapacity of 2,490MW. NLC plansto augment its capacity to about4,300 MW by 2012.

NHPCNHPC registered a 58% increase inrevenues for the full year to Rs 4,218crore. Net income for the financialyear stood at Rs 2,090 crore.

During the period, the companygenerated 16,960 million units of

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Disclaimer: The data used here are from various published and electronically available primary and secondary sources. We have taken care to verify and cross-check theaccuracy of such data. However, despite due diligence, the source data may contain occasional errors. In such instances, CII is not responsible for such errors.

For comments/suggestions, please write to Nita Karmakar, Director, CII at nita.karmakar@cii.in

Published by: Confederation of Indian IndustryThe Mantosh Sondhi Centre, 23, Institutional Area, Lodi Road, New Delhi-110 003, India

Tel: +91-11-2462 9994-7 • Fax: +91-11-2463 3168 • Email: ciico@cii.in • Website: www.cii.in

electricity against the target of16,381 million units.

AwardsRS Sharma conferred CIIPresident’s award

(L to R) Chandrajit Banerjee, Director General,CII; Hari S Bhatia, then President, CII -Designate; Nandan Nilekani, Chairman,UIDAI; RS Sharma, CMD, ONGC; VenuSrinivasan, then President CII; RM Khanna,Chairman, CII Northern Region

Mr RS Sharma, CMD, ONGC wasrecognized by CII for hisoutstanding contribution to thecause of PSEs. Despite hiscommitments to the largest PSE ofIndia, Mr. Sharma has always beenavailable to give his guidance onissues related to the developmentof Indian industry especially thePublic Sector.

Mr Sharma is Chairing CII ApexCouncil on Public SectorEnterprises since February 2008. MrSharma has been felicitated for hisexemplary leadership of CII ApexCouncil on PSEs that has broughtabout significant changes on variousfronts, like HR strategies, sustainabledevelopment and public-privatepartnership, with regard to PSEs.

Partha S Bhattacharyyaconferred CII President’sawardMr Partha S Bhattacharyya,Chairman, Coal India Limited was

conferred CII President’s Award forOutstanding Contribution to CIIfor 2009-10.

(L to R) Hari S Bhatia, then President CII -Designate; Venu Srinivasan, then President, CII;Nandan Nilekani, Chairman, UIDAI; ParthaS Bhattacharyya, Chairman, CIL; RM Khanna,Chairman, CII Northern Region; ChandrajitBanerjee, Director General, CII

The award was in recognition tohis active participation in CII ApexCouncil on Public SectorEnterprises and CII MiningDivision, in spite of his busyschedule. Mr Bhattacharyya has beenChairman of CII’s Sub-committeefor HR Strategies in the PublicSector, which had recently releasedthe CII Hewitt report on “Attracting& Retaining Talent in PSEs” andhas now been nominated Chairmanof the CII Sub-committee onSustainable Development.

AppointmentsCS Verma takes over asSAIL Chairman

Mr Chandra Shekhar Verma hastaken over as Chairman SAIL. MrVerma in a career spanning 29 years

has served as Finance Director ofITI, as Group General Manager ofIndian Railway FinanceCorporation, as General Managerof Delhi Stock Exchange, besidesworking in a financial institution fornine years. Prior to his currentappointment Mr Verma wasFinance Director of BHEL.

Mr Verma has indicated that hewould look to enhance theproduction capacity of SAIL invalue-added steel especially thatrequired by the power sector andalso expand the global presence ofthe company through mergers andacquisitions. “In a globalised worldSAIL will not confine itself as adomestic player but will spread itswings outside, especially towardsbuilding input security by acquiringoverseas assets,” said Mr Verma.He also stated that the share ofvalue-added steel in total companysales would be raised from thecurrent 37%.

PK Rastogi takes over asDirector (Personnel), EIL

Mr P K Rastogi has taken over asDirector (Personnel) of EngineersIndia Ltd. He was previouslyExecutive Director (Personnel &Administration) EIL. Mr Rastogi hasserved EIL for over 36 years indifferent capacities, in the fields ofEngineering Design, EngineeringCoordination and ProjectManagement.

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