Against the backdrop of the growing dynamism in the economy due to the 1991 policy reforms, the Ministry of Heavy Industries and Public Enterprises put together the Ad Hoc Group of Experts on the Empowerment of Central Public Sector Enterprises. The chair would be Arjun Sengupta, Chairman, National Commission on Enterprises for the Unorganized Sector. Members included Anwarul Hoda (Member, Planning Commission); Adarsh Kishore (Secretary to Government, Department of Public Enterprises, Convenor); Nitish Sengupta; Moosa Raza; Prabir Sengupta; Subir Raha (CMD, ONGC Ltd.); C. P. Jain (CMD, NTPC Ltd. and Chairman, SCOPE); and A. K. Rath (Joint Secretary, DPE).

The group’s report noted that the last few decades had witnessed rapid political and economic integration worldwide, propelled by globalization and technological advancements. India’s response to these changes involved comprehensive economic reforms initiated in the early 1990s, aligning fiscal, monetary, trade, and industrial policies with the new global reality. These reforms increased competition from both domestic private sectors companies and foreign companies, underscoring the need to empower central public sector enterprises (CPSEs) with greater financial and operational autonomy. The Navratna and Miniratna categories of CPSEs were introduced in 1997, granting these enterprises enhanced powers related to capital expenditure, joint ventures, subsidiaries, and human resource development policies.

The report’s findings emphasized the importance of well-defined governance structures for CPSEs, advocating a clear delineation of roles between the ministry, board of directors, and management to ensure effective control and supervision. The committee recommended that any decision to reduce government shareholding below 51 percent in Navratna and Miniratna CPSEs should require parliamentary consent. It also proposed establishing supervisory bodies for various sectors to oversee CPSE operations and address stakeholder grievances. Regarding audits, the report highlighted the role of the comptroller and auditor general in auditing government companies per the Companies Act (1956) and suggested streamlining the audit process to avoid delays and duplication of efforts. The committee also discussed the implications of Article 12 of the Constitution, which treats CPSEs as extensions of the state, affecting their commercial functioning and decision-making capabilities. Recommendations included revisiting this issue to enable CPSEs to operate more like private enterprises in a competitive environment.

Parliamentary accountability was another critical aspect addressed in the report, emphasizing the need for CPSEs to be accountable for investments made from the Consolidated Fund of India. The report suggested screening parliamentary questions to avoid disclosing commercially sensitive information and maintaining a balance between accountability and operational autonomy. In terms of vigilance management, the report underscored the role of the Central Vigilance Commission in ensuring probity within CPSEs, recommending the strengthening of vigilance machinery with adequately trained personnel and clear guidelines to protect executives from unwarranted vigilance actions. The committee proposed an approach integrating modern risk management and financial controls to enhance CPSEs’ competitiveness while promoting transparency and integrity.

A group of ministers was convened to review the recommendations of the committee. The recommendations accepted by the government included empowering holding companies to transfer assets, float fresh equity, and divest shareholding in subsidiaries under certain conditions; allowing budgetary support for government-sponsored projects without disqualifying CPSEs from Navratna/Miniratna status; involving CPSE chief executives in search committees for independent directors; allowing board-level executives to travel abroad within board guidelines; setting up internal committees to examine disciplinary cases; and enhancing powers delegated to Navratna, Miniratna, and other profit-making CPSEs. However, the government rejected recommendations such as allowing boards to raise equity without government approval, setting up supervisory bodies, revising the role of government directors, issuing presidential directives, approving capital expenditure without approvals, instituting performance appraisal of independent and government directors, revisiting Article 12 of the Constitution, appointing chief executives and functional directors till superannuation age, and appointing board members in joint ventures/subsidiaries.

The Sengupta Committee recommended enhancing the financial and operational autonomy of CPSEs, emphasizing better governance structures, streamlined audits, and balanced accountability mechanisms. Its proposals sought to make CPSEs more competitive while maintaining oversight and public accountability.