India on Monday gave state-run companies more managerial and commercial autonomy to enable them to operate better in an increasingly competitive environment. The announcement comes on the heels of the communist-backed ruling coalition's plan to revive a faltering state asset sale programme to raise money for projects for the poor.
The communists staunchly oppose any moves to sell equity in profit-making firms and the decision to give state-run firms more freedom stems from a promise in the coalition's policy blueprint.
"The cabinet has cleared a comprehensive policy empowering public sector enterprises with regard to vital decisions and foreign tie-ups," Information and Broadcasting Minister Jaipal Reddy told reporters after a meeting of the federal cabinet.
India has more than 240 state-run firms, half of them loss-making, which make everything from condoms to steel.
The ceiling on investment to set up joint ventures and subsidiaries by large and medium state firms will be raised to 15 percent of their net worth in a single project.
It will ultimately be limited to 10 billion rupees for large state firms, and then 5 billion and 2.50 billion for smaller firms, depending on their size.
The overall ceiling for all projects put together would be raised to 30 percent from 15 percent of each state-run company's net worth, the government said in a statement.
The companies would be delegated powers for mergers and acquisitions within government rules and the boards would be allowed to set human resources policies.
The government said greater autonomy was needed for state firms to enable them to achieve their potential amid intense competition from the domestic private sector and abroad.
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