What happens to PSU employees after privatisation?

• The concern of PSU employees regarding alteration in the terms and conditions of the services are addressed through provisions in the Share Purchase Agreement (SPA)

• In cases where VRS is offered, the new owner must offer employees VRS on terms that are not less favourable than the VRS applicable before disinvestment

New Delhi: As the government has declared its intention to undertake an extensive privatisation/disinvestment exercise, there's one question that is playing on the minds of all those who are employed in the public sector: What happens to PSU employees after privatisation? According to the announcement made by Finance Minister Nirmala Sitharaman in her Budget 2021-22 speech, the government has set the ball rolling on a PSU privatisation plan that will unfold over the next three-four years and will see the number of companies under government control getting reduced to a bare minimum.

However, as the management control of PSUs is passed on to strategic owners, what are the changes that come along with it? And how are the interests of PSU employees protected?

There are two primary employees issues, which are voiced with respect to PSU privatisation. First, there is a concern about change in the terms of services of employees and secondly there is a concern that the reservation policy of the government for the Scheduled Castes/Scheduled Tribes and other categories would be diluted.

Are PSU employees fired after privatisation?

According to the Department of Investment and Public Asset Management's (DIPAM) White Paper on Disinvestment, the concern of PSU employees regarding alteration in the terms and conditions of the services are to be addressed through provisions in the Shareholders Agreement/Share Purchase Agreement (SPA) entered into with the strategic partner at the time of the strategic sale. According to these provisions, the new owner of the privatised PSU cannot retrench or fire employees within a year of the closing date of the transaction. "The SP covenants with the Government that notwithstanding anything to the contrary in this Agreement, it shall not retrench any of the Employees of the Company for a period of 1 (one) year from the Closing Date other than any dismissal or termination of Employees of the Company from their employment in accordance with the applicable staff regulations and standing orders of the Company or applicable Laws," the White Paper says.

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Are PSU employees given VRS?

Yes. If the new owner feels the need to make the workforce lean and thin and let go of employees who are older, they offer voluntary retirement schemes (VRS) to such employees. However, according to the White Paper, the new owner must offer employees VRS on terms that are not less favourable than the VRS applicable before disinvestment. "… in the event of any reduction of the strength of the Company's Employees, the SP shall ensure that the Company offers its Employees an option to voluntarily retire on terms that are not, in any manner, less favourable than the VRS applicable before disinvestment," the White Paper on Disinvestment says. Also, the VRS can be offered after the expiry of the one-year period.

There's a change in the top management

Apart from all these changes, there's obviously a change in the top-brass management. Since the idea behind privatisation is to have a new management control in place, the new owner appoints candidates to the top posts as they deem fit. 

What about SC/ST PSU employees?

While government-run organisations follow a reservation policy for SC/STs, no such policy applies to the private sector. With the privatisation of a PSU, the reservation for SC/ST employees is also nullified. There's no provision to keep the seats intact on humanitarian grounds. Here's what the White Paper on Disinvestment has to say on the matter: "The SP recognises that the government in relation to its employment policies follows certain principles for the benefit of the members of the Scheduled Castes / Scheduled Tribes, physically handicapped persons and other socially disadvantaged categories of the society. The SP shall use its best efforts to cause the Company to provide adequate job opportunities for such persons. Further, in the event of any reduction in the strength of the employees of the Company, the SP shall use its best efforts to ensure that the physically handicapped persons are retrenched at the end."

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