Prime Minister Manmohan Singh on Saturday said PSUs and nationalised banks would be encouraged to enter the capital market to raise resources and offer new investment avenues to retail investors while promising to deploy divestment revenues for social sector schemes.

"Our government believes the process of divestment should increase competition and not decrease it," Singh told a conference of the chief executives of PSUs, organised by Department of Public Enterprises and Standing Conference on Public Enterprises.

Committing to a strong and effective public sector, he said a Board for Reconstruction of PSEs to guide policies would be set up which would advise the government on measures to be taken to restructure state-owned undertakings including divestment, closure or sale.

Clarifying that profit-making PSUs would generally not be divested, he said: "Public sector companies will also be encouraged to enter capital market to raise resources and offer new investment avenues to the retail investors."

"We are of the view that there should be a link between divestment and provisioning of basic social goods," he said.

Recognising that PSEs had to face the twin challenge of social responsibility and commercial objectives, Singh committed to make PSEs 'more efficient and self reliant' and said: "Government will implement the recommendations of TKA Nair Committee report after they are duly examined."

"This is precisely what seems to have happened," he quipped and pointed out that despite 'commendable' performance by many PSEs "the general perception remains they underperform on standard measures used to gauge the performance of any commercial organisation.

"It is a matter of pride that the performance of some of the PSEs is commendable by any yardstick. It has been seen that many PSE stocks have been among the best performers in the stock market," he said.

However, Singh pointed out that while some firms have shed their inhibitions and embraced changes successfully, many others are yet to adjust to the new realities.

The new competitive environment driven by changes in the economic policy environment, technology and consumer taste and aptitude have necessitated phenomenal changes in the functioning of the PSUs, he said and asked the executives to modify every aspect of functioning.

Earlier, Public Enterprise and Heavy Industry Minister Santosh Mohan Deb said PSEs' demand for greater autonomy is justified and his ministry would look into it and give a greater thrust to professionalisation of their boards.

"Specific action plan has been formulated for devolving full managerial and commercial autonomy to successful profit-making companies in a competitive environment. The action plan envisages further enhancement of autonomy of profit-making PSUs particularly the Navratnas and Mini Ratnas", he said.

In his welcome address, SCOPE Chairman and CMD of NTPC C P Jain said: "Unfortunately, today the CPSEs find themselves trapped in a cultural paradigm where there is premium on avoiding decision-making rather than taking decision."

Seeking empowerment for PSEs, Jain asked the prime minister for implementation of TKA Nair Committee recommendations relating to review certain guidelines relating to the management of these undertakings.