Govt frames norms on evaluating PSEs' functioning

Performance Parameters (Weightage %)

- Physical output (20), EPS (15)

- RoCE (15), capex (10), Ebidta (10)

- Operational revenue (5), Asset turnover ratio (5)

- Exports (4), imports (4), R&D expenditure (2)

Exempted PSEs include the ones under liquidation and or closure, not in operation, and have no employees

New Delhi: The central government has finalized the guidelines for the memorandums of understanding (MoUs) it will sign with public-sector enterprises or undertakings (PSEs or PSUs). These guidelines would be applicable on the new MoUs and their evaluation for 2022-23 and onwards, official sources told Bizz Buzz.

The MoU between a PSE and its administrative ministry specifies the objectives, obligations, and mutual responsibilities of both parties. One of the key ownership functions of the government is to undertake their regular performance evaluation, which includes assessment of their efficacy towards fulfillment of core objectives for which these were constituted.

The performance evaluation system, instead of merely evaluating the efforts of a PSE or its management in a given business environment, evaluates its profitability, return on the invested capital, competitiveness, and usefulness in the given commercial space, sources said.

This is important from the perspective of PSE employees because the evaluation is linked with performance related pay (PRP).

All PSEs are required to sign MoUs with their administrative ministries and departments. They also sign MoUs with their subsidiaries, if any.

The exempted PSEs include: the ones under liquidation and or closure; the PSEs which are not in operation, have no employees, or on any other ground on the recommendation of the administrative ministry with approval of the Department of Public Enterprises (DPE) under the Ministry of Finance.

The DPE formulates the MoU guidelines. In the case of subsidiaries, the parent PSE is free to take a decision regarding exemption from MoU.

A total of 100 marks are given on various parameters, some of which are: physical output (20), earnings per share (15), return on net worth or return on capital employed (15), capital expenditure (10), Ebidta as a percentage of revenue (10), revenue from operations (5), asset turnover ratio (5), exports as a percentage of revenue from operations (4), imports as a percentage of revenue from operations (4), and expenditure on R&D (2).

There is also negative marking for non-compliances related to Sebi rules, MSMEs, and corporate social responsibility. The PSEs which have not been given exemption and do not sign the MoU shall be rated as 'poor,' sources said.

An Inter-Ministerial Committee (IMC) finalizes the sectoral templates and PSE-wise MoU parameters. Headed by the DPE Secretary, it comprises representatives from various departments. Based on IMC recommendations, a High Powered Committee (HPC) lays down MoU policy guidelines.

The HPC is chaired by the Cabinet Secretary and includes NITI Aayog CEO, the Finance Secretary, the Expenditure Secretary, the Statistics & Programme Implementation Secretary, Public Enterprises Selection Board Chairman, the Chief Economic Advisor, and the DPE Secretary.