Life may be easier for central PSUs

Last Updated: Mon, Apr 06, 2009 12:19 hrs

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The government is reviewing a proposal by an expert group to lower the weightage to financial parameters of central public sector enterprises while fixing their overall annual targets.

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The proposal, if accepted by the government, would ease the pressure of financial targets, especially for the loss-making firms and those which carry social obligations, besides the commercial consideration.

Department of Public Enterprises officials said companies like National Textiles Corporation and Housing and Urban Development Corporation Ltd, National Scheduled Castes Finance and Development Corporation and National Minorities Development and Finance Corporation will not be given the tough financial tasks.

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At present, a CPSE is assessed based on its financial and non-financial results in the ratio of 50:50. The new proposal makes it 40:60.

A DPE task force had recommended in November 2008 changes in the evaluation system for the CPSEs.

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Annual targets for the government-owned firms are finalised after consultations between the administrative ministry, the Department of Public Enterprises and the unit concerned. Each of the CPSE signs a memorandum of understanding with its administrative ministry.

"The idea behind the new proposal is not to burden companies which could not make profits," a DPE official said.

If the performance exceeds the targets by a predetermined level, the enterprise is ranked as 'excellent'. If the target is met, it is ranked as 'very good'. In cases where targets are not achieved, a company is ranked either 'good', 'fair' or 'poor'.

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The financial milestones set in the MoUs include turnover, gross margin, net profit/net worth, total cost of production/total output and share in market.

On the other hand, the non-financial parameters relate to capital expenditure, research and development, strategic planning and environmental conservation.

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