Profit will decide terms of 100 PSU chiefs

PMO asks 25 ministries to send performance details of PSUs under current chief executives

GN Bureau | August 5, 2014



The terms of the chiefs of top 100 public sector units (PSUs) will be based on their record of showing profits instead of just expanding their turnover, according to a plan drafted by the government. The prime minister’s office has instructed the 25 ministries, which administrates these 100 companies to send details of their performance under the current chief executives.

According to news report published in The Indian Express, the plan also entails slashing a number of other PSUs by merging them with the viable ones or closing them, eventually.

The ministries have been asked to show whether the chiefs have only expanded the top line of these companies without any commensurate rise in their bottom lines. The ministries were asked to furnish their replies by July 31 to the letter, which was dispatched on July 25.

The analysis would also decide if companies should be graded mainly on their turnover or of progressive autonomy the government has given the boardrooms of these state-run companies.

Currently, for a Navratna status, companies are scored on a scale of 100. A company gets the status if it scores 60 in the exercise. To reach that, a company chief can either stress profits or turnover since both enjoy equal scores. This is likely to change.

The ministries have also been asked to provide the domain knowledge and academic background of the chiefs, including whether the person was recruited from a government department or from the private sector.

Finance minister Arun Jaitley, too, has recently asked for comments from ministries about which PSUs can be closed or divested in. He has also said the companies should start investing their cash reserves that as per their balance sheet of 2012-13 is about Rs 3,00,000 crore.

The department of public enterprises has often argued that CEOs on temporary charge avoid taking crucial decisions for fear of being questioned. Also, as they have limited financial powers they are hamstrung in taking investment decisions. The PMO has also asked the ministries to highlight the issues and challenges in their respective PSUs and the available scope to enhance their strengths.

As per the ranking of these companies by the government in terms of their profitability vis-a-vis turnover, Indian Oil Corporation has bagged the first position, while Metallurgical Consultants Limited (MECON) under the steel ministry has been ranked at the bottom. State-run gas supplier GAIL has been ranked at the 89th position, Indian Railway Catering and Tourism Corporation under the railway ministry at 93rd rank and consultancy services company RITES at 91st position.

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