Of the nine CPSEs under the department of defence procurement, Hindustan Aeronautics Ltd, Mishra Dhatu Nigam Ltd and Goa Shipyard Ltd have been rated as “excellent”. 

In the coal sector, the Coal India Ltd and NLC India Ltd have been rated as “good”, NLC Tamil Nadu Power Ltd has been assessed as “fair”. None of the CPSEs that come under heavy industries have made it to the “excellent” category, and have been mostly classified as “poor”, “fair” or “good”.

The two CPSEs under science and industrial research – Central Electronics Ltd. and National Research Development Corporation – have been assessed as “poor”, as is the only CPSE coming under the Ayush ministry – the Indian Medicines & Pharmaceutical Corporation Ltd. CEL was recently sold off under this year’s disinvestment programme.

The CPSU under the IT ministry – National Informatics Centre Services, which forms the backbone of the government’s IT services, has been assessed as “good”.

In telecom, Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL) have been rated as “poor”.

Two CPSUs – Broadcast Engineering Consultants India Ltd, and National Film Development Corporation Ltd – have been rated as “poor” and even flagged for not submitting adequate documents.

PRP carrot and stick 

Will the staff of CPSUs lose on their performance related pay (PRP), if the firms that employ them fail to meet new goals of market capitalisation, return on capital, asset-turnover ratio as well as production and capex targets? 

The Department of Public Enterprises is hoping that the move, while seeking to improve the performance of CPSUs, will also help boost investors’ interest in these firms, many of which are to be privatised over the next few years under a new policy. But the final call will be a political one which will be taken at the highest level.

Market capitalisation, return on capital, asset-turnover ratio as well as production and capex targets are parameters which will be included in the PRP criteria under the customary Memorandums of Understanding (MoUs) being signed between administrative ministries and individual CPSUs, effective 2021-22 financial year.

Another new parameter being included is Ebitda (earnings before interest, taxes, depreciation, and amortisation) which will replace ‘operating profits’ to capture a firm’s operating profitability more accurately. While goals on market capitalisation, asset-turnover ratio and return on capital employed carry 5 marks each in a total of 100, achieving 75 per cent of annual capex target by the third quarter will fetch 2 marks.

Marks for production/generation/transmission have also been doubled to 20 to ensure the CPSEs keep utilising their capacities.

According to officials, the revised MoU guidelines are aimed at “building skin in the game for the management” of the CPSEs while aiding the Centre to fetch more non-debt receipts from disinvestment. What this means is that a slippage in the performance on the parameters could result in a firm’s performance rating downgrade and consequent reduction in variable pay of its staff.

Currently, PRP can be as high as 150 per cent of basic pay for CMDs while it is 40 per cent for the lowest grade officers, if the rating of the PSU performance is ‘excellent’ (a score above 90 per cent), which ensures 100 per cent PRP eligibility. A downgrade would bring down MoU rating from ‘excellent’ to ‘very good’ and from ‘very good’ to ‘good,’ resulting in reduction from 100 per cent eligibility of performance-linked pay for excellent rating to 80 per cent and 60 per cent, respectively. Less than 50 per cent score means staff may be denied PRP.

The combined salary bill of around 250 CPSUs (both Central and state) stood at Rs1.53 lakh crore in FY19; these firms employ over 15 lakh people.