To further professionalise state-owned enterprises, the Narendra Modi government has come out with a new set of parameters to judge the performance of central public sector enterprises (CPSEs). These standards, in force from the current year, are said to be more comprehensive and stronger than those of previous years.
The assessment forms contain a number of new parameters, including measuring capacity utilisation; actual tangible outcomes from research and development (R&D); leveraging of net worth through capital spending or borrowings; cost and time over-run in projects, inventory or loan book; and financial parameters such as dividends disbursed as a percentage of profit after tax (PAT) and net worth.
"There are a number of criteria on which private-sector companies assess their performance and CPSEs don't. If you are competing with the private companies in sectors like energy, manufacturing infrastructure, hospitality, transport and financial services, you need to judge yourself on similar parameters," said an official.
These parameters will be used to assess all PSUs, including banks and financial services companies, except those already earmarked for closure.
While financial parameters such as turnover and profit were the biggest parameters till last year, with 18-24 per cent weight, from 2016-17 onwards, leveraging of net worth through capital expenditure or borrowings as a percentage of net worth, with 15-20 per cent weight, will be the biggest parameter.
So far, capital spending or borrowing was only measured in absolute terms and not as a percentage of a PSU's net worth.
Similarly, while R&D was only measured in terms of how much of a company's R&D budget has been spent, the government will now see tangible outcomes including whether the process has led to any commercialisation or improvement in technology. This will have a weight of five per cent.
The Centre will also look at capacity utilisation (for manufacturing CPSEs), quantity traded (for trading CPSEs) and loans sanctioned (for financial CPSEs). These will have a weightage of 10 per cent. Parameters such as number of projects, cost and time over-runs, and project milestones were always considered, with a weightage of 10-15 per cent. Now, the CPSEs will also be judged on the basis of new projects, completed projects, and delayed projects, as a percentage of capital spending. Cost over-run as a percentage of capex will also be looked at. These will have a weight of up to 15 per cent.
The CPSEs were also judged on the basis of PAT as a percentage of net worth.
Now, the Centre will additionally look at dividends disbursed as a percentage of net worth and PAT.
"We need to look at to what extent is the value of all shareholders, including us, maximised," said the official cited above. It should be noted that while the parameters have changed, the grading system remains the same with five grades – poor, fair, good, very good and excellent. Other assessments, including employee assessment forms, are likely to remain the same.
The assessment forms contain a number of new parameters, including measuring capacity utilisation; actual tangible outcomes from research and development (R&D); leveraging of net worth through capital spending or borrowings; cost and time over-run in projects, inventory or loan book; and financial parameters such as dividends disbursed as a percentage of profit after tax (PAT) and net worth.
"There are a number of criteria on which private-sector companies assess their performance and CPSEs don't. If you are competing with the private companies in sectors like energy, manufacturing infrastructure, hospitality, transport and financial services, you need to judge yourself on similar parameters," said an official.
These parameters will be used to assess all PSUs, including banks and financial services companies, except those already earmarked for closure.
While financial parameters such as turnover and profit were the biggest parameters till last year, with 18-24 per cent weight, from 2016-17 onwards, leveraging of net worth through capital expenditure or borrowings as a percentage of net worth, with 15-20 per cent weight, will be the biggest parameter.
So far, capital spending or borrowing was only measured in absolute terms and not as a percentage of a PSU's net worth.
Similarly, while R&D was only measured in terms of how much of a company's R&D budget has been spent, the government will now see tangible outcomes including whether the process has led to any commercialisation or improvement in technology. This will have a weight of five per cent.
The Centre will also look at capacity utilisation (for manufacturing CPSEs), quantity traded (for trading CPSEs) and loans sanctioned (for financial CPSEs). These will have a weightage of 10 per cent. Parameters such as number of projects, cost and time over-runs, and project milestones were always considered, with a weightage of 10-15 per cent. Now, the CPSEs will also be judged on the basis of new projects, completed projects, and delayed projects, as a percentage of capital spending. Cost over-run as a percentage of capex will also be looked at. These will have a weight of up to 15 per cent.
The CPSEs were also judged on the basis of PAT as a percentage of net worth.
Now, the Centre will additionally look at dividends disbursed as a percentage of net worth and PAT.
"We need to look at to what extent is the value of all shareholders, including us, maximised," said the official cited above. It should be noted that while the parameters have changed, the grading system remains the same with five grades – poor, fair, good, very good and excellent. Other assessments, including employee assessment forms, are likely to remain the same.
Next Story
