Panel may consider new MoU norms this month

Once the guidelines are finalised, the new norms will be implemented from the next fiscal, says DPE Secretary O P Rawat

A High-Power Committee, headed by Cabinet Secretary Ajit Kumar Seth, may take a final call this month on proposed new norms to provide greater operational flexibility to PSUs in achieving their annual targets.

The Department of Public Enterprises (DPE) has prepared the draft Memorandum of Understanding (MoU) norms based on the recommendations of a Working Group on MoU norms for Central Public Sector Enterprises (CPSEs), which was headed by P G Mankad.

The Group was set up by DPE in May last year to examine the current system of setting targets and suggest measures to improve the MoU procedure.

"The proposed MoU norms are ready. The HPC is expected to meet this month and finalise these norms," said DPE Secretary O P Rawat.

He added, "Once the guidelines are finalised, the new norms would be implemented from the next fiscal."

Rawat was talking to reporters on the sidelines of a function organised jointly by the DPE and Vision360 Management Consulting.

The MoUs are signed between the CPSEs and their administrative ministries/departments and is facilitated by DPE.

The move comes in the backdrop of problems faced by public sector units (PSUs), mainly Maharatnas and Navratnas, in achieving targets fixed under MoUs.

"PSUs feel that there should be more flexibility in meeting their targets, given the present business environment," Rawat said.

"CPSEs believe that targets should be achievable and not impossible. So, the new norms will provide more flexibility to them which will help these companies to achieve their goals," he added.

Under the present MoU system, equal weightage (50% each) is assigned to financial and non-financial parameters.

While the financial parameters focus on profit and productivity related criteria, the non-financial ones are divided into dynamic (project implementation and R&D investment), enterprise-specific (safety and pollution) and sector-specific parameters (macro-economic factors like change in demand and supply and interest rates variations).

Currently, the annual target system does not factor in issues and fluctuations like prices of petroleum products and the difficulties that power and coal sectors are facing.

CPSEs have made a case for more weightage to sector- specific parameters so that they could focus more on completing projects on time.