PSUs to allot part of profit for sustainable growth, R&D

The government has made it mandatory for Central Public Sector Enterprises (CPSEs) to earmark a portion of their net profit for sustainable development as well as research and development (R&D) activities.

Earlier, public sector units (PSUs) spent voluntarily on such initiatives.

Under R&D norms, Maharatna and Navratna companies will have to contribute 1% of their profits after tax (PAT) in each financial year, while Miniratna I and II and rest of the PSUs will have to earmark 0.5% of their net profit, as per the guidelines issued by the Department of Public Enterprises (DPE).

"These activities must be original, planned and should result in new knowledge. Also, application of R&D should result in new products or services," the guidelines said.

"R&D activities by CPSEs can result in substantial increase in market share and competitiveness. They would help to increase profitability and reduce costs," they added.

At present, there is negligible investment by state-owned companies in innovation and technology development.

As per the guidelines, for sustainable development, CPSEs earning Rs 100 crore and above will have to earmark Rs 50 lakh plus 0.1% of their net profit exceeding Rs 100 crore. Those earning less than Rs 100 crore will have to contribute 0.5% of their net profit.

Currently, PSUs' contribution in this area is minimal.

Sustainable development involves an enduring, balanced approach to economic activity, social progress and environmental responsibility.

Sustainable development activities include management of waste, water and energy and carbon, the guidelines said.

Earlier, the department had introduced Corporate Social Responsibility (CSR) guidelines, under which PSUs contribute up to five% of their net profit on CSR activities.

There are 217 operational PSUs of which 158 are making profits.