Profit, not turnover to decide stable terms: Govt to tell 100 PSU chiefs

Aug 05 2014, 08:16 IST
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The plan also entails slashing a number of other public sector units by merging them with the viable ones or closing them, eventually. Reuters The plan also entails slashing a number of other public sector units by merging them with the viable ones or closing them, eventually. Reuters
SummaryPMO asks ministries to send performance details of 100 PSUs under current chief executives

The terms of the chiefs of top 100 public sector corporations will be based on their record of showing profits instead of just expanding their turnover, according to a plan drafted by the government.

The plan also entails slashing a number of other public sector units by merging them with the viable ones or closing them, eventually.

The Prime Ministerís Office has instructed the 25 ministries across which these 100 companies are located to send details of their performance under the current chief executives.

The re-organisation of the public sector space is meant to make them operate on a scale where they can take on global competition effectively.

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. ďThe exercise will draw out the performance of those CEOs who have expanded the turnover of their companies without a significant rise in profitsĒ, said a source connected with the exercise.

In view of the urgency of the exercise, the ministries were asked to furnish their replies by July 31 to the letter which was dispatched on July 25. The analysis will 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 it 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. A Crisil study has shown that as on 31, 2014, the top 20 state-run companies were sitting on about Rs 1,60,000 crore.

But the PMO exercise is a larger one to rework the public sector framework, a source connected with it said. The details will also include stuff like how long have

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