Eyeing a bigger role for central public sector enterprises (CPSEs) in the revival of the economy, the Centre is coming out with new a policy that will up the stakes for PSU heads in the implementation of annual capital expenditure plans. Under the policy changes, PSU chiefs will get bigger rewards if they successfully meet their capital expenditure targets. Also, they will stand to lose much more than before if they fail to deliver.
Sources said the government has decided to raise the weightage for capex and project implementation from current 5% to 30% in the annual memorandum of understanding (MoU) that PSUs will sign with the administrative ministries from the financial year 2014-15. The department of public enterprises (DPE) will communicate its decision to PSU Task Force members in a meeting on January 7.
Currently, CPSEs are sitting on cash reserves of over 1.5 lakh crore. But despite prodding by the government, PSUs have failed to expedite their investment plans. But once new rules are in place, PSU CMDs will have to meet the capex targets or risk losing their performance-related pay, which could be as high as 40-200% of their basic salaries.
Significantly, the Centre has set up a Cabinet committee on investment to push infrastructure projects entangled in green hurdles and land acquisition problems and ensure quick economic revival.
The new MoU system will also obviate the need for PSEs to have weightage for corporate social responsibility and sustainability expenditure. This policy tweak is being done because CSR spend is stipulated by the new Companies Act.
The year 2013 was quite eventful from the point of view of policy formulation for PSEs. For example, the department of public enterprises (DPE) came out with new policy guidelines to fix the role and responsibilities of independent directors on PSE boards. Further, it also revised CSR spend guidelines. ?Revised CSR guidelines have been appreciated world over,? said former DPE secretary OP Rawat, who was closely involved with policy changes during the year.