'New MoU norms to realign PSUs to global business environment'

NEW DELHI: The government will come out with new Memorandum of Understanding (MoU) norms by this month-end to realign working of public sector units ( PSUs) in line with changing global business environment.

The proposed guidelines are aimed at providing greater operational flexibility to Central Public Sector Enterprises ( CPSEs) in achieving their annual targets.

The Department of Public Enterprises (DPE) has sent the draft MoU norms, based on the recommendations of a Working Group chaired by P G Mankad, to the High-Power Committee (HPC) for its consideration.

The HPC is headed by Cabinet Secretary Ajit Kumar Seth. "It (new MoU norms) is with the High-Power Committee and I think it should come through by this month-end," Secretary in DPE O P Rawat told PTI in an interview.

The objective of the guidelines is to realign the public sector to the global business environment, which is changing very fast, so that PSUs can manage the change fast, he said.

Besides in some sectors like steel, there is a sluggish demand. Also, the new guidelines will seek changed management as the most important aspect, he added.

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

Asked by when these norms will be implemented, Rawat said, "These norms will be implemented from the next fiscal."

The move comes in the backdrop of problems faced by public sector units (PSUs), mainly Maharatnas and Navratnas, in achieving targets fixed under MoUs. Also, PSUs have been asking for more flexibility in meeting their targets.

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.

Under the present MoU system, equal weightage (50 per cent 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 the difficulties that power and coal sectors are facing.

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