PSU brass may break free from parent ministry shackles

NEW DELHI: The government is considering independent performance assessment for top managers of large state-run companies, as it looks to reduce influence of administrative ministries in the functioning of such firms.

Performance appraisal of the chairmen and functional directors of public sector units (PSUs) is currently done by administrative ministries. A part of PSU salaries is linked to the employees’ performance, giving administrative ministries an undue influence over the management.

“The appraisal should be conducted by an independent body like the department of public enterprises (DPE) to ensure transparency in appraisal and reward system,” said an official with the ministry of heavy industries, which has moved the proposal. DPE is the nodal agency for all public enterprises.

This will give more functional autonomy to the management, particularly those eligible for the ‘maharatna’ status. Of the 18 ‘navaratna’ companies, only 5 will qualify for this status.

Maharatna status requires a three-year track record of annual net profit of over Rs 5,000 crore, net worth of Rs 15,000 crore and a turnover of Rs 25,000 crore. SAIL, ONGC, Indian Oil and NTPC are the only PSUs that meet the criteria. Only listed entities are eligible to become ‘maharatnas’.

The proposal is part of a larger government plan to achieve better corporate governance and provide more autonomy to public sector companies.

There is also an informal proposal to bring DPE under ministry of corporate affairs. Earlier, Corporate Affairs Minister Salman Khurshid had said that the proposal of bringing PSUs under MCA can be discussed.

Maharatna companies are allowed to take investment decisions involving investment of up to Rs 5,000 crore. Earlier a committee set up on performance appraisals in PSUs had also recommended that department of public enterprises (DPE), being the nodal department for central PSUs, should monitor the performance appraisal.

“It is felt that the appraisal should also be used as a tool for career planning rather than a mere judgmental exercise. Moreover, it will also help to identify the future leaders,” said a DPE official, who asked not to be named. The appointment of top PSU management is done in a three-stage process, in which the administrative ministries have a major say.