PSU incentives to employees for beating deadline

NEW DELHI: The government may allow state-run firms to offer incentives to employees for executing projects ahead of schedule, a move that will not only provide much-needed thrust to a slowing economy but also tackle the problem of cost overruns.

"If we give incentives to the staff involved in the projects, both time and cost overruns can be curtailed," said a government official, requesting anonymity.

As per the proposal, the government may allow state-run firms to offer up to 20% of salary as bonus if the project is completed before schedule.

"This is not the final number, and we are looking to set up slabs, like 10% of salary if it's completed on time, amongst other options," the official said.

There is a cost overrun of Rs 1.43 lakh crore, which is 19.5% of the original cost, in projects being implemented by the state-run companies, says a report by the ministry of statistics and programme implementation.

Some projects get delayed in spite of all requisite clearances due to issues such as contract-related problems. According to official estimates, out of 571 projects costing above Rs 150 crore, 258 are delayed, and 31 have been sanctioned without any commissioning schedule.

"There are some projects where neither the year of commissioning nor the tentative gestation period has been finalised. We need to take a call on that," the official added. The government may work out the bonus scheme on the lines of performance-related pay, or PRP, that's already a component of the compensation packages in PSUs.

The PRP is taken from the 5% distributable profit or profit after tax, and PSU can give as much as 200% of basic as performance pay to its senior board level employees.

"Incentive system cannot be the remedy. A robust system is needed to tackle the problem," said a senior officer with BHEL.