Profits from idle cash not for performance pay: Government

NEW DELHI: The Centre has asked state-run firms not to use profits generated from idle cash balance to give performance allowances to employees, a reiteration that comes amid the government’s efforts to drive these companies to undertake capital expenditure.

The public sector units or PSUs have been told that they should deduct the interest accrued from idle cash or bank balance while calculating their profit before tax, a senior official of the heavy industries ministry said, adding that the department of public enterprises will keep a close watch on the PSUs. “We have restated the policy to all public enterprises concerned.

Any performance related pay will be distributed based on profit accruing from core business activities,” said the official, who did not wish to be identified. As per the norms, the PSUs can provide for payment of performance related pay to their employees subject to a ceiling of 5% of the profit before tax. PSUs currently have a cash surplus of over Rs 2 lakh crore.

In 2013, the Comptroller and Auditor General had pointed out in its audit report that steel maker SAIL had not adhered to guidelines on performancerelated payment to its employees, which resulted in an irregular outgo of Rs 319.61 crore from 2007-08 to 2010-11. The government, which is set to soon start the process of entering into memorandums of understanding with all state-run enterprises on their expected financial and non-financial targets for the fiscal, has already made the process more stringent.

In 2013-14, PSUs had achieved capital expenditure of Rs 2.48 lakh crore against the projected target of 2.57 lakh crore. “This will be closely monitored and if companies fail to meet their capex targets we do not see any reason to dole out performance pay to employees,” the official added. The government will further scrutinise the performance target of each firm and may call the chairman of the PSU concerned to seek an explanation on plausible reasons for overachievement, if it feels that the company has under pitched the target.