REPORT OF THE

COMMITTEE
ON THE
MoU SYSTEM - 2012
GOVERNMENT OF INDIA
MINISTRY OF HEAVY INDUSTRIES & PUBLIC
ENTERPRISES
DEPARTMENT OF PUBLIC ENTERPRISES
TABLE OF CONTENTS
BACKGROUND......................................................................................................... 3
TERMS OF REFERENCE & MAJOR ISSUES.......................................................... 4
Format(s)
Desirability / need for all CPSEs to be covered under the o! system
"ar#et Settin#$ Parameters and %ei#hts
Fle&ibility in "ar#et Settin# and Evaluation
'r#anisational and other measures to stren#then the "as( Force mechanism
"he )uidelines
"he o! and the *FD system
OBSERVATIONS AND RECOMMENDATIONS OF THE COMMITTEE ON
TERMS OF REFERENCE & MAJOR ISSUES......................................................... +
Format(s)................................................................................................................... +
"he o,tion of multi,le formats
Desirability / need for all CPSEs to be covered under the o! system ................... -
"he e&istin# system and the .or(in# of o! mechanism
/e#otiations .ith Subsidiaries
Covera#e of all CPSEs
"ar#et Settin#$ Parameters and %ei#hts.................................................................. 0
Financial Parameters 1 total .ei#ht 23
',erational as,ects of financial ,arameters
/on4Financial (Dynamic) Parameters 1 total .ei#ht 23
Fle&ibility in tar#et settin# and evaluation................................................................. 5+
"ar#et settin# Sta#e
"he Evaluation Sta#e
'r#anisational and other measures to stren#then the "as( Force mechanism...... 50
Syndicate )rou, com,osition and allocation of CPSEs to them
"reatment of Sic( / 6oss ma(in# units
/umber of syndicates
Formation of *esource )rou,
Formation of E&,erts )rou,
Pre4ne#otiation ,rocesses
"he /e#otiation meetin#s$ lo#istics and administrative arran#ements
"he )uidelines......................................................................................................... 77
*evisitin# the )uidelines
Desirability of continuous interaction in the conte&t of #uidelines
"he o! and the *FD System................................................................................. 73
EXECUTIVE SUMMARY & RECOMMENDATIONS............................................... 74
Pa#e 7
BACK GROUND
5.5 "he DPE$ by its order /o.3(7)/73574DPE(o!) dated 73
rd
ay 7357 set u, a
Committee to e&amine the e&istin# o! #uidelines in li#ht of the e&,erience
#ained and ma(e suitable recommendations/su##estions to im,rove the o!
system further.
5.7 "he "erms of *eference$ the com,osition$ and the details of the meetin#s of
the Committee are at Annex A, B, and C res,ectively.
5.3 "he list of Syndicate Coordinators$ CPSES re,resentatives$ e&,erts and
others .ho met and .ere consulted by the Committee are at Annex D.
5.4 "he 8uestionnaire sent by the Committee and the list of reci,ients are at
Annex E and F res,ectively.
5.2 9 list of the bac(#round ,a,ers$ re,orts$ documents etc. that the Committee
referred to and too( into consideration is at Annex G.
5.+ "he Committee .as ably assisted in its deliberations by :oint Secretary DPE
Shri 9run ;umar Sinha$ Director Shri :.*. Pani#rahi$ and a number of
resource ,ersons$ .hose list is at Annex H. "he Committee .ould li(e to
e&tend its sincere than(s for the unstinted su,,ort ,rovided to it by all of them.
<t .ould also li(e to ,lace on record the courtesy and consideration e&tended
to it by the Secretary DPE Shri '.P. *a.at.
5.- "he Committee attem,ted to reach out to as lar#e a number$ as ,ossible$ of
the CPSEs$ syndicate members $ e&,erts $ and those involved in or familiar
.ith the o! system to obtain their in,uts$ .ithin the #iven time frame$ and
to evaluate them ob=ectively. <t received valuable in,uts from many sources$
for .hich it is than(ful to all those .ho found time to interact .ith it.
5.0 <t did not$ ho.ever$ confine itself to the in,uts received from outside. "he
Committee also dre. u,on its o.n cumulative e&,erience$ and ,ro4actively
sou#ht vie.s on s,ecific matters from those .ith .hom it interacted. <t
identified issues .hich .ould have a bearin# on the system and its efficiency$
and considered a ran#e of o,tions$ holistically for stren#thenin# and im,rovin#
the system.
Pa#e 3
2 TERMS OF REFERENCE & MAJOR ISSUES
7.5 "he ma=or issues that .ere to be addressed in li#ht of the "o*$ most of .hich
.ere also reflected in some manner in the su##estions received from a lar#e
number of those .ho .ere consulted$ includin# the convenors of the "as(
Forces and senior re,resentatives of CPSEs$ may be summarised as follo.s>
FORMAT!S"
7.5.5 This relates to the need/desirability of revising the existing format(s) and the
possibility of devising specifc formats for CPSEs diferentiated by parameters
like size, sector, activity, scope of operations, status etc.
7.5.7 It has been argued that the current format(s), though well designed, are not
able to adequately address the widely difering enterprise or sector specifc
requirements, and lead to targets being set which, in the view of the enterprise
concerned, are sometimes not entirely appropriate for it.
DESIRABILITY#NEED FOR ALL C$SES TO BE COVERED UNDER THE M%U
SYSTEM
7.7 This relates to the desirability/need for review of the current system wherein all
CPSEs are covered by MoU exercise.
7.3 The existing MoU system covers all CPSEs, including Sick and Loss making
units, all of which are required to sign the MoU with their administrative
ministries and their subsidiaries which sign the MoU with the holding
company.
7.4 A question was raised whether enterprises that are sick, or are on the verge of
being wound up or merged, or have no revival package, should not be
excluded from the MoU exercise?
TARGET SETTING, $ARAMETERS, AND &EIGHTS
7.2 This relates to the need/desirability of reviewing the current system of setting
targets on the fve point scale (poor, fair, good, very good, excellent); the
parameters within which the targets are set; and the weights assigned to
various fnancial and non- fnancial (also referred to as dynamic) parameters.
Pa#e 4
7.+ <t has been ar#ued that the current system ta(es an ?e&cellent? achievement in
a #iven year as the basis for only ?very #ood? for the ne&t$ .hich ma(es the
tar#et for the ?e&cellent? level for the ne&t year too hi#h.
7.- <t has also been ar#ued by several CPSEs that the ,resent system is not able
to ta(e into account the constraints uni8ue to them@ that it does not ,rovide
ade8uately for enter,rise/sector s,ecific factors@ and that .hile some of the
,arameters are not relevant for some units$ others are too detailed or
fra#mented to be effectively im,lemented.
FLEXIBILITY IN TARGET SETTING AND EVALUATION
7.-.5 "his relates to the need/desirability of #ivin# more o,erational fle&ibility to the
CPSEs$ the 9dministrative inistries$ and the "as( Forces in the areas of
tar#et settin#$ ,arameters$ and in the ,rocess of evaluation.
7.-.7 <t has been ar#ued that the current ,ractice of not acce,tin# o! tar#ets .ith
conditions of any nature$ of fi&ed ,arameters and .ei#hts$ and evaluation
done strictly on the basis of the achievement or non4achievement of the o!
tar#ets .ithout consideration for circumstances beyond the control of CPSEs$
is too ri#id$ and needs to be made more fle&ible.
ORGANISATIONAL AND OTHER MEASURES TO STRENGTHEN THE
TASK FORCE MECHANISM
7.+ "his relates to issues li(e the classification$ siAe$ and com,osition of the "as(
Force syndicate #rou,s@ ste,s for enhancin# their o,erational effectiveness
and stren#thenin# the su,,ort systems@ and matters relatin# to meetin#s and
lo#istics etc. .hich .ould ma(e the ,resent system more efficient and
effective.
THE GUIDELINES
7.- Detailed )uidelines are issued by DPE on various substantive and ,rocedural
issues to #uide all ,artici,ants in the o! ,rocess.
7.0 <t has been su##ested that some of these could be made shorter.
THE MOU AND THE RFD SYSTEM
7.0.5 "his relates mainly to the inter4related issues arisin# out of the *FD system
under the Cabinet Secretariat and the e&istin# o! mechanism under the
DPE.
2.8.2 Some issues relating to targets and co-ordination have been raised in this
context.
Pa#e 2
' OBSERVATIONS AND RECOMMENDATIONS OF THE
COMMITTEE ON TERMS OF REFERENCE & MAJOR ISSUES
FORMAT!S"
3.5.5 THE O$TION OF MULTI$LE FORMATS
3.5.7 "he Committee .as of the vie. that the current format (s) a,,licable to
most of the CPSEs$ (e&ce,t for section 72 com,anies and sic(/loss ma(in#
units) need to be modified in a suitable manner to ,rovide more relevant
o,tions for enter,rise/sector s,ecific factors in tar#et settin#$ selection of
,arameters$ and their .ei#ht.
3.5.3 <t considered the o,tion of multi,le formats based on differentiatin# factors
amon# CPSEs$ but noted that these .ere so numerous$ com,le& and
overla,,in# that it did not a,,ear to be a feasible ,ro,osition$ as can be
seen even from the follo.in# illustrative list of ,ossible cate#ories>4
'fficial status (e.#. aharatna$ /avratna$ iniratna)@
6e#al status$ (e.#. listed$ unlisted$ section 72 com,anies)@
SiAe (e.#. Fortune 233$ me#a$ lar#e$ midca,$ and small)@
Sector$ (e.#. ,etroleum$ ,o.er$ steel$ coal$ minin#$ e8ui,ment
manufacturin#)@
9ctivity/cate#ory (e.#. minin#$ manufacturin#$ ,rocessin#$ services$
a#riculture)@
/ature of state control (e.#. on ,rice$ distribution$ investment decisions)@
E&tent of state control (e.#. near total$ substantial$ mar#inal)@
ar(et ,ositionin#$ (e.#. mono,oly$ dominant$ mar#inal)@
Client base (e.#. <nternational$ national$ re#ional$ sin#le client @)
Primary ob=ective (commercial$ socio economic$ essential services)@
*elevance to national economy (e.#. critical$ im,ortant$ mar#inal)@
Financial ,osition (e.#. lar#e ,rofits/ reserves$ ,rofitable$ loss ma(in#$ sic()
etc.
3.5.4 "he Committee felt that the ,ur,ose of ,rovidin# for enter,rise or sector
s,ecific factors in the o! format can be served more effectively by (ee,in#
a common format for all CPSEs$ (e&ce,t section 72 com,anies and sic(/loss
ma(in# units)$ incor,oratin# a lar#er number of ,arameters and o,tions for
CPSEs to choose .hat is more relevant for them$ .ith the a,,roval of the
9dministrative inistry and the "as( Force.
Pa#e +
3.5.2 %hile the Committee a,,reciated the value of choices and fle&ibility$ it also
felt that this must be done .ithin a broad common frame.or( to maintain a
desirable level of uniformity of a,,roach amon# syndicates$ and to minimise
the element of sub=ectivity in the selection of o,tions.
3.7 DESIRABILITY#NEED FOR ALL C$SES TO BE COVERED UNDER THE
M%U SYSTEM
T(e ex)*+)n, *-*+e. and +(e /%01)n, %2 M%U .e3(an)*.4
3.7.5 "he e&istin# o! system covers all CPSEs$ includin# sic( and loss ma(in#
units$ all of .hich are re8uired to si#n the o! .ith their administrative
ministries and their subsidiaries .hich si#n the o! .ith the holdin#
com,any. 9 "as( Force mechanism$ com,risin# e&,erts from various
disci,lines and divided into syndicates has been ,ut in ,lace to coordinate
and conduct the ne#otiations .ith CPSEs. 9 brief note on the current system
is at 9nne&e <.
3.7.7 "he Committee noted that ste,s have been ta(en by DPE on a continuin#
basis to nurture$ u,date and stren#then the o! mechanism$ .ith the
ob=ective of ma(in# the CPSEs more efficient$ com,etitive and result
oriented. <t also found$ in its various interactions .ith a .ide ran#e of
or#anisations and e&,erts$ that by and lar#e$ the o! system$ as it has
evolved$ is ,erceived as bein# useful and robust$ and some ,roblems and
shortcomin#s not.ithstandin#$ as havin# .or(ed .ell over the years to
enhance ,ublic sector ,erformance.
Ne,%+)a+)%n* /)+( S56*)d)a0)e* 7
3.7.3 "he Committee felt that .hile the current system of the DPE/"as( Force bein#
involved in the ,rocess of o! ne#otiation and ,erformance evaluation of
subsidiaries$ .hich ultimately si#n the o! .ith their holdin# com,anies$
may continue$ DPE may also e&amine the ,ossibility of settin# u, an
enablin# mechanism to consider and ,ermit leavin# the entire ,rocess of
ne#otiations/evaluation of the subsidiaries to the CPSEs/administrative
ministries if they so desire in some s,ecific cases.
Pa#e -
C%8e0a,e %2 A99 C$SE*
3.7.4 "he Committee discussed the desirability or other.ise of limitin# the o!
e&ercise to selected CPSEs to ma(e it more focussed$ but concluded that
since the e&ercise is and has al.ays been meant to be for the Public Sector
as such$ irres,ective of the siAe$ sector or activity of the enter,rise$ it is
desirable to continue .ith the e&istin# system of includin# all CPSEs in it. <t
also felt that it .ould be for the )overnment$ as the ,rinci,al shareholders of
these enter,rises to ta(e a call on the issue of e&clusion of any of them from
the re8uirement of si#nin# o!s .ith it$ if it so desires.
3.7.2 "he Committee discussed the issue of e&clusion of sic(/loss ma(in# units
from the o! e&ercise$ but concluded that it .as a matter relatin# to ,olicy
to be decided by the )overnment. <t did$ ho.ever$ feel that it .ould be
desirable if enter,rises that .ere certain to be .ound u,$ or .here no
meanin#ful o! .as ,ossible .ithout a revival ,ac(a#e bein# ,ut in ,lace$
.ere left out of the o! e&ercise$ for .hich DPE .ould need to consult the
administrative ministries concerned and ta(e a vie..
3.3 TARGET SETTING, $ARAMETERS, AND &EIGHTS
De*)0a69e A++0)65+e* 2%0 Ta0,e+*
3.3.5 <n order to be relevant for any meanin#ful evaluation of the ,erformance of
the CPSEs$ the o! tar#ets need to be realistic and attainable$ as also
as,irational$ #ro.th oriented $and challen#in# enou#h to brin# the best out
of the enter,rise for meetin# and e&ceedin# the tar#ets.
Se++)n, Ta0,e+* 7 *%.e e**en+)a9 3%n*)de0a+)%n*
3.3.7 "he tar#ets su##ested by the CPSEs and the 9dministrative inistry at the
draft sta#e should be the ma&imum achievable under the #iven and
antici,ated circumstances includin# its o.n ,ast ,erformance$ .ith some
com,arative benchmar(in#$ su,,orted by relevant data$ and in line .ith
e&,ectations of the #overnment$ the Five Bear Plan$ the Cor,orate Plan$
and interests of the shareholders.
Pa#e 0
3.3.3 "he Committee also felt that in ,re,arin# the draft tar#ets$ CPSEs should
(ee, in vie. and ,resent to the "as( Force details about the ,ro=ections that
may have been made in their o.n business ,lans@ those submitted to the
administrative inistry/Plannin# Commission@ and in relevant cases$
disclosed to ,otential investors for raisin# of ca,ital. "his is desirable not
only in the conte&t of ,ro,er tar#et settin#$ but also for avoidin# any
substantive or une&,lainable discre,ancy bet.een the o! tar#ets and
those in other relevant documents.
$e03e:+)%n a6%5+ .)n).5. 2)xed ,0%/+( 0e;5)0e.en+ )n +a0,e+*
3.3.4 <n the conte&t of tar#et settin#$ the Committee also noted the concern
e&,ressed by some CPSEs about the ina,,ro,riateness of a fi&ed minimum
tar#et for #ro.th year on year$ (usually mentioned as 53C by them). <t also
noted that in reality$ the current #uidelines did not sti,ulate any such
mechanical or minimum #ro.th re8uirement$ and hence this .as not an
issue that needed to be addressed by the Committee.
De+e0.)na+)%n %2 +(e Ba*)3 Ta0,e+ %n +(e F)8e $%)n+ S3a9e
3.3.2 9fter detailed discussion$ the Committee felt that it .as not feasible to set
do.n any formula for this$ as it can vary from year to year and from
enter,rise to enter,rise in li#ht of the business conditions$ current levels of
ca,acity and li(ely e&,ansion$ o,erational factors$ #overnment ,olicies and
various e&ternal factors. <t .as therefore deemed best to leave this to the
"as( Force and the CPSEs to discuss and settle.
3.3.+ 9ccordin#ly$ the Committee .as of the vie. that the "as( Force should have
the discretion and fle&ibility in decidin# the basic tar#et on the five ,oint
scale$ as also the difference of ,oints bet.een the various levels.

The present structure of parameters and weights
3.3.- "he o! formats incor,orate the ,arameters a#ainst .hich tar#ets are set$
and the .ei#hts assi#ned to them to facilitate the final evaluation on a
8uantifiable basis. Presently$ t.o ma=or cate#ories of ,arameters are
,rescribed$ namely$ financial$ and non4 financial (also called dynamic). Each
cate#ory carries a .ei#ht of 23 ,oints on a scale of 533$ and each is further
sub divided into s,ecific ,arameters. Details of the current system are at
Annexe J
Pa#e D
De*)0a6)9)+- %2 3(an,e )n :a0a.e+e0*#/e),(+
3.3.0 "he Committee discussed in detail the need / desirability of chan#in# the
cate#ories in .hich ,arameters are divided$ the sub4,arameters ,rescribed
.ithin them$ as .ell as the .ei#hts (,oints) assi#ned. <t felt that the division
of ,arameters into the t.o ma=or cate#ories of financial and non4financial is
ade8uate and does not need to be chan#ed$ althou#h .ithin them$ chan#es
in terms of s,ecific ,arameters and .ei#hts are desirable.
3.3.D "he Committee considered the o,tion of chan#in# the .ei#ht #iven to the
t.o basic cate#ories from 23>23 to 43>43>73 (.ith 73 bein# assi#nable to
either cate#ory$ in full or ,art$ as considered desirable on an enter,rise
s,ecific basis). Eo.ever$ after detailed consideration$ the Committee o,ted
in favour of the e&istin# level of 23>23 for each ma=or cate#ory viA. financial
and non4financial. "his .as essentially in vie. of the im,ortance of financial
,arameters for any business enter,rise and hence a feelin# that their .ei#ht
should not be less than that of non4financial ,arameters$ and also because
more o,tions in terms of sub4,arameters and fle&ibility in terms of .ei#ht is
bein# su##ested in the common format .hich should accommodate
enter,rise s,ecific re8uirements in both cate#ories.
3.3.53 "he Committee recommends that the total number of ,arameters$ both
financial and non4financial chosen for o! should not e&ceed 5+ i.e. 0 each
from both cate#ories. "he "as( Force should ensure that CPSEs lay
em,hasis on relevant and si#nificant ,arameters and as a result there is no
fra#mentation.
F)nan3)a9 $a0a.e+e0* 7 +%+a9 /e),(+ <=
!)" G0%/+(#S)>e#A3+)8)+- !Manda+%0- G0%5:" 7 /e),(+ ?2 +% ?@
a) "urnover or Sales$ e&cludin# interest and other income (o,eratin#
#ro.th)
b) )ross ',eratin# ar#in
c) 6oans sanctioned
d) Disbursements F recoveries
!))" $0%2)+a6)9)+-7 /e),(+ A +% ?= !Manda+%0-"
a) PG"//et %orth
b) EG<D"9//et Gloc(
c) EG<"D9/9vera#e Ca,ital Em,loyed
d) P9"/Stoc(holder E8uity
Pa#e 53
e) P9"/"otal 9ssets
f) P9"/"otal *evenues
!)))" C%*+* and O5+:5+ E22)3)en3-4 /e),(+ A +% ?=!Manda+%0-"
a) an,o.er Productivity4Halue 9dded/Em,loyee Cost
b) Ca,ital Productivity4Halue 9dded/Ca,ital Em,loyed
c) Cost ',timisation
d) !nit *evenue *ealisation
e) PG" ,er Em,loyee
!)8" L);5)d)+-#Le8e0a,e7 /e),(+ @ +% A
f) Current *atio
#) /et .or(in# ca,ital *atio
h) Debt E8uity *atio
i) Debt Service Covera#e *atio
=) EG<"/interest e&,enses
!8" E22)3)en3- %2 A**e+ U*e 4 /e),(+ A +% ?=
a) "urnover/<nventory4 (avera#e or number of days)
b) 9vera#e Collection Period of "rade *eceivables
c) *esource obilisation
d) /P9@ /P9/9ssets
e) 9vera#e cost of funds
f) <nterest rate s,read
!8)" C%..%n S+%31 4 /e),(+ B +% @
a) Earnin#s Per Share
b) Price Earnin# ulti,les
c) ar(et Ca,italisation
!8))" D)8)dend 4 /e),(+ B +% @
a) Pay4out ratio
b) Goo( Halue ,er Share
c) Price to Goo( *atio
Pa#e 55
O:e0a+)%na9 a*:e3+* %2 2)nan3)a9 :a0a.e+e0*
Se9e3+)%n :0%3e** and 2)na9 de3)*)%n
3.3.55 Parameters and their .ei#hts may be finalised in the "as( Force syndicate
meetin# after discussion amon# the CPSEs$ the administrative inistry$
DPE and the syndicate. "he decision of the convenor shall be final$ and
reasons should be recorded in minutes of the meetin# .
3.3.57 "he CPSEs .ould normally have the o,tion to ,ic( t.o or three sub4
,arameters from each #rou, $ or such number as may be ,rescribed in the
)uidelines/Format.
De2)n)+)%n %2 F)nan3)a9 Te0.* and Ra+)%*
3.3.53 DPE should ,re,are and issue a #lossary of Definitions of Financial and
9ccountin# "erms used in the o! Documents$ alon# .ith the relevant
)uidelines$ and include e&,lanations as needed for the terms and
abbreviations used. "hese should be in consonance .ith the Com,anies?
9ct and its Schedules$ as also .ith 9ccountin# Standards #enerally
acce,ted and follo.ed by leadin# 'r#anisations and Practitioners in the field
of accountin# and audit.
N%n7F)nan3)a9 !D-na.)3" $a0a.e+e0* 7 +%+a9 /e),(+ <=
I.:%0+an3e and need 2%0 a/a0ene**
3.3.54 )iven the s,ecial mandate of the ,ublic sector$ the ,erformance of its
enter,rises in areas other than those directly lin(ed to the balance sheet$
,rofit and loss account and mar(et valuation ac8uires e&tra si#nificance.
3.3.52 Even for ,rivate sector enter,rises$ there is a #ro.in#$ and #lobal$
reco#nition that it is not ,ossible for any business entity to survive or thrive
in todayIs environment .ithout due attention to its role as a cor,orate
citiAen$ es,ecially in areas li(e sustainable develo,ment and cor,orate
social res,onsibility. %here businesses have been slac( in a,,reciatin#
this$ often the la. or international conventions have ste,,ed in.
3.3.5+ any of the non4financial activities can also contribute to the efficient
o,eration of the businesses$ .ith an ultimate im,act on the bottom line$ as
.ould be the case .ith the mana#ement of human resources$ customer
focus$ and attention to ,roductivity$ 8uality and technolo#y. <n some cases$ it
also ,ays to be socially res,onsible and environmentally conscious$ as
sho.n by the value of the carbon credits.
Pa#e 57
3.3.5- "he Committee .ould li(e to reem,hasise the need for a continuous
,ro#ramme of education and a.areness creation to ensure that CPSEs
understand and a,,reciate the relevance of these$ and other$ non4financial
,arameters$ and #ive it the de#ree of attention that they deserve.
D)*3%n+)n5a+)%n %2 :a0a.e+e0 %n 3%.:9)an3e /)+( D$E ,5)de9)ne*
3.3.50 Currently$ the mandatory non4financial ,arameters include cor,orate social
res,onsibility$ sustainable develo,ment$ human resource mana#ement$
research and develo,ment$ and com,liance .ith #uidelines issued by DPE.
3.3.5D <n the conte&t of the last ,arameter$ the Committee felt that it has achieved
its ,ur,ose of dra.in# the attention of CPSEs to the issue of com,liance
.ith #overnment ,olicies and directives$ .hich$ in any case$ is mandatory$
and as such$ no incentive by .ay of o! ,oints needs to be continued any
more for doin# so. "he Committee felt that it .ould be ,referable to
reallocate these ,oints to other ,erformance related ,arameters.
T0ea+.en+ %2 a0ea* /(e0e 0e,59a+%0- 3%.:9)an3e a90ead- :0e*30)6ed
3.3.73 "he listed CPSEs are already under the ambit of re#ulators li(e SEG< and
Stoc( E&chan#es in the area of cor,orate #overnance. For unlisted entities$
DPE may ,re,are #uidelines based on the same lines as those ,rescribed
for the listed ones$ .ith suitable modifications as needed. Com,liance .ith
these .ould be mandatory and hence these need not be included in the
o!$ but it .ould be desirable for their Goards and administrative
ministries/DPE to do so at their level for all CPSEs$ and inform the "as(
Force/DPE as a ,art of the o! e&ercise.
C%n3e:+ %2 ne,a+)8e .a01)n,
3.3.75 "he Committee also felt that it may be useful to consider introducin# the
conce,t of ne#ative mar(s for non4com,liance .ith the directives of the
#overnment$ includin# the DPE #uidelines/ re#ulatory re8uirements $ at least
in cases .here it is of a substantive$ deliberate and continuin# nature$ and
the directives re8uire time bound com,liance.
3.3.77 "he Committee felt that this may be introduced on an e&,erimental basis$ for
u, to 2 ,oints$ and a,,lied =udiciously and after due consideration$ so that
technical la,ses$ or delays caused by essential administrative ,rocedures$
or .here the inability to com,ly is due to reasons #enuinely beyond the
control of CPSEs$ do not invite a ,enalty.
Pa#e 53
3.3.73 "he Committee .as of the vie. that the other four ,arameters$ namely$
CS*$ SD$ *FD$ E* need to be continued.
Me0,)n, %2 CSR and SD
3.3.74 "he Committee also considered the mer#in# of the CS* and SD
,arameters$ as su##ested by many enter,rises. <t felt that each one .as
im,ortant enou#h in its o.n ri#ht to find a ,lace in the list$ and should
receive individual attention$ es,ecially .hen the CPSE concerned has a
lar#e bud#et for them or is in sectors li(e minin# or natural resource
consumin# / ,ollutin# industries$ .here SD is of even #reater relevance.
C%0:%0a+e S%3)a9 Re*:%n*)6)9)+- !CSR", S5*+a)na69e De8e9%:.en+ !SD" 4
!Manda+%0- G0%5:*" 7 /e),(+ A +% ?= !B +% < 2%0 ea3("
!)" C%0:%0a+e S%3)a9 Re*:%n*)6)9)+-
3.3.72 "he (ey com,onents of this ,arameters are the formulation of an enter,rise
s,ecific vision$ strate#y$ and annual/medium term ,lans for CS*@
develo,ment of in house ca,acity@ selection of ,ro=ects throu#h a
trans,arent and normative ,rocess@ and their su,ervision$ monitorin# and
evaluation.
3.3.7+ 9ction on all these should normally be initiated and com,leted in the first
year itself$ but some rela&ation may be #iven by the "as( Force in suitable
cases. <n situations .here action is li(ely to ta(e lon#er$ annualised tar#ets
for o! ,ur,ose may be set.
3.3.7- "he sectors/activities under CS*$ ,referably not more than t.o$ should be
selected from the list of DPE )uidelines. DPE may revise the e&istin#
)uidelines and the evaluation tem,late suitably.
!))" S5*+a)na69e De8e9%:.en+
3.3.70 "he sectors/activities under Sustainable Develo,ment$ ,referably not more
than t.o$ should be selected from the list of DPE )uidelines. DPE may
revise the e&istin# )uidelines and evaluation tem,late suitably.
!)))" $0%d53+)8)+- and In+e0na9 $0%3e**e* !Manda+%0- G0%5:" 7 /e),(+ ?= +%
?@
a) 9sset/machine/Facility !tilisation/ "urnaround time/ Do.ntime
b) Product manufacture/Pro=ect Cycle "ime
Pa#e 54
c) easures ta(en to increase efficiency and ,roductivity of man,o.er/
resources
d) Genchmar(in# and ,erformance evaluation
e) Customer satisfaction and redress of customer #rievances
f) Customer Focus 4 Customer Satisfaction <nde& and Com,laints ,er unit
of sales etc.
3.3.7D System Efficiencies and ,erformance ,arameters .ithin aharatna and
/avaratna CPSEs could be ali#ned/benchmar(ed$ to the e&tent ,ossible
and in course of time$ .ith their com,arable #lobal counter,arts$ to enhance
their com,etitiveness.
!)8" Te3(n%9%,-, Re*ea03( & De8e9%:.en+, C5a9)+-, Inn%8a+)%n !Manda+%0-
G0%5:" 7 /e),(+ ?= +% ?@
3.3.33 <t needs to be reco#nised by all CPSEs that *FD is not meant as
fundamental scientific research (thou#h it is not e&cluded) but is lin(ed to
im,rovements in their o,erational efficiencies in all activities$ includin#
manufacture$ ,rocessin#$ ,roduct develo,ment$ ,ac(a#in#$ mar(etin#$ and
even .or( ,rocesses$ throu#h innovation$ ada,tion$ and a,,lication of
available and emer#in# technolo#ies and techni8ues. DPE may address this
suitably in the #uidelines.
a) /e. "echnolo#ies/im,rovin# e&istin# ones
b) <ntellectual ,ro,erty 1 ,atents$ trade4mar(s$ co,yri#hts
c) Juality ana#ement 4 methods li(e "J$ si& Si#ma and <S'.
Galdrid#e Performance E&cellence Criteria$ etc.
d) Safety ana#ement 4 Safety incidents <nde&$ re,ortable incidents
e) Cyber Security 4 develo,in#/settin# u, security systems@ monitorin#
and detection of cyber security breaches.
f) R&D - The sectors/projects/activities under R&D should be selected
from the list of DPE Guidelines. DPE may revise the existing Guidelines
and evaluation template suitably.
Pa#e 52
!8" H5.an Re*%503e Mana,e.en+ 7 /e),(+ B +% <
3.3.35 Pro=ects/activities under E* should be selected from the DPE #uidelines.
DPE may revise the e&istin# #uidelines and evaluation tem,late suitably to
address the ,erce,tion that these are very len#thy and com,le&.
!8)" $0%De3+ Mana,e.en+7 /e),(+ ?= +% ?@
3.3.37 > a) Pro=ect ,erformance inde& 1 ,ercenta#e of milestones achieved .ithin
s,ecified time durin# the year and cost/im,act of shortfalls$ if any.
b) "ime/cost overruns and cost thereof for each on4#oin# ,ro=ect and total
cost to com,any
c) /umber of on4#oin# ,ro=ects to be com,leted durin# the year.
d) ilestones to be reached for on4#oin# ,ro=ects that cannot be
com,leted durin# the year.
3.3.33 %ith a vie. to facilitatin# the understandin# of the "as( Force about .here a
,articular CPSE stands in the conte&t of ,ro=ect mana#ement and
im,lementation it .ould be desirable that a list of ,ro=ects started /
com,leted in the last five years$ their ori#inal cost and time estimates alon#
.ith the final actual ones for com,leted ,ro=ects$ and current ,osition of
incom,lete ,ro=ects$ and .ith details of ca,ital and man,o.er loc(ed u, and
their cost$ should be made an inte#ral ,art of o! bac(#round ,a,ers for
reference. DPE may ta(e a,,ro,riate ste,s in this re#ard in the document
formats/#uidelines as needed.
!8)))" In)+)a+)8e* 2%0 G0%/+( 4 /e),( A +% ?@
3.3.34 > a) Physical tar#ets/out,ut
b) Cor,orate/strate#ic ,lans 1 ,re,aration and achievement of #oals
c) E&,ansion/diversification/ ac8uisitions/=oint ventures
d) Grand buildin#/ ar(etin# initiatives/ne. ,roducts/ne. mar(ets
e) <m,ort substitution/e&,orts/#lobalisation of o,erations
f) *is( identification and miti#ation
Pa#e 5+
3.4 FLEXIBILITY IN TARGET SETTING AND EVALUATION
Ta0,e+ *e++)n, S+a,e
T(e I**5e %2 29ex)6)9)+-
3.4.5 "he issue of fle&ibility in tar#et settin# has already been addressed in the
revised structure and contents of the formats and ,arameters$ .ith the
,rovision for o,tions and choices for the CPSEs$ and authority to the "as(
Force to ma(e e&ce,tions.
Pa#e 5-
T(e )**5e %2 :e0.)++)n, C%nd)+)%na9 Ta0,e+*# :0%8)d)n, 2%0 a M)d4Te0. Re8)e/,
and .)+),a+)%n %2 ,en5)ne :0%69e.*
3.4.7 any CPSEs have demanded that they should be allo.ed to acce,t tar#ets
sub=ect to certain conditions and a mid4term revie. of tar#ets may also be
,rovided for$ as other.ise they have to suffer for actions or defaults on the
,art of others u,on .hom they are de,endent$ or due to unforeseen
chan#es in factors li(e e&chan#e rate and international ,rices.
3.4.3 "he Committee$ .hile not unmindful of the ,roblem$ felt that it .ould not be
desirable or even .or(able to allo. for conditions to be attached to tar#ets
or to ,rovide for a mid4term revie.. <t .as of the vie. that in business
o,erations$ the fulfilment of almost any tar#et de,ends u,on some variables
and e&ternal factors$ and unforeseen develo,ments are a ,art of business
life. <t is for the enter,rise to antici,ate ,roblems as best as it can$ and ta(e
miti#atin# action to achieve its ob=ectives and tar#ets.
T(e I**5e %2 A**50an3e* 6- G%8e0n.en+
3.4.4 9 number of CPSEs have e&,ressed the vie. that to ma(e the o! a
#enuine t.o .ay e&ercise$ some assurances should also be forthcomin#
from the administrative ministries re#ardin# decisions and action on their
,art that are relevant and essential for finalisin# and realisin# the o!
commitments made by the CPSEs.
3.4.2 "he intrinsic validity of this e&,ectation cannot be 8uestioned$ and the
Committee felt that #rantin# of such assurances could #o a lon# .ay in
miti#atin# the mis#ivin#s about the o! e&ercise bein# one sided. "he
Committee$ ho.ever$ also felt that this needs consideration by the
#overnment$ and as it could involve a ,olicy decision affectin# various
ministries$ it .ould be more a,,ro,riate if DPE considers ta(in# it u,
suitably at the #overnment level$ includin# .ith the Ei#h Po.er Committee.
9 .or(able arran#ement could be to enlist these obli#ations in the o!
document and incor,orate these a,,ro,riately in the *FD e&ercise$ every
year.
Pa#e 50
T(e E8a95a+)%n S+a,e
3.4.+ %hile conditional tar#ets .ere not found to be acce,table and a mid4term
revie. of tar#ets .as also not found to be administratively feasible$ the
Committee reco#nised that in some e&ce,tional cases$ .here situations
entirely beyond the control of CPSEs$ es,ecially involvin# ,olicies or
directives of the )overnment$ could render the fulfilment of the committed
tar#ets almost im,ossible$ des,ite their best efforts$ it .ould be reasonable
to ma(e some ,rovision to address such a situation.
3.4.- "he Committee recommends that in such force ma=eure (ind of
circumstances$ the affected CPSEs could see($ at the sta#e of ,erformance
evaluation$ suitable ad=ustments / offsets throu#h its administrative inistry$
.hich may for.ard it to the DPE .ith its comments/recommendation for
,lacin# before the "as( Force.
3.4.0 "he "as( Force should ta(e u, the matter in the evaluation meetin# .here the
CPSE can ,resent its case in detail$ and e&amine the re8uest in the li#ht of
the recommendation/comments of the administrative inistry / DPE and all
relevant factors$ and ta(e an a,,ro,riate decision re#ardin# the relief to be
#iven. "he reasons for the decision should be recorded in the minutes of
the meetin#.
3.2 ORGANISATIONAL AND OTHER MEASURES TO STRENGTHEN THE
TASK FORCE MECHANISM
S-nd)3a+e G0%5: 3%.:%*)+)%n and a99%3a+)%n %2 C$SE* +% +(e.4
3.2.5 "he details of the current and ,revious syndicates are at Annex K.
3.2.7 "he Committee felt that a syndicate should normally have no more than four
or five members$ includin# the convenor$ thou#h the number could be
e&ceeded in suitable cases. "he basic com,osition .ould include the
convenor .ho can ,rovide leadershi, and have varied e&,erience$
,referably havin# held very senior ,ositions in the )overnment of <ndia or
the State )overnments$ as in fact has been the ,ractice till no.@ one e&,ert
in finance/accounts@ one domain s,ecialist$ ,referably a former CE' of a
CPSE@ and one ,erson .ith (no.led#e and e&,erience of non4financial
,arameters and mana#ement. %here re8uired$ one or more member(s) .ith
e&,ertise in areas li(e ,ro=ects$ o,erations$ ,roductivity$ human resources$
turnaround of sic( units$ mar(etin#$ financin# of social sector activities$ or
s,ecialised domain (no.led#e could be considered to stren#then the #rou,.
Pa#e 5D
T0ea+.en+ %2 S)31#L%** .a1)n, 5n)+*
3.2.3 "he Committee reco#nised the merits in the ,resent system of a se,arate
syndicate for sic(/loss ma(in# units $ but .as of the vie. that on balance$ it
.ould no. be ,referable to ,lace them in their relevant sector4 based
syndicates$ because the sic(/loss ma(in# units$ .ith their diverse domains
and functionalities$ are li(ely to have more in common .ith units in a similar
sector than .ith those .here the only commonality is sic(ness/losses$
.hich also could have been caused by reasons entirely dissimilar to their
o.n.
Pa#e 73
N5.6e0 %2 *-nd)3a+e*
3.2.4 "he Committee .as in a#reement .ith havin# se,arate syndicates for
section 72 com,anies and for financial sector com,anies. <t felt that the
remainin# could either be (e,t as they are$ or in li#ht of the su##estions
#iven by the convenors$ more syndicates could be created as may be
needed to brin# #reater cohesion and homo#eneity. "he Committee .as
broadly in favour of more syndicates if needed rather than #o in for clubbin#
dis,arate ones merely to (ee, the number do.n for the ,ur,ose of lo#istical
convenience.
3.2.2 "he Committee .as also of the vie. that in the final analysis$ it should be
left to DPE to determine the number and com,osition of the syndicates$
es,ecially in vie. of the administrative$ bud#etary and lo#istics as,ects that
also need to be ta(en into consideration in any decision in this re#ard.
F%0.a+)%n %2 Re*%503e G0%5:
3.2.+ "he current system of resource ,ersons has$ for reasons not related to its
intrinsic utility and merit$ led to avoidable resentment amon# CPSEs$ and
the Committee felt that it .ould be desirable to remove the ,erceived
irritants .hile retainin# the essence of the mechanism. <t is accordin#ly
su##ested that the resource ,ersons may be desi#nated as embers of the
*esource )rou, for the "as( Force$ (*)) .ith .hom they may interact
closely$ but need not ma(e the o,enin# ,resentation or ta(e direct ,art in
the ne#otiations$ unless invited by the convenors to do so.
3.2.- "he *esource )rou, .ould constitute the main su,,ort mechanism for the
"as( Force and DPE in collectin# and analysin# data and information
relatin# to the economy$ industry$ and sectors$ .hich should be done from
multi,le sources$ includin# ,lannin# commission and ministries$ industry
associations$ industry or sector s,ecific or#anisations$ ban(s$ ratin#
a#encies and economic research or#anisations. "his #rou, .ould also
assist DPE/"as( Force in the e&ercise of ne#otiation of the o! draft and
,erformance evaluation of o! tar#ets.
Pa#e 75
Pa#e 77
3.2.0 embers of this #rou, should be chosen .ith care$ and .ith s,ecial
attention to their analytical ability$ ran#e and diversity of business
e&,erience$ understandin# and e&,ertise$ includin# that of the ,ublic sector
o,erations$ balance of a,,roach$ and .illin#ness to be a ,art of this
e&ercise. "heir contribution should be reco#nised and conveyed to the
a,,ro,riate 8uarters by DPE and su##est to the ,arent or#anisation/
de,artment that it should find a mention in their 9P9*Is. "hey may also be
#iven ade8uate infrastructure su,,ort and o,,ortunity for u,datin# their o.n
(no.led#e and e&,erience base so as to be able to assist the DPE/"as(
Force more effectively.
F%0.a+)%n %2 Ex:e0+* G0%5:
3.2.D DPE may also form a small e&,ert ,anel of ,ersons .ith e&,ertise and
e&,erience in the field of finance/accounts from amon# the e&istin#
members of the "as( Force$ and from outside$ ,referably those .ho may
have been associated .ith the o! e&ercise earlier$ to advise and assist the
"as( Force as and .hen needed in dealin# .ith matters relatin# to financial
,arameters and allied issues.
3.2.53 9 similar ,anel may also be set u, for dealin# .ith issues relatin# to non4
financial ,arameters.
$0e4ne,%+)a+)%n :0%3e**e*
3.2.55 <t .ould be of #reat value to the o! e&ercise if DPE could convene a
meetin# of the Ei#h Po.er Committee headed by the Cabinet Secretary and
the Secretaries from the administrative ministries dealin# .ith ma=or/
im,ortant CPSEs$ before the start of the o! ne#otiations every year.
3.2.57 Such a meetin# could discuss and brin# out the e&,ectations of the
#overnment from the ,ublic sector in #eneral and the ma=or/im,ortant
CPSEs in ,articular for the current year and over a three year ,ers,ective$
and the e&tent to .hich the administrative ministries can facilitate their
fulfilment in terms of ,olicy initiatives and administrative su,,ort$ or indicate$
to the e&tent ,ossible $ if there are any measures contem,lated that .ould
have a direct relevance on the o! .ith these CPSEs and should thus be
(e,t in mind by the "as( Force.
3.2.53 "his meetin# .ill also be of valuable #uidance to DPE and the "as( Force in
dealin# .ith issues of interde,endence and coordination. <t .ill also hel, in
determinin# the a,,roach to sic( and loss ma(in# units .here decisions for
revival/further investments rest .ith the #overnment.
Pa#e 73
3.2.54 <n addition to the meetin# of the Ei#h Po.er Committee$ DPE may also
consider holdin# a meetin# .ith the secretaries havin# administrative
=urisdiction over the concerned o! si#nin# CPSEs$ in #rou,s or
se,arately$ before the start of the ne#otiations to discuss the ,riorities and
,olicy initiatives relatin# to their ministries.
3.2.52 Pre,aratory meetin#s .ith convenors may also be arran#ed by DPE to brief
them a,,ro,riately$ ans.er their 8ueries$ and to discuss relevant issues
includin# those relatin# to cohesion and commonality of a,,roach amon#
different syndicates in the ensuin# ne#otiations/evaluations.
3.2.5+ Each syndicate may hold one or more meetin# (s) .ell before the start of
ne#otiations to discuss the draft o! received from all CPSEs in their
syndicate amon# itself and .ith the resource #rou, member and DPE
re,resentatives@ follo.in# .hich 8ueries and su##estions for revision$ if any$
can be sent to the CPSEs/administrative inistry throu#h DPE$ .ith a
reasonable mar#in for them to res,ond.
T(e Ne,%+)a+)%n .ee+)n,*, 9%,)*+)3*, and ad.)n)*+0a+)8e a00an,e.en+*
3.2.5- "here should not be more than one meetin# in a day for any syndicate$
unless the syndicate and the CPSES concerned so desire$ and minutes
should be recorded and finalised ,referably on the same day and in no case
later than the ne&t .or(in# day.
3.2.50 9de8uate time$ ,referably at least one hour may be ,rovided before the
ne#otiation meetin# for an internal meetin# of the syndicate to discuss the
o! tar#ets and the ne#otiatin# ,oints$ .ith the resource #rou, members
bein# available for assistance.
3.2.5D <n vie. of the coordination issues that have come u, in the ,ast involvin#
Coal <ndia$ /"PC and GEE6( or others) it is su##ested that in addition to
the re#ular syndicate meetin#s$ either one =oint meetin# of the syndicates in
.hich these are included may be held$ .ith rail.ays $ the concerned
administrative ministries and DPE also ,resent@ or a se,arate meetin# of
these CPSEs$ *ail.ays$ administrative inistries$ DPE and the convenors
of their res,ective "as( Forces be convened to sort out cross cuttin# issues.
3.2.73 "he Committee felt that the administrative inistry must be re,resented in
every ne#otiation meetin#$ and su##ested that DPE may ,ursue this .ith
the ministries to ensure their effective re,resentation at an a,,ro,riate level.
Pa#e 74
3.+ THE GUIDELINES
3.+.5 "hese are the basic documents #uidin# all ,artici,ants in the o! ,rocess
in its various sta#es$ issues relatin# to their nature$ structure$ content and
inter,retation are of critical relevance for the entire o! e&ercise.
3.+.7 "he Committee noted that over the years$ detailed #uidelines have been
,re,ared for various com,onents of the o! document$ coverin# the
financial and the non4financial dynamic ,arameters and tar#ets$ as also for
the ,rocesses/,rocedures for the ,re,aration and submission of documents$
for meetin#s and other relevant issues. "hese have been revised and
su,,lemented from time to time by additional #uidelines to meet the
emer#in# re8uirements$ and by and lar#e$ the DPE has done a
commendable =ob in this re#ard.
Re8)*)+)n, +(e G5)de9)ne*
3.+.3 "he Committee$ ho.ever$ also noted that ,arado&ically$ sometimes the very
com,rehensiveness of the #uidelines seems to have #one a#ainst them in
terms of the inability of some of the ,layers to fully com,rehend them$
leadin# to a ne#ative$ thou#h not necessarily =ustified ,erce,tion about
them.
3.+.4 <t is$ therefore$ felt that a revie. of these by DPE on a ,riority basis$ .ith
redraftin# as/.here needed$ .ould be desirable. <n the vie. of the
Committee$ the #uidelines should be sim,le$ clear and brief$ and can be
su,,lemented by additional e&,lanatory notes if and as re8uired$ thou#h it
also reco#nised that ultimately it is the DPE .hich .ill be the best =ud#e of
ho. the #uidelines should be drafted.
De*)0a6)9)+- %2 3%n+)n5%5* )n+e0a3+)%n )n +(e 3%n+ex+ %2 ,5)de9)ne*E
3.+.2 "he Committee felt that some of the ,erce,tions of the CPSEs e&,ressed
durin# the discussions .ith them seemed to be due to a different
understandin# of the #uidelines than intended$ or .ere ,robably based on a
syndicate s,ecific e&,erience. "he Committee felt that further clarity in
#uidelines and closer and continuous interaction .ith CPSEs in e&,lainin#
these .ould assist in dis,ellin# such misconce,tions .here they may e&ist.
Pa#e 72
3.- THE M%U AND THE RFD SYSTEM
3.-.5 "he Committee noted the vie.$ e&,ressed by CPSEs and DPE$ that there is
a need to brin# harmony bet.een *FD of the administrative inistry and the
o! tar#ets of the CPSEs. <t .as also noted that DPE$ .hich is the nodal
De,artment to coordinate ,olicy matters relatin# to CPSEs but does not
administer or control their functionin# has been #iven an K*FD tar#et of
)ro.th in "urnover and )ross ar#in of CPSEs by 2C for the year 73574
53.L
3.-.7 "he Committee discussed this issue and .as informed that o! meetin#s
are held in :anuary4February$ and tar#ets are fi&ed in due consideration of
the Gud#et Estimates of the CPSEs as submitted to their ministries. "hese
are by definition$ for the future$ and are based$ amon# others$ on certain
assum,tions re#ardin# economic factors$ business conditions$ and the
e&,ectations and commitments$ .here available$ of the #overnment.
3.-.3 "he tar#ets for *FD$ on the other hand$ are finaliAed much after the o!
are si#ned$ and as such$ any chan#e in se8uencin# does not a,,ear to be a
feasible ,ro,osition.
3.-.4 "he Committee reco#nised the ,roblem bein# faced by DPE in bein# as(ed
to deliver .hat .as not in its control$ and felt that DPE may consider
brin#in# this u, at the Ei#h Po.er Committee meetin#$ and the issues
relatin# to better harmony$ synchronisation and syner#ies bet.een the t.o
systems$ .hose ultimate ob=ectives are similar.
Pa#e 7+
B EXECUTIVE SUMMARY & RECOMMENDATIONS
4.5 "he o! system is ,erceived to be useful and robust$ and has .or(ed .ell
over the years to facilitate ,erformance im,rovement of CPSEs. Eo.ever$
some chan#es are desirable in the evolvin# scenario.
4.7 "he main areas / issues to be loo(ed at in this conte&t are the formats for
o!$ the tar#ets$ ,arameters and their .ei#hts$ the need for more fle&ibility
at ne#otiation and evaluation sta#es$ the #uidelines for the o! e&ercise$
measures for stren#thenin# the "as( Force and its syndicates$ and the
issues relatin# to the *FD system.
T(e .a)n 0e3%..enda+)%n* %2 +(e C%..)++ee .a- 6e *5..a0)*ed a* 2%99%/*E
FORMATS
4.3 9 common format .ith o,tions instead of multi,le formats recommended
,rovidin# fle&ibility for enter,rise / sector s,ecific factors. "hese should be
o,erated .ithin a broad common frame.or( to maintain a desirable level of
uniformity of a,,roach.
TARGET SETTING, $ARAMETERS & THEIR &EIGHTS
4.4 "he determination of basic tar#et and the difference of ,oints bet.een levels
on the five ,oint scale should be left to the "as( Force.
4.2 Parameters and their .ei#hts .ould be finalised in "as( Force syndicates$
and the final decision .ould be .ith the convenor.
4.+ DPE should brin# out a #lossary of Definitions of Financial and 9ccountin#
"erms used in o! documents.
4.- /on4Financial ,arameters .ould be divided in the follo.in# main #rou,s$
related to Cor,orate Social *es,onsibility F Sustainable Develo,ment@
Productivity and <nternal Processes@ "echnolo#y$ *FD$ Juality$ <nnovation@
Euman *esource ana#ement@ Pro=ect ana#ement@ and <nitiatives for
)ro.th$ each .ith a .ei#ht / ran#e of .ei#hts assi#ned to it.
Pa#e 7-
4.0 "here is need for a continuous ,ro#ramme of education and a.areness to
ensure that CPSEs understand and a,,reciate the im,ortance of non4
financial ,arameters.
4.D "he conce,t of ne#ative mar(in# for non4 com,liance .ith DPE #uidelines$
directives of #overnment and com,liance re8uirements of re#ulators in
serious cases may be considered on an e&,erimental basis$ .ith ade8uate
safe#uards to ,revent ,enalisation of minor la,ses.
FLEXIBILITY IN TARGET SETTING AND EVALUATION
4.53 Conditional tar#ets or mid4term revie. of tar#ets are not recommended$ but
miti#ation of #enuine serious ,roblems may be made ,ossible at evaluation
sta#e.
4.55 DPE may e&amine and follo. u, the issue of assurances from administrative
ministries re#ardin# decisions and action on their ,art that are relevant for
realisin# the tar#ets set in o!.
ORGANISATIONAL AND OTHER MEASURES TO STRENGTHEN THE TASK
FORCE MECHANISM
4.57 9 syndicate should normally not have more than four / five members$ but this
can be increased .here re8uired.
4.53 Sic( / loss ma(in# units may be (e,t in the sector based syndicates .hich
.ould have more in common .ith them$ than bein# clubbed in a se,arate
syndicate only for sic( / loss ma(in# units.
4.54 Se,arate syndicates for Section 72 com,anies and for the financial sector
units may continue$ alon# .ith their formats.
4.52 "he total number of syndicates could be increased$ if needed$ to brin# #reater
cohesion and homo#eneity$ but final decision on the com,osition and
number of syndicates .ould be .ith DPE.
Pa#e 70
4.5+ 9 *esource )rou, for the "as( Force$ .ith ade8uate infrastructure$ may be
set u,$ and the resource ,ersons may be desi#nated as members of this
#rou,$ .ith a clear mandate about their role. "his #rou, .ill also collect
relevant data from multi,le sources and analyse it$ and .ould constitute the
main su,,ort mechanism for the "as( Force / DPE for assessin# draft
tar#ets$ in ne#otiations and for ,erformance evaluation.
4.5- ".o small e&,ert #rou,s$ one each for finance / accounts and for non 4
financial matters may be set u, from amon# e&istin# members of syndicates
and outside e&,erts$ to assist the "as( Force.
4.50 9 series of ,re4ne#otiation meetin#s may be held$ includin# those of the Ei#h
Po.er Committee under the chairmanshi, of the Cabinet Secretary@ of
secretaries of administrative de,artments@ and of convenors of syndicate
#rou,s.
4.5D 'ne or more internal meetin#(s) of the syndicate / DPE should be held to
discuss the draft o! received$ and 8ueries / su##estions arrived at should
be sent to the CPSEs in advance of the start of the ne#otiations.
4.73 "here should not be more than one ne#otiation meetin# in a day$ and the
minutes should be recorded on the same day$ barrin# in e&ce,tional
circumstances. "he schedule should ,rovide ade8uate time for each
syndicate to have an internal meetin# before the start of the ne#otiation
meetin#(s).
4.75 :oint meetin#s of syndicates or convenors and CPSEs concerned may be
held$ as needed$ to address issues arisin# out of the interde,endence and
its im,act on their res,ective tar#ets.
4.77 "he administrative inistry must be re,resented in every ne#otiation meetin#$
at an a,,ro,riate and effective level.
Pa#e 7D
THE GUIDELINES
4.73 "hese have been u,dated from time to time by DPE$ and are 8uite
com,rehensive. Eo.ever$ these .ould need to be revised in li#ht of the
chan#es ,ro,osed in the system. <t is desirable to (ee, them as sim,le$
clear and brief as ,ossible to ma(e them com,rehensible to the CPSEs.
THE M%U AND THE RFD SYSTEM
4.74 "he issues of harmony$ synchronisation and syner#ies bet.een o! and
*FD systems$ and of the redress of #enuine ,roblems faced by DPE can
best be addressed at #overnment level$ and DPE may consider ta(in# them
u, in the Ei#h Po.er Committee meetin#.
Pa#e 33
CONCLUSION
"he Committee feels ,rivile#ed at havin# been #iven the o,,ortunity to
contribute to the e&ercise to ma(e the o! System more effective and
relevant to the needs of the CPSEs. <t feels that #iven the com,le& and
dynamic nature of the e&ercise$ it .ould be desirable not to treat the
introduction of the chan#es su##ested by it$ to the e&tent acce,ted by the
#overnment$ as a one4 time e&ercise$ but also to (ee, o,en the o,tion of
ma(in# suitable ad=ustments in the future$ in li#ht of the e&,erience of its
.or(in#.
(P .). an(ad)
Chairman$ %or(in# )rou,

(Shri 9=ay Dua) (Shri 9mar=it Cho,ra)
ember ember
(Shri 9nil *aAdan) (Shri Gri=esh ;umar)
ember ember

(Shri P.P.Hora) (Shri P.*.;hanna)
ember ember
(Shri *.;.ishra) (Shri S.D.;a,oor)
ember ember
(Shri !.D.Choubey) (Shri 9run ; Sinha)
ember :oint Secy$ DPE F Convener
Pa#e 35
Annex A
Te0.* %2 Re2e0en3e %2 +(e C%..)++ee %n M%U S-*+e.
<. E&amine the desirability/,ossibility of different o! Formats for different
siAes and cate#ories of CPSEs includin# aharatna//avratna.
<<. E&amine the issue of the desirability/need for all CPSEs to be covered by
the o! e&ercise$ es,ecially in its current format and ,rocess .hich is
common to all CPSEs.
<<<. E&amine the current system of settin# tar#ets on five4,oint scale.
<H. E&amine the issues arisin# out of the *esults Frame.or( Document (*FD)
System of the inistry/De,artment.
H. 6oo( into the as,ects of #ivin# more o,erational fle&ibility to
CPSEs/administrative inistry and the "as( Force on o! in the matter of
tar#et settin# and ,erformance evaluation.
H<. 6oo( into or#aniAational and other measures to stren#then the "as( Force.
H<<. 6oo( into any other matter of relevance that the %or(in# )rou, and the
De,artment may consider a,,ro,riate for the em,o.erment and
enhancement of CPSEs es,ecially in the conte&t of their role in the
economy and to ma(e the o! e&ercise more effective.
Pa#e 37
Annex B
C%.:%*)+)%n %2 +(e C%..)++ee %n M%U S-*+e.
NAME
5. Shri P. ) an(ad$ Chairman
7. Shri 9nil *aAdan$ ember
3. Shri 9=ay Dua ember
4. Shri S.D.;a,oor ember
2. Shri Gri=esh (umar ember
+. Shri *.;. ishra ember
-. Shri 9mar=it Cho,ra ember
0. Shri !.D.Choubey$ D) SC'PE ember
D. Shri P.*.;hanna ember
53. Shri P.P.Hora ember
55. Shri 9run ;umar Sinha$ :S DPE ember Secretary
Pa#e 33
Annex C
Mee+)n,* %2 +(e C%..)++ee %n M%U S-*+e.
S9 N% Da+e %2 Mee+)n, Re.a01*
5. 74.32.7357 Discussion amon# members of the
Committee
7. 3-.3+.7357 Discussion amon# members of the
Committee
3. 73.3+.7357 Discussion amon# members of the
Committee
4. 70.3+.7357 Discussion amon# members of the
Committee
2. 55.3-.7357 Discussion amon# members of the
Committee@ Discussion .ith CPSEs 4 EC6$
/DC$ S9<6$ EC'/$ "C$
D6$ )*SE$ SPC<6
+. 57.3-.7357 Discussion amon# members of the
Committee@ Discussion .ith CPSEs 4
EP<6$ C%C$ GE6$ E<6$ C'/C'*$ PFC$
S"C
-. 7+.3-.7357 Discussion amon# members of the
Committee@ Discussion .ith CPSEs 1 C<6$
/"PC$ <'C$ '/)C$ )9<6 (<ndia) 6td.
0. 35.3-.7357 Discussion amon# members of the
committee
D. 35.30.7357 Discussion amon# members of the
Committee@ Discussion .ith Convenors of
Syndicate )rou,s
53. 53.30.7357 Discussion amon# members of the
committee
55. 55.30.7357 Discussion amon# members of the
committee
57. 53.30.7357 Discussion amon# members of the
committee
53. 54.30.7357 Discussion amon# members of the
committee
Annex D
Pa#e 34
L)*+ %2 S-nd)3a+e C%n8ene0, C$SE Re:0e*en+a+)8e*, Ex:e0+* & O+(e0* Me+#
C%n*59+ed B- +(e C%..)++ee
S9
N%
Na.e
!S0) #S.+# S5*(0)"
S-nd)3a+e # C$SE
5. D P Ga#chi "rans,ort F "ourism
7. Dr.S S eena(shisundaram Sic( F 6oss a(in#4<<
3. ; *a=endran /air Section 72 CPSEs F Financial Services
4. 9 ; :ain Sic( F 6oss a(in#4<
2. Pa.an Cho,ra "radin# F ar(etin#
+. ; S Sarna Electronics$ "elecommunication F <"
-. : / 6 Srivastava 9#riculture$ FertiliAer$ Chemicals F
Pharma
0. Srinibas *ath Steel F other inerals
D. Sha(eel 9hmed Eindustan Co,,er 6td.$ CD
53. Subimal Gose /DC$ Director (Production)
55. 9nil Cho.dhury S9<6$ Director (Finance)
57. S Chatto,adhyay EC'/$ Director (Pro=ect)
53. Sunir ;hurana "C$ Director ((t#.)
54. ) )u,ta "C$ Director (Fin.)
52. Cdr P * *a#hunath D6$ Director (Shi,buildin#)$
5+. S S Eiremath D6$ D) 4PSC
5-. S P Sin#h )*SE$ ) (Cor,. Pl#.)
50. S alli(ar=un S.amy ED 1 Cor,orate Plannin#
5D. S *ana SPC<6$ CD
73. 9 ; Herma EP<6$ Director (Finance)
75. G G Pattanai( C%C$ D
77. S ; Sharma GE6$ Director (GC)
Pa#e 32
73. *am Sin#h E<6$ Director (Finance)
74. P 9lli *ani C'/C'*$ Director (Finance)
72. Satnam Sin#h PFC 6td$ CD
7+. G G Sin#h S"C 6td$ D (Comm)
7-. S Hen(atraman )9<6 (<ndia) ltd.$ Director
70. Sudhir Hasudeva '/)C$ CD
7D. * S Gutola <'C$ CD
33. 9 * Chodhury /"PC$ CD
35. S /arsin# *ao C<6$ CD
Annex E
F ./o. 3(7)/73574DPE (o!)
)overnment of <ndia
inistry of Eeavy <ndustries F Public Enter,rises
De,artment of Public Enter,rises
(o! Division)
Gloc( /o. 54$ 3rd Floor
C)' Com,le&$ 6odi *oad
/e. Delhi4553 333
Dated> 35
st
ay$ 7357
Dear Sir/adam$
"his is to inform you that a %or(in# )rou, headed by Shri P ) an(ad$
Chairman "as( Force has been constituted to revie. the o!
System/)uidelines for CPSEs.
< have been directed to re8uest you to send su##estions/feedbac( on the
e&istin# o! system and to s,ecifically #ive your vie.s on the follo.in#
issues>
5) %hether the o! format currently bein# used is com,atible .ith the
business of the CPSEs or should there be any chan#es made to #et a
better understandin# of the ,erformance and the constraints etc. facin# the
enter,riseM
7) %hether the current system of settin# of Gasic "ar#ets (G.".) and other
,arameters on a five4,oint scale is com,rehensive enou#h or should any
modifications be made in itM
Pa#e 3+
3) %hether it is desirable to #ive #reater o,erational fle&ibility to
CPSEs/administrative ministries includin# the concerned "as( Force on
o! to devise ,arameters and .ei#hta#es to set tar#ets of ,erformance
and the evaluation mechanismM
4) %hat other ,rovisions be introduced in the o! system (ee,in# in vie. the
e&,ected role of the CPSE in the current economic environmentM
2) Su##estions for ma(in# the o! system more effective as a mana#ement
tool from the ,oint of vie. of both the CPSE and the shareholders.
<t should be (indly noted that the su##estions/feedbac( should be in
ma&imum of t.o ,a#es (font siAe454) and should reach DPE latest by 54
th
:une 7357 throu#h fa& or mail at mou4d,eNnic.in. 9ny communication
received after 54
th
:une$ 7357 .ill not be entertained.
Sd/4
(:.*. Pani#rahi)
Director (o!)
"el> 3554743+3045
Fa&> 3554743+7+53
E4mail> mou4d,eNnic.in
"o>
5. 9ll CPSEs concerned
7. 9dministrative inistry/De,artment concerned
Annex F
L)*+ %2 C$SE* /(% 0e*:%nded 2%0 S5,,e*+)%n*#M%d)2)3a+)%n )n M%U S-*+e.
!Re2E D$E 9e++e0 n%' !2"#2=?24D$E !M%U" da+ed '?=<2=?2"
S9
n%
Na.e %2 +(e C$SE S9
n%
Na.e %2 +(e Ad.n M)n)*+0-
5 /ational Seed Cor,oration ltd. 5 De,t. of 9#riculture F
Coo,eration
7 Eindustan Co,,er ltd. 7 De,t of Eeavy <ndustries
3 <ndian tourism Develo,ment
cor,oration 6td.
3 inistry of StatisticsF
Pro#.<m,lementation
4 EdC<6 <ndia 6td. 4 inistry of Coal
2 Central .arehousin# cor,oration
+ GE6 6td
- Gharat Electronics ltd.
0 E&,ort Credit )uarantee
Cor,oration
Pa#e 3-
D Gharat Petroleum Cor,n. 6td.
53 )oa Shi,yard 6td.
55 *ail Hi(as /i#am 6td.
57 adras FertiliAer 6td.
53 Container Cor,. of <ndia 6td.
54 isra Dhatu /i#am 6td.
52 E" 6td.
5+ /ational Gac(.ard Class Fin F
Dev Cor,.
5- "ehri Eydro Dev Cor,.
50 *ashtriya Chemical F FertiliAers
6td.
5D 9ir,ort 9uthority of <ndia
73 /"PC 6td.
75 GEE6
77 <'C
73 S"C
74 Galmer 6a.rie F Co. 6td.
72 EC'/
7+ ;on(an *ail.ay Cor,. 6td.
7- *<"ES
70 E<6
7D <ndian *ail.ay Finance Cor,n.
33 Chennai Petroleum Cor,. 6td.
35 %9PC'S
37 'il <ndia 6td.
33 96<C'
34 )9<6
32 EPC6
Pa#e 30
3+ /evyeli 6i#nite Cor,.
3- Shi,,in# Cor,. of <ndia 6td.
30 <*C'/
3D Eindustan 9eronautics 6td.
43 S9<6
45 aAa#on Doc(
47 S:H/
43 P)C<6
44 "C<6
42 /EPC
4+ Cochin Shi,yard 6td
4- Cement Cor,. of <ndia 6td
40 '/)C
4D *P6
23 /96C'
25 /ational Schedule Caste Fin FDev
Cor,.
Pa#e 3D
Annex G
L)*+ %2 Ba31,0%5nd $a:e0*, Re:%0+*, D%35.en+*, e+3 0e2e00ed 6- +(e
C%..)++ee

S9
N%
Re2e0en3e
5 Study on the *evam,in# of the o! System by /C9E*$7334
7 *e,ort of the %or(in# )rou, on *evie. of o! )uidelines in CPSEs by Sh.
9sho( Chandra$ Chairman "as( Force on o! 7330
3 Consultancy *e,ort on activities related to Performance of CPSEs by
Consultant$ D< )ur#aon$ 7353
4 *e,ort of Panel of E&,erts on *eforms in CPSEs submitted to Plannin#
Commission 7355
2 o! )uidelines and other Documents of DPE
Pa#e 43
Annex H
L)*+ %2 Re*%503e $e0*%n* /(% a**)*+ed )n +(e de9)6e0a+)%n* %2 +(e C%..)++ee
S9 N% NAME
5 Sh 9nand Pra(ash$ 9sst. Director ( o!)
7 Sh Pra(ash )urba&ani
3 Sh :yoti *an=an Panda
4 Sh *am Chandra Patra
2 Sh Saurabh :ain
+ Smt 6e(ha ;hare
- Smt Poonam Sin#h
Pa#e 45
Pa#e 47
Annex I
BRIEF NOTE ON THE CURRENT M%U SYSTEM
1. "he Performance Contract System first ori#inated in France in the late 5D+3s. <t
.as later ado,ted by Pa(istan and ;orea. <ndia too( to the system of
emorandum of !nderstandin# (<ndian version of Performance Contractin#) in
5D0+.
2. <n the ,ast t.o and half decades more than 33 develo,in# countries have
introduced the Performance Contract system for enhancin# ,erformance of their
,ublic sector enter,rises and for ,rovidin# o,erational autonomy. <n 9sia$ the
Performance Contract conce,t has been used in Gan#ladesh$ China$ <ndia$
;orea$ Pa(istan and Sri 6an(a. <n 9frica$ ,erformance Contracts have been used
in selected enter,rises in Genin$ Gurundi$ Cameroon$ Ca,e Herde$ Con#o$ Cote
dI<voire$ )abon$ the )ambia$ )hana$ )uinea$ ada#ascar$ ali$ auritania$
orocco$ /i#er$ Sene#al$ "o#o$ "unisia and Oaire.
3. <n 6atin 9merica$ they have been used at different times in 9r#entina$ GraAil$
Golivia$ Chile$ Colombia$ e&ico$ !ru#uay and HeneAuela. 'thers include
alaysia$ !nited ;in#dom$ !.S.9$ Canada$ Denmar( and Finland.
4. "he )overnment of <ndia introduced the system of o! in the year 5D0+$ based
on recommendations #iven by 9r=un Sen#u,ta Committee re,ort (5D04). "he
re,ort recommended that the Central Public !nderta(in#s enter into a#reements
.ith their 9dministrative inistries for five years$ .hile ,ro#ress .ould be
revie.ed annually. "he committee recommended three ,arameters for re#ulatin#
the control4freedom interaction bet.een #overnment and CPSEs> ,rice fi&ation$
investment ,lannin# and financial mana#ement. "hese ,arameters are
essentially financial in nature.
5. "he o! system .as #iven broader thrust by the <ndustrial Policy of 5DD5 .here
in it .as mentioned in that ,olicy statement Kthere .ill be #reater thrust on
,erformance im,rovement throu#h the o! system throu#h .hich mana#ement
.ould be held accountable. "echnical e&,ertise on the ,art of the )overnment
.ould be u,#raded to ma(e the o! ne#otiations and im,lementation more
effectiveL.
Pa#e 43
6. Durin# the initial years of o! im,lementation$ )overnment of <ndia laid #reater
em,hasis on the core sectors li(e Steel$ Eeavy En#ineerin#$ Coal$ Po.er$
Petroleum and FertiliAers. <nitially$ o!s .ere done for enter,rises belon#in# to
these select sectors only. "he first set of o! .as si#ned by four CPSEs for the
year 5D0+40-. 'ver the years$ more CPSEs .ere brou#ht .ithin the system and
for the year 735747353 5D- CPSEs have si#ned o!s .ith their res,ective
administrative ministries.
7. *evam,in# <nitiatives ta(en by )o<@4<nitially the ,rocess of o! .as based on
ne#otiations bet.een the enter,rise and the res,ective inistry. "he system .as
revam,ed in 5D0D and it moved closer to the Ksi#nallin# systemL of the Pa(istani
and the ;orean models as develo,ed by Prof. 6eroy P. :ones (Director$ Public
Enter,rises Pro#ramme$ Goston !niversity). "he P,erformance contractI under
the o! system #ot de4lin(ed from the medium4term a#reement as
recommended by 9r=un Sen#u,ta Committee .hich .as im,lemented till 5D0+.
!nder the ne. o! system that .as im,lemented from the financial year of
5D0D4D3$ ,erformance evaluation .as based on the annual tar#ets a#reed u,on
bet.een the #overnment and the CPSEs$ rather than the five4year tar#et. From
5D0D45DD3 the Si#nallin# System .as ado,ted and it remains in vo#ue till the
,resent.
8. "he o! system .as a#ain revam,ed in 7334432 by a study conducted by the
/ational Council of 9,,lied Economic *esearch (/C9E*) en#a#ed by DPE.
%hile the ,erformance evaluation under the earlier system allocated +3C .ei#ht
to Pfinancial ,arametersI and 43C .ei#ht to Pnon4financial ,arametersI$ the
/C9E* recommended e8ual .ei#hts (23C) to both PfinancialI and Pnon4financialI
,arameters. 9s ,er the recommendations #iven by /C9E*$ .hich is bein#
follo.ed in the current o! #uidelines$ e8ual .ei#hts are #iven to financial (23C)
and non4financial (23C) ,arameters. "his is done accordin# to the Galanced
Scorecard a,,roach to ,erformance mana#ement. "he financial ,arameters are
,resented in absolute values as .ell as in ratios. "he non4financial ,arameters
are further divided into dynamic ,arameters$ enter,rise4s,ecific ,arameters and
sector4s,ecific ,arameters.
Pa#e 44
9. "he evolution of o! as a mana#ement tool is of fairly recent ori#in and it
evolved to im,rove the efficiencies of the PSE. "he s,ecific ob=ectives of the o!
system are to>
<m,rove the ,erformance of PSEs thou#h increased mana#ement
autonomy@
*emove the haAiness in #oals and ob=ectives@
Evaluate mana#ement ,erformance throu#h ob=ective criteria@ and
Provide incentives for better future ,erformance.
10. o! system is essentially a system of mana#ement audit. <t is not an attem,t at
a rea,,raisal of the ori#inal investment decision .hich brou#ht the PSE into
bein#$ or a revie. of the ,olicies$ .hich lay behind the establishment of the PSE.
"he o! is an instrument to evaluate the ,erformance of the mana#ement in a
#iven year .ith reference to the commitments a#ainst s,ecific indicators made in
the o! for the year. <t tries to reduce the information asymmetry that e&ists
bet.een the #ovt. actin# as the o.ner of the enter,rise and the mana#ers of the
PSE.
11. 9 %or(in# )rou, headed by Shri 9sho( Chandra$ the then Chairman "as( Force
.as constituted in 9u#ust 7330 by )overnment of <ndia to revie. the o!
#uidelines in CPSEs. "he re,ort recommended that .hile determinin# the basic
tar#ets$ the enter,rise ,erformance for the ,ast 2 years must be ta(en into
consideration$ other.ise if the estimated achievement for the year is ta(en into
consideration as it .as bein# done$ it could lead to distortions. "he )rou,
recommended that thou#h the Galanced Score Card method .as acce,table
.herein 23C .ei#hta#e .as #iven to both financial and non4financial
,arameters$ it .ent ahead and said that for those enter,rises .hich are not
,urely commercial in nature$ or .hich are o,eratin# in a ,urely #overnment
administered ,ricin# re#ime$ enter,rises .or(in# in social and financial sectors$
the .ei#hta#es for financial and non4financial ,arameters may be suitably
altered.
Pa#e 42
12. 9nother study .as conducted durin# 7355 by De,artment of Public Enter,rises$
)overnment of <ndia$ .herein the study .as #iven to D< )ur#aon to su##est
measures for im,rovin# the system of o!. "he re,ort su##ested si& different
(inds of formats for o!s bet.een CPSE and its inistry (anufacturin# and
inin# Sectors$ "radin# and Consultin# Sectors$ Social Sector$ Financial Sector
and Sic( enter,rises). "he re,ort also su##ested that the 9dministrative inistry
and the CPSE may formulate t.o additional enter,rise s,ecific ,arameters li(e
,hysical ,roduction$ #lobaliAation$ ca,ital e&,enditure$ e&,ansion ,lans$ economy
measures to cut costs etc) of 53 mar(s each a#ainst the 53 mar(s meant for
enter,rise s,ecific variations.
13. "he Ei#h Po.er Committee (EPC) on o! is a Committee of Secretaries (C'S)
set u, by the )overnment as the 9,e& Committee to assess the ,erformance of
o! si#nin# CPSEs .ith reference to the commitments made by them in the
o! and also to assess ho. far the 9dministrative inistries/De,artments have
been able to #ive the necessary su,,ort as committed by them in the o!. EPC
is headed by the Cabinet Secretary and is assisted by an inde,endent$ neutral
body of e&,erts called "as( Force on o! for annual #oal settin# of CPSEs and
their ,erformance evaluation durin# and at the end of the year. "hey also assist
DPE and EPC on o! for determinin# the o! format$ ,arameters and inter se
.ei#hts. "he "as( Force is further divided into different #rou,s called syndicates
and each syndicate is entrusted .ith the tas(s relatin# to o! e&ercise of CPSEs
of a ,articular sector.
14. 9s ,er the decision of the KEi#h Po.ered Committee on o!L headed by the
Cabinet Secretary$ all CPSEs$ Eoldin# as .ell as Subsidiaries Com,anies and
includin# sic( and loss ma(in# CPSEs are re8uired to si#n o!s .ith their
administrative inistries/De,artments by 35
st
arch every year. <t is e&,ected
that si#nin# of o! .ould im,rove the ,erformance of CPSEs and also hel, the
)overnment in monitorin# their ,erformance.
15. Performance tar#ets for o!s are framed on a five ,oint scale (E&cellent$ Hery
)ood$ )ood$ Fair$ and ,oor). "he draft o!s submitted by the CPSEs to
De,artment of Public Enter,rises throu#h their administrative inistries/ holdin#
com,anies are discussed and after mutual acce,tance of finaliAed the
,arameters at the o! ne#otiation meetin#s arran#ed by the De,artment of
Public Enter,rises.
Pa#e 4+
16. Performance Evaluation is based on the PGalance Score CardI a,,roach and
includes both KfinancialL and Knon4financial ,arametersL havin# e8ual .ei#ht of
23C each. Eo.ever$ in the case of syndicate #rou,s KSic( and 6oss a(in#
CPSEsL and KSection 72 CPSEsI the .ei#hts for financial and non4financial
,arameters are 43C and +3C res,ectively
17. "he content of the o! has chan#ed over the years .ith dynamic factors bein#
introduced. "hese factors such as Euman *esource Develo,ment (E*D)$
*esearch F Develo,ment (*FD)$ Sustainable Develo,ment (SD)$ Cor,orate
)overnance$ Cor,orate Social *es,onsibility (CS*) .ere conse8uentially #iven a
hi#her .ei#hta#e so as to duly re.ard those PSEs .hich aim for not =ust short4
term ,rofit but lon#er term sustainable #ro.th.
18. Performance Evaluation of the CPSE is done at the end of the year on the basis
of actual achievements vis4Q4vis the o! tar#ets. CPSEs are re8uired to submit
,erformance evaluation re,orts on the basis of audited data alon# .ith 9nnual
9ccounts$ Galance Sheet etc. to De,artment of Public Enter,rises throu#h their
administrative inistries/De,artments .ithin the tar#et date of 35
st
9u#ust.
19. "he evaluation of the o! si#nin# CPSEs is done at the end of the year by the
"as( Force on the basis of actual achievement vis4Q4vis the o! tar#ets. "he
.ei#hted score for each ,arameter in the o! is .or(ed out by ta(in# into
account the actual achievements and the .ei#hts assi#ned to that ,arameter.
"he overall o! com,osite score is$ thus arrived at by addin# .ei#ht score for all
,arameters. "his system is based on PFive4,ointI scale and Pcriteria .ei#htI for
the calculation of Com,osite Score$ .hich is inde& of the ,erformance of the
CPSE .ith reference to its tar#ets. "he system of *atin# CPSEs on the basis of
o! Com,osite Score is as follo.s>
o! Com,osite Score *atin#
5.33 1 5.23 E&cellent
5.25 1 7.23 Hery )ood
7.25 1 3.23 )ood
3.25 1 4.23 Fair
4.25 1 2.33 Poor
Pa#e 4-
20. 9fter com,letin# the evaluation of the ,erformance of the o! si#nin# CPSEs
.ith the assistance and e&,ertise the "as( Force$ DPE submits the results to the
Ei#h Po.er Committee headed by the Cabinet Secretary for its a,,roval. 'nce
the Ei#h Po.er Committee #ives its seal of a,,roval to the evaluation done by
the "as( Force$ the com,osite score and the ratin#s of the CPSEs become final.
Com,osite score$ thus$ facilitates measurin# the ability of the CPSEs to meet
their o.n commitments and to com,are and ran( various CPSEs even thou#h
the commitments of these enter,rises are different.
21. 9s ,er the :a#annath *ao CommitteeIs (Second Pay *evision Committee)
recommendations$ o! ,erformance evaluation is one of the basic criteria for
Performance related ,ay (P*P). "he )overnment has acce,ted this
recommendation. "he si#nin# of o! by the CPSEs .ith their ,arent inistries/
De,artments/ Eoldin# Com,anies has been made mandatory for ma(in# them
eli#ible for ,erformance related ,ay/variable ,ay. "he o! ratin# also forms the
basis of P*P$ .ith all the (ey result areas identified in the o!. "he P*P .ill be
,ayable at 533C eli#ibility levels in case the CPSE achieves the o! ratin# as
KE&cellentL. <n res,ect of KHery )oodL$ K)oodL and KFairL o! ratin#s$ the
eli#ibility levels for P*P .ould be 03 C$ +3C and 43C res,ectively. <f the o!
,erformance of a CPSE is rated as PPoorI$ it .ill not be eli#ible for P*P
irres,ective of the ,rofitability of the CPSE.
22. "he non4monetary incentive is in the form of o! E&cellence 9.ard. 9,art from
,rovidin# an incentive for the Central Public Sector Enter,rises to.ards achievin#
e&cellence in their ,erformance$ these o! a.ards are an e&,ression of
commitment of the ,olicy ma(ers to the CPSEs and the o! system.
23. "he total number of o! E&cellence 9.ards are 57 (5 from each of the 53
Syndicate #rou,s$ 5 from the listed CPSEs$ 5 from amon#st the turnaround sic(
and loss ma(in# enter,rises). 9ll other PE&cellentI ,erformin# CPSEs #et o!
E&cellence certificates.
24. "he follo.in# three basic ,rinci,les for selection of CPSEs for o! E&cellence
9.ards and Certificates from amon#st the Syndicate #rou,s are follo.ed:
"he ,rofit of the CPSE in the year should be hi#her com,ared to the
,revious year.
<t should not be a loss4ma(in# enter,rise.
"he com,osite score of the CPSE should not be more than 5.2
(E&cellent ratin#).
Pa#e 40
Com,liance of Cor,orate )overnance is one of the criteria for the
consideration of o! E&cellence 9.ards.
25. 9.ard is #iven to the CPSE meetin# the above criteria and havin# the best o!
com,osite score in the concerned Syndicate )rou,. <n case t.o or more CPSEs
score the same o! com,osite score in a Syndicate )rou,$ the CPSE recordin#
the hi#hest #ro.th rate of net ,rofit over the ,revious year is eli#ible for the
9.ard.
26. *an(in# of CPSEs for o! E&cellence 9.ard in the cate#ory of Plisted CPSEsI
and Psic( and loss ma(in# CPSEsI is done by the De,artment of Public
Enter,rises. "he Klisted CPSEsL .ith the hi#hest ,ercenta#e #ro.th in mar(et
ca,italiAation are arran#ed in descendin# order and the CPSE .ith the hi#hest
#ro.th is selected for the o! E&cellence 9.ard.
Pa#e 4D
Annex J
B0)e2 n%+e %n +(e C500en+ M%U F%0.a+*
Financial Parameters Mining and
manufacture
Trading &
Consulting
Sector
CPSEs
under
section 25
Financial
Sector
Sick & Loss
Making
CPSEs
CPSEs
Under
constru
ction
Profit Related
i) Disbursements
ii) *esource
mobiliAation
6oan sanctions
iii) Pro=ects
commissioned in value
terms
iv) Financial returns
(differential bet.een
cost of borro.in#s and
disbursements)
v) *ecoveries as a C of
amount due
vi) *ecoveries as a C
of amount overdue for
varyin# years
vii) Cash #eneration
from ',erations
12+2+5+4+
5
22 5
/'/E
Gross Margin to Gross
Block (manuacturing!
or to Gross "al#s
($ra%ing!
2 10
Gross &roit to ca&ital
#m&lo'#%
10
(&#rating
turno)#r*+m&lo'##
12
Size Related
Gross "al#s 4 4 4 10
Gross Margin 8 8 10 8 10
et Profit 5
!ross Profit 5
"dded #alue
Producti$it% related
Management Ratios
,B-.$*$otal
+m&lo'm#nt
7 7 2 7
/#t &roit*/#t 10
Pa#e 23
0ort1
2%%#%
3alu#*"al#s
9 9 9
0orking
4a&ital*$urno)#
r
5
SU& T'T"L 5( 5( )( 5( )(
on*Financial
Parameters &
+ndicators
Mining and
manufacture
Trading &
Consulting
Sector
CPSEs
under
section 25
Financial
Sector
Sick & Loss
Making
CPSEs
CPSEs
Under
constru
ction
Ca,ital E-,enditure
Pro.ect
+m,lementation
milestone
Pro.ect related
,arameters
,1'sical
ac1i#)#m#nt(tim#
o)#r run!
25
,ro5#ct cost(cost
o)#r run!
25
Strategic
Planning/Cor,orate
,lanning/$ision
,1'sical
targ#ts
(r%#r 6ooking
-i)#rsiication*mo%#rni7
ation*#8&ansion*2%o&ti
on o .nno)ati)#
&ractic#s
/o. o B#n#iciari#s
assist#% %uring t1# '#ar
9ag# o 6#n#iciari#s
ins&#ct#% %uring t1#
'#ar
9ag# o 6#n#iciari#s
oun% %uring ins&#ction
to 1a)# &oss#ss#% t1#
ass#ts cr#at#%
9ag# o assist#%
6#n#iciari#s oun%
%uring ins&#ction to
1a)# cross#% &o)#rt'
lin#
9ag# r#%uction in non:
&#rorming ass#ts:
'#ar;is# 6r#ak u&
/o. o 6#n#iciari#s got
Pa#e 25
assist#%un%#r go)t.
sc1#m#s
Financial Parameters Mining and
manufacture
Trading &
Consulting
Sector
CPSEs
under
section 25
Financial
Sector
Sick & Loss
Making
CPSEs
CPSEs
Under
constru
ction
/o. o targ#t grou&
&ro)i%#%
+ntr#&r#n#urs1i& -#)*
skill%#) &rog. $1at 1#l&
t1#m to s#cur#
#m&lo'm#nt
,artn#rs1i& ;it1 go)t.
%#&ts.. to l#)#rag#
#8isting sc1#m#s
,artn#rs1i& ;it1 +-,
.nstitut#s to train
6#n#iciari#s
0RM 5 5 5 5 5
1ualit%2 +S'
Certification
Customer satisfaction
as measured 3%
re,eat orders 3%
same customers
!lo3alization
R&4 5 5 5
Cor,orate Social
Res,onsi3ilit%
5 5 5
Sustaina3le
4e$elo,ment
5 5 5
Cor,orate
!o$ernance
5 5 5 5 5
Sector 5s,ecific
Parameters
,r#&aration*
.m&l#m#ntation o t1#
Busin#ss* <#)i)al ,lan
G#n#ration o un%s
rom non:&#rorming
ass#ts
<#%uction in
r#c#i)a6l#s
.n)#ntor' 4ontrol
Enter,rise*s,ecific
Parameters
Com,liance of 4PE
!uidelines
SU& T'T"L <= <= @= <= @= ?==
!R"4 T'T"L 6(( 6(( 6(( 6(( 6(( 6((
Pa#e 27
Annex K
D$E TASK FORCE ON M%U 2%0 2=?24?'
CHAIRMAN Shri P.G. Mankad, IAS 1964
S.No. Syndicate Convener inance
!"#ert
CSR S$%taina&'e
(eve'o#)ent
R*( H$)an Re%o$rce%
Mana+e)ent
1 A+ric$'t$re,
erti'i,er,
Che)ica'% *
Phar)a.
Sh. -.N... Sriva%tava,
!"/Secy, G0I,
1IAS266, P34
Sh.
Mahendra
5.
A+ra6a'a,
Chartered
Acco$ntant,
Sh. A.S. 3an%a',
!"/CM(, 7CI.
(r. Siri%h
San+'e,
Pro8,
NI7I!,M$)&ai
(r.3a'dev Ra9
IGCAR
M% Shie'a 3hide,
!"/Secretary, G0I
1IAS2 :;, AP4
< Stee' * other
Minera'%
Sh. Srini&a% Rath,
!"/Add'.Chie8 Secy.,
0ri%%a,
1IAS26=,0ri%%a4
Sh. -yoti
Praka%h
Gadia,
Chartered
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Sh.S.N. (a%h,
!".Secretary, G0I,
IAS/ 5era'a>:;
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Arora
CII/I7C
Centre 8or
!"ce''ence on
S(
Sh. R.5. Mi%hra,
(irector, IP!,
Sh.
R.3andyo#adhyay
!"/Secretary,GoI
IAS 2 ?3 2 :4
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Petro'e$)
Sh. A9ay ($a,
!"/Secy. 1IAS2:1,
MH4
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Sara6+i
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Con%$'tant
(r S.Sivara)
!"/
(irector,NC.,P$ne
Sh
7.-ayara)an
Pro8e%%or,,7ISS
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Sh. 3ri9e%h 5$)ar,
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5.5.G$#ta
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Centra'
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Pro8e%%or,IMI,(e'hi
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Shri 7 S .a%char
I!S Retd. 19:;
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Sh 3rah) ($tt
!"/Secretary,GoI
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Generation *
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Sh. Ani' Ra,dan, !"/
Secy. G0I, 1IAS2:<,
HR4
Sh. C.S.-o+,
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Con%$'tant
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3ha''a, MS,
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Sh.B.(.
Cho$&ey,
!"/CM(,
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Sh. Bdde%h 5oh'i,
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Shri
Mani%h
5edia
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Sh. 5... Mehrotra
!"/CM(, M0I.
Mr
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!"/3H!.
S)t. Ra)a Rani
Hota,
!"/Chie8
Co))i%%ioner, I/
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Chatter9ee, !"/Secy,
G0I, 1IAS266, ?34
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(ha6an,
Chartered
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Sh. P.P. @ora,
!"/CM(, AC7,
Sh. A.5.Rath
!"/
Secretary,GoI
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Sh. Ade%h C. -ain,
Hon. Pre%ident,
PMA
= 7ran%#ort *
7o$ri%)
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!"/Secy, G0I,
1IAS266, 0ri%%a4
Sh. 3.5.
Sahoo,
Chartered
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Sh. @inod So)ani,
Chartered
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(r Pra%ad
Modak
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S+ri R.5.Narayan
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Cor#n
Sh @.5.Ma'hotra
1IAS2:D,B.P.4
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9 !'ectronic%,
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Sar)a, IAS16=4
Sh. P.5.
Shar)a,
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Sh. 3.R. 5$)ar,
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Sh. 3.C.
Maha#atra, !".
Chair)an,
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Cho$dh$ri,
!"/Me)&er, P!S3,
Shri A)arendra
Moha#atra
or)er
(irector,MM7C
1D Section <C CPS!%
* inancia'
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Sh. 5.R. Nair,
1IAS26:, P34
Sh. Ra9i&
Sekhar
Sahoo, CA
Shri G. B#adhyaya
or)er (irector,
SAI.
Sh. 3. Sa)a',
!"/Chair)an,
A''aha&ad
3ank
Shri R.P.09ha
or)er !(,PGCI.
Shri @.Shivak$)ar
Me)&er,Pra%ar
3harati
Pa#e 23
11 Sick * .o%%
Makin+/I
Sh. A.5. -ain,
!"/Secy, G0I,
1IAS2:D, BP4
Sh. R.5.
A+ra6a',
Chartered
Acco$ntant
Sh. S.(. 5a#oor,
!"/CM(, MM7C
NA NA Sh. 5. Cherian
@ar+he%e,
!"/Chair)an,
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(r. S.S.
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Chand
G$#ta,
Chartered
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NA

NA Shri A.I.3$net
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(irector,PGCI.
Pa#e 24