Implementation of revised appraisal guidelines means that chairman and managing director as well as other top-level officials of a CPSE could lose their performance-related pay (PRP) in case they are unable to meet their target in key result areas (KRAs) including rationalisation of subsidiaries or joint ventures, market capitalisation improvement goals, return on capital employed, asset turnover ratio.
“This will be the first annual appraisal with revised criteria, linking the performance-related pay with market capitalisation (in case of a listed entity), return on capital, asset-turnover ratio and capex and implementation of central government policies, for instance land monetisation,” a senior official at the public enterprises department told ET.
This could have large implications for the emoluments of the top brass as PRP of top officials ranges between 50% to 150% of the basic pay.
The new guidelines are in line with the greater autonomy given to CPSEs’ boards by the cabinet, including allowing them to decide on disinvestment of their subsidiaries and exiting joint ventures, officials cited above said.
“The new appraisal system will ensure better efficiency in the performance of CPSEs, making them more competitive and at par with their private peers,” a senior officer of the Standing Conference of Public Enterprises (SCOPE) said.
SCOPE is an apex professional organisation representing central government public enterprises.
Changes in the rules governing the appraisal process were unveiled in 2020-21, but its implementation was deferred in view of the pandemic.
CPSEs have been to complete appraisals for 2021-22 till April 15, 2023. Normally, state-owned companies are expected to complete appraisals for FY22 by the end of FY23.
Separately, CPSEs also will have to commit about sale or revival of a loss-making subsidiary or project delays in their MoU (memorandum of understanding) with administrative ministries. The move is aimed at improving execution of projects as well as overall performance of these companies.