Finance ministry to ensure PSUs meet investment target.

NEW DELHI: The finance ministry is contemplating a raft of measures to ensure that the cash-rich state-run companies stick to their investment targets.
Officials told ET that the ministry has proposed to review the performance of these companies on a quarterly basis.

The ministry is also likely to suggest that performance-linked pay of senior executives be held back in case the company fails to meet its investment goals. If the companies still do not fall in line, the ministry may ask them to surrender their cash to the government through big dividends, these officials said.

"The PSUs (public sector undertakings) had argued that they have capital expenditure plans. We want them to review their milestones accordingly," a finance ministry official said on condition of anonymity. "There is also a suggestion that the companies, which are only earning profits on their investments, should not be allowed to give performance-related pay."

The official, however, denied that the ministry is trying to arm twist these companies. "This is not a pressure tactic," he said.

The move follows Finance Minister P Chidambaram's meeting last week with heads of nine blue chip PSUs, which are together sitting on a cash pile of about Rs 1.8 lakh crore. These PSUs include NTPCBSE 0.98 %, Coal IndiaBSE 0.56 %, OIL, IOCBSE 0.78 %, ONGCBSE 0.46 %, SAILBSE 1.72 % and BHELBSE 3.03 %.

The government, which is aiming to mop up Rs 30,000 crore through divestment this year, wants the cash-rich PSUs to expedite their capital expenditure plans. It has already given them the option of share buy back.

The official quoted above said the finance ministry has sent a note to the department of public enterprises-the nodal agency for all central PSUs-asking it to issue norms for review of PSU targets in quarterly meetings.

An official with the department said the proposal is under consideration. "We will discuss with state-run firms before formulating any guidelines," he said.

In a related development, the National Manufacturing Competitiveness Council (NMCC) has suggested that an infrastructure fund should be created to park dividends of PSUs that fail to meet their investment targets.

In a letter to the Prime Minister's Office, NMCC chairman V Krishnamurthy has suggested that such PSUs should give 100% dividend, which should be deposited in a fund that can be utilised for developing infrastructure across sectors.

The Planning Commission has also envisaged more contribution from PSUs towards the central plan.

Source : economictimes.indiatimes.com