No Performance Pay for Staff of PSUs Failing on Capex Targets
Govt aims to push central public sector enterprises to boost investment as well as growth
New Delhi: State-run companies that fail to deliver on their capital expenditure plans may not be allowed to distribute performance-related pay to their employees.
A senior official with the ministry of heavy industry confirmed the development to ET. The official, who requested not to be named, said the idea is to push central public sector enterprises (CPSEs) to boost investment and growth. Government data released on Tuesday showed that capital goods production in February declined 9.8% from a year ago, a sign of sluggishness in investments. The government has been trying to revive investment through budget spending on infrastructure and getting cash-rich, state-run enterprises to spend.
“Private investment is not picking up, so it is important that CPSEs act as engine of growth and drive investment,” the official said, adding that firms that do not leverage their net worth for expan- sion, modernisation or diversification will be asked to withhold performance pay.
At present, CPSEs can provide for payment of PRP for their employees subject to a ceiling of 5% of the profit before tax. “We will monitor companies not only for capex but also for percentage of projects completed without time and cost over-runs,” the official said.
Finance Minister Arun Jaitley, in his budget speech, had said there is a need to leverage the assets of CPSEs for generation of resources for investment in new projects. “We will encourage CPSEs to divest individual assets such as land, manufacturing units, to release their asset value for making investment in new projects,” Jaitley had said.
A senior official from a commodity sector CPSE said that amid the global downturn, the government
Deliver or Lose
At present, CPSEs can provide for payment of PRP for employees subject to a ceiling of 5% of profit before tax
should take steps to support staterun firms. “The government should create conditions such as implementing antidumping measure or clear hurdles such as land acquisition and environmental clearance issues, if it wants us to meet our capex targets,” he said.
The department of public enterprises (DPE), a nodal agency for all CPSEs, has already barred staterun firms from distributing performance pay from profits generated through idle bank balances.
Companies have to deduct the interest accrued from idle cash or bank balance while calculating their profit before tax (PBT). The government has budgeted .₹ 53,883 crore as dividends from CPSEs this fiscal.
Last year, the government had noted that there were huge variations in dividend paid by CPSEs and there was a need for a clear policy on the matter. It had then asked CPSEs to shell out 30% dividend and raised about .₹ 44,000 crore including special dividends.