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

The Economic Times - - Economy - Dheeraj.Ti­wari @times­group.com

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.

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