CPSEs: Centre for m-cap, asset monetisation goals in MoUs

The government is set to include market capitalisation and asset monetisation among the goals set for central public sector enterprises (CPSEs) in the customary memoranda of understanding (MoUs) between the administrative ministries and these firms, department of investment and public asset management (DIPAM) secretary Tuhin Kanta Pandey said on Friday.

The staff of CPSEs — which are around 250 now — may lose on their performance related pay (PRP), if the firms fail to meet the goals on M-cap and monetisation.

What this means is that a slippage in the performance on the two parameters could result in a firm’s performance rating downgrade and consequent reduction in variable pay of its staff. The DIPAM and department of public enterprises (DPE) are working on revising PRP guidelines on these lines, FE had reported recently.

“A point of concern has been that, while between March and November (2020) the Sensex and the Nifty have risen by about 50%, the BSE CPSE index rose only 19%,” Pandey said. “We must also do Atma Chintan (introspection) as to why this is happening. Is it due to something inherently problematic in the way we manage the companies? Or is tehre something that the government can do? Or is it some issues in the government policy that has led to this situation? We have to introspect and ensure that the investors who are investing in public sector companies space are also equally rewarded and not shortchanged.” Total market cap of 54 listed CPSEs stood at Rs 9.74 lakh crore on Friday.

The secretary asked the CPSEs also to hear what market is telling on shortcomings and take steps to improve return on capital employed, return on equity and pay dividends quarterly or half-yearly to keep investors interested in their stocks. The Centre also wants CPSEs to monetise non-core assets to raise resources and repay debt.

M-cap improvement and asset monetisation are expected to aid the government’s non-debt receipts – while M-cap improvement will boost disinvestment receipts, asset monetisation drive is a relatively new channel of resource mobilization, with great potential to boost government receipts in the short to medium term.

Currently, PRP can be as high as 150% of basic pay for CMDs while it is 40% for the lowest grade officers, if the rating of the PSU performance is ‘excellent’ (a score above 90%), which ensures 100% PRP eligibility. A downgrade would bring down MoU rating from ‘excellent’ to ‘very good’ and from ‘very good’ to ‘good,’ resulting in reduction from 100% eligibility of performance-linked pay for excellent rating to 80% and 60%, respectively. Less than 50% score means staff will be denied PRP. The combined salary bill of CPSEs stood at Rs 1.53 lakh crore in FY19; these firms employ over 15 lakh people.

After the new asset monetisation policy was announced in the interim budget for FY20, the Niti Aayog had submitted a report to the government for immediate asset monetisation worth `1 lakh crore by various CPSEs. Asset monetization was included as a minor parameter with it only carrying 3 marks broken into three parts with 1 mark each (preparation, approval from DIPAM and achieving set goals). The weight for asset monetization is likely to be enhanced.

While the Centre would retain 100% of the proceeds from monetisation of non-core assets of units identified for strategic sale and enemy properties, it could share a large chunk of the proceeds with CPSEs in case operational assets are monetised.