In a bid to improve the efficiency and profits of state-owned firms, the government is working an ambitious plan to benchmark their performance with global standards.

New targets

According to the plan, the Department of Public Enterprises (DPE) will specify new efficiency and performance targets for each of the 13 sectors that public sector units are classified in.

“We are appointing consultants to examine national and global standards and set sectoral benchmarks that PSUs must aspire to meet. They can not just be an avenue for employment generation but should be productive, efficient and profitable entities.

“The objective is to pull up the performance of these firms so that they are able to stand on their feet,” said a senior government official.

Disinvestment drive

The move is also expected to increase the attractiveness of these firms for investors, as part of the government’s disinvestment drive.

“While PSU stocks are considered a safe bet by investors, but often their attractiveness loses lustre because of problems of efficiency and corporate governance. The benchmarking will show that the government means business,” said the official.

For instance, the proposed stake sale in Coal India Ltd has faced trouble with merchant bankers questioning its sustainability plan while disinvestment in state-owned oil companies is usually dogged by concerns over subsidy and profitability.

The process has already been initiated for the oil and gas sector as well as the thermal and hydro power sector and consultants are being appointed to conduct studies for both the sectors.

“Benchmarks for midstream and downstream oil and gas PSUs could include criteria such as exploration while generation and environment protection could be some of the standards for thermal and hydro power firms,” said the official.

The benchmarks would be included in the memorandum of understanding between the DPE and the PSUs that sets annual standards for performance and dividends.

According to official data, there were 290 central PSUs by March 2014, of which 234 were operational and 163 were profitable entities.