SAIL MOU Evaluation Chapter 4

Chapter – 4 Importance of MOU for SAIL 4.1 Concept of Memorandum of Understanding (MOU): The concept of MOU arose from the report of Arjun Sengupta Committee. SAIL was among the first Public Sector Undertakings to enter into MOU (first time in 1987-88). Since then, SAIL has been entering into MOU wi...

Chapter – 4 Importance of MOU for SAIL 4.1 Concept of Memorandum of Understanding (MOU): The concept of MOU arose from the report of Arjun Sengupta Committee. SAIL was among the first Public Sector Undertakings to enter into MOU (first time in 1987-88). Since then, SAIL has been entering into MOU with the Ministry of Steel. Purpose and Scope of MOU: The purpose of the MoU is to measure the performance of SAIL on key selected parameters against the targets agreed upon so as to improve the critical performance indicators of the organization. The MOU envisages the performance expectations of Government of India from SAIL. The MoU enables SAIL to operate as an efficient public sector commercial enterprise within the broad policy objectives set by the Government and the requirements of Parliamentary Accountability. The MoU in respect to SAIL is being finalized by Department of Public Enterprises [DPE] on consolidated basis only (i.e. including all subsidiaries and JVs of SAIL). MoU target setting and its evaluation in respect of SAIL’s subsidiary maybe done by SAIL on the same principles as being followed for SAILby DPE. 4.2 The MOU Framework: The parameters included in the MoU process are market oriented reflecting the shareholders· interest in terms of growth in revenue, return on net worth, asset turnover ratio and market capitalization for listed CPSEs. The parameters are further indexed to past performance and future projections of the CPSE; vision of the Administrative Ministry; sectoral benchmarking and peer comparison (if any).Vision provided by the Administrative Ministry is also considered for Benchmarking. All the parameters are quantifiable and verifiable from the documents in public domain. Besides certain government's priorities/ programmes such as CSR, procurement from MSEs, etc. are alsoincluded for compliance by CPSEs. the non-compliance of which would result in deduction of full marks i.e., there would not be any partial deduction. 46 4.3 Digital dashboard: A digital dashboard with a centralized portal developed by DPE is being used for entering, signing, monitoring and evaluating MoU agreements. The CPSEs and Administrative Ministries would be on boarded with appropriate user roles. 4.4 MoU Evaluation: Once the Company’s data from its audited balance sheet and P&L Statement is available on the dashboard, the score would be automatically calculated against the benchmarked targets. There would be no adjustment in MoU agreement due to changes inMoU exchange rate, prices of raw material or finished goods or due to offset for any other reason as these are deemed to be normal business activity and audited statement of accounts declared shall prevail. The criterion for evaluation of score is as below:    Proportionate marks for achievement of 50% to 100% Targets - Applicable to all parameters unless specified by DPE for a certain parameter. No marks for achievement below 50.00% of Targets. Score on all parameters would be added to arrive at aggregate score. Besides certaingovernment's priorities/ programmes such as CSR, procurement from MSEs, etc. are alsoincluded for compliance by SAIL, the non-compliance ofwhich would result in deduction offull marks i.e., there would not be any partial deduction. The Final aggregate Score is arrived at after deduction of marks towards noncompliance from the aggregated score. MoU Rating: The MoU rating ofCPSEs will be assigned as per the following Table: MoU Score >= 90 >=70 >=50 >=33