DIPAM devising matrix to monitor cash utilisation by PSUs

The newly created Department of Investment and Public Asset Management (DIPAM) has devised detailed parameters to monitor the performance of state-owned companies for ensuring optimal utilisation of cash and free reserves, estimated at Rs 2.6 lakh crore.

The government, as an investor, will expand its focus from disinvestment and also work for improving the financial and physical performance of the PSUs, a top official said. In case PSUs are unable to utilise their surplus cash, government would nudge them to buy back shares using free reserves, the official said.

In order to evaluate the performance of PSUs, government has evolved 10 parameters which include capacity utilisation, leveraging networth, return on investment, technology upgradation and marketing efficiency. “The idea behind the exercise is to ensure that cash does not remain idle and is utilised optimally by PSUs who have high networth and negligible or zero leverage ratio and whose expansion of business does not justify holding so much cash,” the official said.

While the private sector companies utilise cash for acquisition or capital expenditure, the PSUs have a trend of holding on the cash and bank and hence their balance sheets needed to be looked at professionally, the official added.

To assess the cash utilisation of PSUs, the government starting this fiscal will also look at ratios like-- return on networth, dividend to networth, Profit after tax to networth.