Memorandum of Understanding scheme' between government and public enterprise has forced public undertakings to improve the overall performance. Comment. (25 Marks/300 Words) Model Answer :
The Memorandum of Understanding is a tool employed by the Government to give greater autonomy to public sector enterprises while ensuring accountability on their part. It is in the form of a document that entails the intentions, obligations and responsibilities of the two parties in the agreement. Further it aims to exercise a management of PSE’s not based on control, but rather on results and objectives.
In order to achieve this goals an institutional mechanism is in place comprising of a High Powered Committee, Task Force and the MOU division in the Department for Public Enterprises. The MOU division communicates the guidelines for the MOU which entails the basic expectations of the Government and the direction the PSE’s must take. A process of negotiation takes place to integrate the priorities of PSE’s into the MOU document and arrive at objectives on a consensus basis. MOU’s are evaluated twice a year, once based on provisional results and the other time on audit results. The evaluation also provides a review mechanism to change the weights on the different parameters for the future. The companies are graded as Excellent, Very Good, Good, Fair and Poor.
The MOU system has been successful in increasing the efficiency of the Public Sector Enterprises since:
1)It focuses on achievement of results
2)MOU signing PSE’s are given more autonomy in financial and administrative matters making them more effective
3)MOU’s stress on marketing effort thereby making PSE’s more competitive with the private sector
4)The quarterly performance reviews have now become more targeted since they now evaluate performance in alignment with the overall goals set in the MOU. Hence the MOU mechanism keeps a check on the operation of the PSE and ensures its alignments with the goals of the Government.
2)MOU signing PSE’s are given more autonomy in financial and administrative matters making them more effective
3)MOU’s stress on marketing effort thereby making PSE’s more competitive with the private sector
4)The quarterly performance reviews have now become more targeted since they now evaluate performance in alignment with the overall goals set in the MOU. Hence the MOU mechanism keeps a check on the operation of the PSE and ensures its alignments with the goals of the Government.
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