Performance Evaluation System for Memoranda of Understanding

Memoranda of Understanding Prajapati Trivedi Following the recommendation of the Arjun Sengupta Committee, the government of India decided to adopt a system of Memorandum of Understanding (MOU) in 1986, These MOUs were supposed to outline the mutual obligations of the government and public enterprises. As of now, eleven public enterprises have signed MOUs with their respective administrative ministries and six more will be added to this list in the next round. It is fair to say, the policy of MOUs is one of the major initiatives of the government towards the public sector in India. Yet, there has been a certain degree of dissatisfaction, both within and outside the government, over the functioning of the MOU system as it has prevailed over the last two years. It was, therefore, decided that a thorough review and revamping of the system should be undertaken. While performance improvement requires action on several fronts, a proper system to evaluate public enterprise performance is a critical element of any such effort. This paper presents a pro- cedure for fixing performance criteria in MOUs and evaluating the performance of a public enterprise based on these MOUs. The proposed system has been derived after examining the international experience in this regard. According to the available information, the proposed system appears to be the most successful. After discussing the conceptual aspects of a 'desirable' performance evaluation system, the paper examines the MOU of ONGC for illustrating the difference between the existing approach and the one proposed in this paper.