MoU Methodology. The MoU system was revamped in 1989 and was modelled on ‘the signaling system’ using the five-point scale of performance measurement, that is, ‘excellent’, ‘very good’, ‘good’, ‘average’ and ‘poor’. This was further refined in 2004-05 utilising ‘the balanced score card’ methodology. Under the MoU Guidelines for the year 2013-14, ‘financial’ and ‘non-financial’ parameters were assigned equal weightage (50%) for all CPSEs except section 25 CPSEs and sick & Loss making CPSEs where they were assigned weightages of 40% and 60% respectively. The ‘financial’ parameters are both in the form of absolute values, such as gross margins (profits) and turnover as well as in terms of financial efficiency ratios. It is stipulated that financial parameters should be consistent with the proposed Annual Plan/Annual Budget and Corporate Plan of the CPSE. The ‘non-financial’ parameters (dynamic parameters) are of three kinds, namely, dynamic parameters, sector specific mandatory parameters and enterprise specific parameters. The dynamic parameters include project implementation, quality of products and services, customer satisfaction, Human Resource management, Research & Development, Capital Expenditure (CAPEX), Corporate Social Responsibility (CSR) & Sustainable Development (SD), extent of globalization, adoption of innovative practices etc. The ‘sector-specific’ parameters refer to macroeconomic factors like change in demand and supply, price fluctuations, variation in interest rates etc, while the ‘enterprise-specific’ parameters relate to issues such as safety and pollution etc. For MoU 2013-14, Corporate Social Responsibility & Sustainable Development (8% weightage), R& D (5%weightage), were mandatory parameters. In the MoU 2013-14 negative marking was introduced to penalise non- compliance with DPE guidelines including those on Corporate Governance. The MoU guidelines 2013- 14 emphasized inclusion of project implementation, listing by CPSEs and CAPEX. The rating of performance of a CPSE is done on the basis of a Composite Score which is an index of the performance of the enterprises. The rating of the ‘composite score’ is done in the following manner: MoU Composite Score Rating 1.00-1.50 Excellent 1.51-2.50 Very Good 2.51-3.50 Good 3.51-4.50 Fair 4.51-5.00 Poor
