Public Enterprise Performance Information System

A Proposal
Prajapati Trivedi This paper examines the much overlooked distinction between a Performance Information System (PIS) and a Management Information System (MIS). The international experience in this regard is examined along with a thorough analysis of the rudimentary PIS that operates in the Bureau of Public Enterprises, The paper makes a strong case for improving the present system after examination of all pros and cons associated with the proposed new system. A blueprint for such a system is also suggested. I Introduction
AN 'information system' is simply an organised method by which decision-makers in an organisation are presented with needed information in the appropriate format at the appropriate time, in order to improve the quality of their decisions. Therefore, the nature of the information, format in which it is presented and timing varies not only from one organisation to the next, but also from one decision-maker to another, In fact, an organisational structure, itself, is nothing but a "decision system!' It consists of decision centres and associated bi-directional information flows, both horizontal and vertical. Viewed in this framework, the decision structure of the Indian public sector may be divided into two broad categoriesthe general policy decisions of the government at the level of ministries and specific management decisions at the corporate level. The respective concerns of the decisionmakers at these two levels are very different. The government, as the owner of public enterprises, has to decide on the objectives of public enterprises, and the resources required to attain them. At the corporate level, on the other hard, public enterprise nanagers have to basically ensure that the necessary resources are obtained and used effectively and efficiently to achieve the objectives of the public enterprise.1 Given these different concerns, it is clear that the government and public enterprise managers need two different types of information systems. Hence, a distinction has to be made between the performance information system (PIS) proposed here for the government and the more detailed management information system (MIS) appropriate for the lower levels. In order to maintain the advantages of hierarchy and decentralisation of decisionmaking, and to avoid swamping of the top levels with extraneous data, it is necessary to filter information as it moves upward. Top government decision-maker need broad summary variables, not all of the details. For example, a management information system provides managers with a wealth of detai' M-140 on standard costs, inventory levels and a multitude of other factors which help them to control costs. The top of the hierarchy does not need this information; therefore, the performance information system contains much less details in this area, being concerned only with whether costs are rising or falling (and whether it is due to price or quantity effects). The two information systems are not substitutes but complements. The performance information system at the ministry level motivates the use of and, in part, measure the success of the management information system at the enterprise level. II Purpose of the System The proposed performance information system is meant for use by the government to monitor the socio-economically relevant behaviour of its public enterprises. For this purpose, the system provides information on the following three sets of economic data:2 Performance Evaluation Variables As a shareholder, the government must be able to assess the performance of public enterprise managers in order to motivate and reward them for improving performance and to make decisions on future allocations of resources to high-yielding sectors. The purpose of the proposed information system, however, is not to make a final arbitrary decision about how well managers have done. Rather, its aim is to equip the government with necessary information in order to enable it to make such a decision, if it so wishes. Financial Control Variables As the ultimate bearer of risk, the goverment must be able to assess the consolidated level of external indebtedness of the system as a whole, as well as of its constituents. In addition, it must make decisions regarding how internally generated surplus funds ought to be reallocated to the most appropriate units. Macroeconomic Variables For purposes of macroeconomic control and development planning, the government requires data on revenue, expenditure, savings, investment, borrowing, value-added, capital information, etc, by public enterprises. The proposed system provides information on these items for each enterprise and, also, at the aggregate level for the industry as well as for the entire public sector. Ill D e s c r i p t i o n of the System Conceptual Background The proposed information system was developed as part of a larger 'signalling system' which guides managers to make decisions in the national interest and rewards them for doing so. The complete system for performance improvement consists of three components:3 Performance Information System-, provides the necessary information to the government in a suitable manner, thus enabling it to monitor and evaluate public enterprise performance. Performance Evaluation System: determines the 'criteria' and criteria value' in order to distinguish 'good' performance from 'bad'. The former deals with the issue of an appropriate measure of public enterprise performance. For example, discussion regarding criteria may involve questions like: Is financial profitability an adequate measure for performance evaluation of PEs or do we need to consider other alternatives? Discussion on criteria value, on the other hand, usually involves issues such as: What level of profitability constitutes superior performance? Performance Incentive System: helps to make the results of the evaluation exercise count by linking performance to rewards and penalties. While each of the above components is essential for ensuring the success of any effort to improve public enterprise performance, the existence of a performance information system for public enterprises is a necessary (though not sufficient) condition for any public policy towards this sector. It is a common sense proposition that unless one knows the true picture, one can-

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not begin to undertake corrective public policies. Therefore, an information system is required, regardless of the government's intention to go in for an evaluation or incentive system. In fact, an absence of such a system in many countries has been a major barrier and, in some cases, a stumbling block for efforts at implementing a performance evaluation system. In India, as well, a successful implementation of many of the recent initiatives of the government such as the Memoranda of Understanding (MOUs) will depend on the availability of a good PIS. For example,, it is difficult to negotiate targets for an M O U when there is such a great asymmetry of information availability between the government and the public enterprises. The existence of a PIS will tend to rectify this imbalance It is worth noting that all countries that have recently adopted M O U type approaches, have first installed an effective PIS [Song, 1988; Mehdi, 1988; and Sosa, 1988]. In fact, in the past, MOUs were not successful in countries like France and Senegal due to the poor quality of PIS in their governments among other reasons [Trivedi, 1988]. Historical Background The original software for the proposed system was developed for the -ministry of production, government of Pakistan. It was installed primarily for evaluating the performance of public enterprises under that ministry. This software, known as PEPIS (Public Enterprise Performance Information System), was written in Fortran for use on a mainframe computer.4 Subsequently, it was extensively modified after consultation with the Korea Development Institute (KDI) and Economic Planning Board, government of Korea. This version was intended for much more extensive use in Korea. Besides operational efficiency, this sytem was to be used for national income accounting, input-output analyses, macroeconomic planning and research on economic as well as financial dimensions of public enterprise operations (Park, 1986). A significant development in the history of PEPIS occurred when the Venezuelan government decided to install this system and convert it to a micro-computer based software. At this stage, the entire program was rewritten using Lotus 1-2-3. At this stage, the Venezuelan planning agency, C O R D I P L A N , intends to use it for sectoral planning. Once the system becomes familiar, it is expected to be used as part' of a larger signalling system consisting of all the three components mentioned earlier.5 Structure of the System PEPIS consists of three kinds of tables: (a) Input Tables (b) Output Tables (c) Summary Tables The input tables are used to record the input data which is derived mainly from the audited financial statement of a public enterEconomic and Political Weekly

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prise. Only a small amount of additional information is needed for constant price calculations. In some cases, like the cement industry, even this information is given in the schedules for the financial statements. This information in the input formats is processed to produce 'output' tables and 'summary' tables. The two differ only in their respective level of details. The summary tables are meant for the top policy makers who require the 'broad picture'. The output tables represent the intermediate calculations and are meant for 'technocrats' who may be interested in explaining the aggregate summary measures contained in the summary tables [Jones and Trivedi, 1983]. It may be useful to think of PEPIS as a hierarchical triangle, with' the summary table at the top, as shown in the figure As the information travels upwards, it is filtered and summarised while maintaining the original integrity of the accounting data. In order to understand the relationship between PIS and MIS, it is instructive to show MIS as the last layer in the hierarchy. In fact, the audited financial statements are really summary tables of enterprise level MIS. The input, output and summary formats mentioned above are generated for each enterprise. In addition to these enterprise reports, PEPIS can generate the following reports: Aggregate Sector Report: This report aggregates all enterprises in the sector or subrsector (eg, the enterprises under one corporation) and generates a five-year time series for the more important tables in the

basic enterprise reports. This is a composite rather than a consolidated report. Rank-List Report: This report presents rank-lists for all the companies far selected indicators. For example, it can prepare a listing of all companies arranged in descending order of their public profitabilities. Comparative Sub-Sector Report: This report provides all input, output and summary tables for selected companies in a comparative format for a single year. The comparative tables are identical in format to those of the basic enterprise reports, except that these tables give cross-section information rather than time-series. That is, instead of giving data for one company for five years, they give data for five companies for one year. Types of Analyses The various tables of PEPIS support different sorts of analyses. The user is free to choose whichever type is most suitable for his or her purpose Many of the options may not be used in the early stages of implementation of the proposed system and, in fact, some options may never be used. For example, PEPIS has an option for using shadow prices -for measuring costs and benefits. However, Pakistan decided not to use this option in the initial stages of implementing its version of MOUs. Broadly speaking, the types of analyses performed by PEPIS may be classified into three categories. Business Analysis-, Since the integrity of M-141

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the original accounting data is preserved in the system, conventional, management analysis can be performed. Appendix I from PEPIS shows the kinds of standard financial ratios comouted by the proposed system. Economic Analysis: The system takes the data supplied by the accountants and rearranges it into economically meaningful categories following the methodology of the United Nations System of National Accounts. In the process, it generates production and distribution flows and assets and liability stocks, all at either market or shadow prices and at current or constant prices.6 Appendix II gives a sample of output tables in this category. Performance Evaluation: In addition to being an information system for aiding financial analysis and planning, PEPIS is also equipped to aid in a performance evaluation exercise. When speaking about public sector efficiency, a distinction has to be made between static and dynamic efficiency. The former tries to determine how much social welfare is being generated from a given stock of assets in a particular year. Not all actions of the enterprises taken in a particular year, however, bear results in that year. Research and development (R and D) is a well known example of this phenomenon. While PEPIS focuses on the measurement of static operational efficiency using public profitability as the primary criterion, 7 provision is also made for supplementary indicators to capture dynamic effects such as R and D and repair and maintenance. Further, there is a sub-routine which generates a single performance score based upon user-defined weights and criterion values. Finally, there is a 'social adjustment account' for commercialising non-commercial objectives and adjusting for certain exogenous constraints placed on managers. IV Comparison of PEPIS with Existing PIS Description of PIS in the Bureau of Public Enterprises Each year, the Bureau of Public Enterprises (BPE)prepares a report on the working of industrial and commercial undertakings of the central government. This report, entitled 'Public Enterprise Survey', is presented to the parliament in February of each year, prior to submission of the general budget for the succeeding year. lb prepare this survey, BPE contracts the services of the National Informatics Centre (NIC), This agency stores, processes and retrieves data on approximately 245 central public enterprises. The BPE initiates the process by asking all public enterprises to fill out a proforma (in triplicate) with financial and other data extracted from the auditied and adopted
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accounts for each public enterprise. The returned proforma (Appendix I I I ) are checked manually against the audited accounts for any errors. If there are problems, clarifications are sought. Otherwise, the proforma are forwarded to the N I C . The N I C enters the data in to its computers and checks, once again, for errors. If there are still further problems, clarifications are sought from the enterprise via BPE; if not, print-outs are generated and sent to BPE. Using these print-outs, BPE prepares its Public Enterprise Survey. Limitations of the Existing PIS At the very outset, it must be pointed out that India was one of the first LDCs to have installed some kind of a PIS for public enterprises. In discussing the limitations, one must bear in mind this pioneering aspect of the existing system.8 The promising start India made in this regard was, however, never fully capitalised. One would have expected to see an evolution of successive generations of more useful and powerful Performance Information System. Unfortunately, this growth was stymied and stunted. The role of the BPE in the overall scheme of thi rigs, as well as uncertainty regarding its future, must have been a major contributory factor in retarding the evolution of a better system. While the growth and role of the BPE are important areas to explore, they are beyond the scope of this paper. However, it should be noted that the critique that follows is an extension of a debate that has been going on for some time. Unfortunately, previous critiques, in spite of being insightful, failed to generate any concrete action on the part of the government. In part, perhaps, because no concrete alternatives were offered, I quote extensively from Iyer (1986) to illustrate this point. Unfortunately, there is often far too much information of diverse kinds, not all of it useful, flowing into different ministries and agencies in the government from public enterprises. Under such circumstances, there are two dangers. One is that the enormous inflow of information into the government disappears into files and cabinets and that it is not studied, much less responded to. This is not a monitoring system at all; it is merely a waste of stationery, office space and managerial time. The mere fact that the reports and returns of all kinds are flowing into the government does not mean that a monitoring system exists. ... It is necessary to remember in this context that any well-managed public enterprise must have an internal monitoring system. Monitoring has to be done at various levels for various purposes, To the extent that there is a good monitoring sytem within an organisation, which serves the purposes of the top management of the enterprise, that system should have in it elements which ought to be able to meet the requirements of governmental monitoring, without a fresh expenditure of executive time and energies on data collection or tabulation.

However, monitoring by the top management is bound to be far more detailed and managerial than monitoring by the government. This distinction ought to be kept in mind, and in laying down an information system for monitoring, government should not expect the same degree and depth of information as is made available to the board of directors. In the balance of this section, we simply list the limitations of the existing PIS at BPE and contrast them with the features present in PEPIS. Lack of Constant Price Calculations. One of the major sources of confusion in assessing public enterprise performance is the role of changing prices. It is often observed that both the profit and loss of a public enterprise (PE) are often attributed to changes in prices. Profits are said to arise because of an increase in output prices, losses due to a net increase in input prices. While all this may be true in some cases, the BPE system is incapable of distinguishing between the pure "price effects" and "real effects" because of all its calculations are in current prices. Input Tables Too Condensed: The proforma sent by the BPE to all public enterprises forces the latter to condense their audited accounts in order to fit the proforma. This, in turn, creates several problems. An element of arbitrariness and adhocness is introduced because many items have to be lumped together. For example, there is no separate provision for 'nonoperating' expenses in the BPE proforma. If such expenses do exist for a PEthey have to be forced into one of the categories under 'Expenses on Production'. This lack of differentiation between 'non-operating* and 'operating* expenses is particularly surprising since this distinction is clearly made on the 'income' side (Proforma for 1987-88, page 4). Further, a detailed diagnosis of the performance of PEs surveyed becomes difficult. For example, suppose we find that in a particular year the profitability has decreased significantly. Subsequent investigation reveals that the main reason for this decline was an increase in the consumption of raw materials. Now, if we wanted to find out which component of the raw material cost went up, the BPE survey would not be able to provide this information. Similarly, in a multi-product PE, changes in sales cannot be explained in terms of its components. An increase in sales could be due to a massive increase in one product line, swamping decreases in all other product lines. This kind of increased sales is a dramatically different story than an increase in the total sales resulting from a steady increase in sales of all product lines. Unfortunately, the BPE system cannot distinguish the two situations. Finally, another consequence of this squeezing of audited accounts is the impossibility of calculating several key variables. For example, there is no reliable way of calculating even such a basic measure

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as the 'value-added'. The difficulty arises from the fact that only aggregated figures are utilised for items like 'repair and maintenance'. These aggregates may consist of both labour and raw material costs and, of course, only the latter should be subtracted' from the output to calculate value-added. No wonder, then, that the BPE system does not even attempt to calculate value added. Instead, it asks the enterprises to supply the number. Now, if a system is unable to calculate such a fundamental concept, it surely cannot claim to have a very high value-added for itself. In contrast, none of these problems arise when using PE PIS. Not only does it maintain the integrity of the data in the narrow sense, i e, the numbers add up to the bottomlines in both the balance sheet and the profit and loss statement, but it also tries to maintain the style of presentation adopted by the accountants for the audited statements. The System Is Very Time-Intensive. The BPE system does not make full use of advances in computer technology. Its orientation is clearly towards main-frame computers. In a world increasingly dominated by personal microcomputers, the system appears just a trifle anachronistic This inefficient use of time manifests itself in two ways in the BPE system. First, the whole cycle of filling out BPE proforma, manual checking, and computer crosschecking takes up a large amount of precious time. Each mistake at every stage has to be referred back to the concerned PE. This problem disappears when using the Lotus 1-2-3 based PEPIS. Each PE can input the data directly into its computers and send a clean data-set, free of all errors, on a diskette to a central point. In other words, the computer checking of the integrity of the data is done at the source. Our experience shows that fewer mistakes are made in data entry when the computer is allowed to scream 'foul' at the person responsible for data-entry. Further, it is much easier to fix an error when the person is working on the data and is familiar with it. In the BPE system, by the time an error is referred back, the responsible person may have become alienated from the data-set and, therefore, has to work longer and harder to detect even a minor problem. The other time-bottleneck arises when the user tries to get information on items not covered by the BPE survey even though the data for it may exist. For example, suppose ope wanted to get some information on the marginal cost or average cost of production in order to examine the prospects of implementing marginal cost (MC) pricing. Since the BPE survey does not calculate M C , a very elaborate programming exercise would have to be launched in collaboration with the National Informatics Centre to get the desired information. Incapable of Sensitivity Analysis:, The essence of planning is choosing among comEconomic and Political Weekly

peting alternatives. Unfortunately, the BPE system does not lend itself very easily for use as a planning tool, Changing a few figures to see how they might change the macro picture would be a major undertaking with prohibitive costs. In contrast, PEPIS is a spreadsheet program in which one can change as many numbers as one wants and get instant feedback based on re-calculations. Reports Generated Are Not User-Friendly. As mentioned earlier, the main purpose of any information system is to help the decision-makers do their job well The users of BPE surveys are likely to be people with a lot of demands on their time. The substance and style of the reports generated by the existing system, however, cannot be considered to show sensitivity towards their potential users. As an illustration, consider the fact that the BPE survey gives a large amount of data about various criteria. For example, it gives various financial ratios, capacity utilisation, etc, yet, a composite picture fails to emerge. Any enterprise, however inefficient, can always find some ratio that may have improved. What are members of parliament (the alleged users) to make of a public enterprise whose profits increase while capacity utilisation goes down? Further, it is not very helpful to have two years of data for some measures and three years for others. For example, data on 'Net Loss Sustained by Companies' is given for two years (BPE Survey 1985-86, Vol 1, p 62), while "capacity utilisation" is provided for three years (BPE Survey 1985-86, p 189). Finally, most of the analysis in the BPE survey is purely financial. This is both inadequate and unfair for public enterprises who are expected to do much more than just make financial profits. Limited Access to Other Ministries'. Since the BPE system is main-frame based, it is not easy for other organs of the government to have it in-house. Hence, this data is used only by the BPE. Once the initial fixed cost of entering the data has been incurred, it would appear to be more sensible to spread it across a large number of users, making the average per capita cost of this exercise decline. This is precisely what PEPIS enables us to do. Since it can run on PCs, almost any agency in the government can have access to it. Besides lowering the average cost of access, PEPIS would provide an additional benefit. Public enterprises would not be burdened with the arduous task of providing a large number of answers to questions about their operations. One central agency could, with the help of PEPIS, provide most of the information asked for by different agencies of the government. V E x p e r t Committee Views on I n f o r m a t i o n System As mentioned earlier in the paper, the current sense of dissatisfaction with the existing

PIS is neither new nor unique. The critique of the existing PIS is in line with the recommendations of the two recent high-powered committees headed by L K Jha and Arjun Sengupta.9 This paper has proposed an information system that will operationalise many of the ideas contained in these and other government reports. As an illustration, a few exerpts from the two reports are quoted below: Excerpts from L K Jha Report . . . There is certainly need for information but to the extent possible the information requirements of different agencies in government should be integrated and met through one set of reports and returns. There is urgent need^to review and drastically reduce the enormous number of reports, returns and statements flowing into ministries from the public enterprises, limit them to the inescapable minimum, and ensure that there is a machinery in the ministry for the effective review of the information through QPR meetings with which all the agencies concerned in government are associated..Such an exercise has been attempted in one or two departments (e g, chemicals and fertilisers) but this needs be carried out in a systematic manner in all the ministries (para 3.10). A thought which may be interjected at this juncture is that it would be better to refer to this as the 'Monitoring and Information System' of the ministry rather than the 'Management Information System.' What is meant by the latter is of course that the economic ministries such as steel and mines, chemicals and fertilisers, energy and petroleum industry, etc, have alI,a management role to perform in relation to the sectors of the economy with which they are concerned; and that their information system should be designed to meet the requirements of such economic management. However, the expression might tend to convey the misleading suggestion that these are Management Information Systems in relation to public enterprises with which the ministries are concerned, or in other words, that the ultimate management of the public enterprises vests in the administrative ministries. This is an impression which ought to be avoided. Insofar as a public enterprise is concerned, its Management Information System should stop with its board of directors. The role of the ministries is to review and monitor and not to manage the public enterprises. This may seem a mere semantic point but the nomenclature has the potentiality to influence attitudes (para 3.11). Excerpts from Arjun Sengupta Report The performance indicators and the procedures that we have suggested are very much simpler than the present Management Information System instituted by the Bureau of Public Enterprises vide their OM No BPE/GL-003/75/I and R/16(4)72 dated 11 March, 1975. This system collects a vast amount of information and envisages an elaborate system of quarterly performance review meetings. We feel that our approach to autonomy and accountability requires a M-143

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less intensive form of interaction. In fact, the primary concern of the government should be to exercise the responsibilities of an owner w h o should concern himself not w i t h details of all operations but w i t h results in terms of a few indicators. An excess of monitoring dilutes not merely autonomy but also accountability since in a welter of figures and meetings, an overall assessment of performance becomes d i f f i c u l t . We would, therefore, suggest that the existing Management I n f o r m a t i o n System a n d the quarterly monitoring by the Planning Commission be abandoned. Enterprises w h i c h need the assistance of the secretariat can always seek such assistance as and when the need arises, from the enterprises. The only element in the existing system that may need to be retained in a system of production reporting as it applied to D G T D units, progress reporting on major projects costing more than Rs 100 crore (para 5.16). Detailed monitoring should be the responsibility of the holding company or the enterprise. The government should insist that in each public sector unit there should be a well defined Management I n f o r m a t i o n System ( M I S ) Unking all cost or profit centres to the top. In fact, this M I S should be the basis on which top management reports performance indicators to the government so that they are in a position to offer any clarification that may be required in the evaluation process. The items w h i c h should be covered in the M I S should be left to each holding company or enterprise. However, it is our expectation that the performance indicators we have suggested w i l l induce top management to monitor a wide range of production, productivity and cost variables and thereby generate pressure for improvement in efficiency and profitability. On the basis of the performance evaluation criteria evolved, a w o r k i n g 'group w o u l d go into the M I S requirement (para 5.17). VI Policy Options It is clear f r o m the above discussion t h a t the present i n f o r m a t i o n system is n o t satisfactory to say the least. This, then, raises the q u e s t i o n , ' W h a t o u g h t to be done?'. Essentially, there are t w o choices. Either we can develop a new system f r o m scratch or adapt a t r i e d and tested system such as P E P I S . Since there is no guarantee t h a t the indigenous system w o u l d be better t h a n P E P I S , it appears to be a very uncertain and expensive r o u t e to take. However, even i f one were t o decide, I n principle, to go for PEPIS, it is not clear that it w o u l d be easy to realise this objective. A l o t of questions are g o i n g to be asked by skeptics. Let us, therefore, examine some of the alleged barriers to i m p l e m e n t i n g P E P I S w h i c h are l i k e l y to be p o i n t e d o u t by these skeptics. Conceptual Barrier. Is the concept behind P E P I S sound? Three c o u n t r i e s a n d t w o i n t e r n a t i o n a l agencies have examined the p h i l o s o p h y , concept, a n d structure o f P E P I S ' m e t h o d o l o g y a n d f o u n d i t accep-

table. Each aspect is well-documented and supported by conceptual papers. One is not suggesting that a country should opt for PEPIS just because others have done so. Rather, the proposition is that since these concepts have been around for some years and have been subjected to close scrutiny and debate, they are likely to be well honed and relevant for other LDCs. Financial Barrier. Most of the cost for developing and testing of the system have already been incurred. PEPIS is now available to countries for a fraction of the cost paid by Pakistan, Korea and Venezuela. If this system helps improve government monitoring and evaluation and leads to improved performance, the system would pay back the initial investment several times over. Further, since the system w i l l be used by the central as well as state governments, the per head cost for users will be insignificant. Technical Barrier PEPIS does not represent any fancy technology. A l l the necessary hardware and software for running PEPIS is easily available. Institutional Barriers: Two issues are involved here. First, do we have the institutional capacity to implement PEPIS? India is one of the few LDCs which more than

satisfies the institutional preconditions for installing a performance information system. We have a long tradition of audited accounts of our PEs and valuable experience in running the current PIS. The second issue is, perhaps, more vexing. It deals with the question of which organisation should be the focal point for operating the system. This is a matter on which the government w i l l have to decide; however, it is worth noting that the proposed system is so flexible and 'transportable' that this consideration need not unduly weigh us down at this stage. International experience suggests that this information system should be located in a government department or agerrcy which has enough clout to demand information and get it. The current role of BPE in regard to MOUs makes it an ideal agency to locate this system. Political Barrier A major hurdle in reforming a system is usually political inertia. Technocratic ideas usually do not get implemented because political calculations are often not the same as economic ones. Fortunately, this obstacle is not a major issue either In India, the government is taking the initiative at various levels. At the highest political level, a White Paper on public enterprises is being prepared to clarify

Appendix I
BUSINESS RATIOS

(all figures are ratios) 1 Short-Term Liquidity Ratios 11 Current Ratio 12 Acid Test 13 Inventory Turnover 2 Debt/Equity Ratios 21 Total Debt to Net Worth 22 Long-Term Debt to Net Worth 3 Long-Term Solvency Ratios 31 Net Worth to Fixed Assets 32 Times Interest Earned 4 Return on Investment Ratios 41 Return on Total Assets 42 Return on Equity Capita 5 Operating Performance Ratios 51 Gross Margin Ratio 52 Operating Profit to Sales 53 Pretax Income to Sales 54 Net Income to Sales 6 Turnover Ratios 61 Sales to Cash 62 Sales to Accounts Receivable 63 Sales to Inventories 64 Sales to Working Capital 65 Sales to Fixed Assets 66 Sales to Other Assets 67 Sales to Total Assets 7 Stock Market Ratios (where applicable) 71 Price/Earnings Ratio 72 Dividend Yield 73 Dividend Payout Ratio 74 Trend in Price Per Share Economic and Political Weekly November 26, 1988

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the government's position on the subject. At a lower level, the Bureau of Public Enterprises is itself reviewing the Public Enterprise Survey produced by it. VII
Concluding Comments

This paper set out to make a case for implementing a performance information system for monitoring public enterprises in

India. A comparison of the proposed system (PEPIS) with the existing system at BPE makes the need for adopting such a system abundantly clear. Further, an examination of the potential obstacles shows that none is insurmountable. Hence, the inescapable conclusion that if the Indian government is serious about reforms in the public sector, it cannot afford to delay a decision to upgrade its public enterprise information system.

Notes [I have benefited enormously from my discussions on this subject with Leroy P Jones at Boston University; Istaqbal Mehdi at the Expert Advisory Cell, Ministry of Production, Pakistan; Antonio J Sosa at the CORDIPLAN, Venezuela and Dae Hee Song at the Korean Development Institute, Seoul, Korea, Part of this research was supported by the Centre for Studies in Public Enterprise Management at the Indian Institute of Management, Calcutta.]

Appendix I I

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1 In practice, however, the distinction has tended to be somewhat blurred. Managers at the corporate level have often complained of government involvement even in the operational decisions. The White Paper under preparation is understood to make it amply clear that the government wants to improve the situation by restraining itself from involvement in the day to day functioning of public enterprises. 2 For details, see Jones and Trivedi (1983). 3 For further details, see Jones (1979 and 1981). 4 See Hartman and Nawab (1983), Mehdi (1984) and Nawab (1985). 5 See Sosa (1988) for further details on the Venezuelan plans for their information system. 6 See Jones and Sakong (1976), for conceptual details regarding derivation of economic stocks and flows from the accounting data. 7 For further details, see Jones (1981) and Trivedi (1986). 8 For more on the history and the role of BPE in monitoring public .enterprises, see Basu (1984) and Trivedi (1985). 9 (A) Reports of the Economic Administration Reforms Commission (The L K Jha Commission) on Government and Public Enterprises, November 1983-June 1984. (b) Report of the Committee to Review Policy for Public Enterprises (The Arjun Sengupta Committee Report) December 1984. References Aiyar, Ramaswamy P, 'A Note on Management Information Systems' (mimeo), Indian Institute of Management, Calcutta, 1984. Basu, P K, 'Evaluation of Economic Performance of Public Enterprises in India' in Performance Evaluation of Public Enterprises in Developing Countries: Criteria and Institutions, United Nations, New York, 1984. Hartmann, A and Nawab S A, 'Evaluating Public Manufacturing Enterprises in Pakistan', Finance and Development, September 1985. Iyer, Ramaswamy P, 'The Government-Public Enterprises Relationship in India' in The Role and Management of Public Sector, SCOPE, New Delhi, 1986. Jones, Leroy P, 'Ibwards a Performance Evaluation Methodology for Public Enterprises, with Reference to Pakistan', International Symposium on Economic Performance of Public Enterprises, Islamabad, November 1981. 'Public Enterprise Performance Evaluation: A Methodology and an Application to Asian Fertiliser Plants', Boston, (mimeo), 1979. and SaKong, I I , 'A Social Accounting System for Public Enterprises', Korea Development Institute, Working Paper 7604, July 1976. and Trivedi, Prajapati, User Manual for the Computerised Public Enterprise Performance Information System (PEPIS), Korean Development Institute, Seoul, Korea, 1983. Mehdi, J, 'Performance Evaluation of Public Enterprise in Pakistan: Experiment in Social Accounting System', The Pakistan Development Review, Vol X I I I , Nos 2 and 3 (Summer-Autumn 1984).

The Pakistani Experience in the Development and Implementation of the Signalling System', Public Enterprise, Vol 8, No 1, pp 1-120, Ljubljana, Yugoslavia, January, 1988. Nawab, S I, 'The Evaluation of Public Enterprises: The Pakistan Signalling System', Public Enterprise, Vol 5, No 2, February 1985. Park, Young C, 'A System for Evaluating the Performance of Govern ment-Invested Enterprises in Korea', Public Sector Management Division, World Bank, 1986. Song, Dae Hee, 'A New Performance Evaluation System of Korean Enterprises: Policies and Experiences', Public Enterprise, Vol 8, No 1, pp 1-120, Ljubljana, Yugoslavia, January 1988.

Sosa, Antonio J, 'A Mixed-Scanning Approach to Performance Evaluation of Public Enterprises: The Venezuelan Experience', Public Enterprise, Vol 8, No 1, pp 1-120, Ljubljana, Yugoslavia, January 1988. Trivedi, Prajapati, 'Performance of the Bureau of Public Enterprises: Evaluating the Evaluators', Economic and Political Weekly, Vol XX, No 35, August 31, 1985. . 'Public Enterprises in India: if Not For Profit Then For What?' Economic and Political Weekly, Vol X X I , No 48, November 29, 1986, 'Theory and Practice of the French System of Contracts for Improving Public Enterprise Performance', Public Enterprise, Vol 8, No 1, pp 1-120, Ljubljana, Yugoslavia, January 1988.

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Economic and Political Weekly

November 26, 1988