MoU System in State-owned Enterprises in India: A Tool in Strategic Management
| Published date | 01 March 2018 |
| Date | 01 March 2018 |
| Author | Sharat Kumar |
| DOI | 10.1177/0019556117735460 |
| Subject Matter | Articles |
Article
Indian Journal of Public
Administration
64(1) 36–48
© 2018 IIPA
SAGE Publications
sagepub.in/home.nav
DOI: 10.1177/0019556117735460
http://journals.sagepub.com/home/ipa
1 Former Senior Adviser, Government of India, India; Former Economic Adviser, Department of
Public Administration, India.
Corresponding author:
Sharat Kumar, Former Senior Adviser, Government of India, India; Former Economic Adviser,
Department of Public Administration, India.
E-mail: sharat.kumar.dr@gmail.com
MoU System in
State-owned Enterprises
in India: A Tool in
Strategic Management
Sharat Kumar1
Abstract
The role of state-owned enterprises (SOEs) in India has to be seen in the historical
context. They have played an important role in the country’s development. The
Memorandum of Understanding (MoU) system introduced in these enterprises
has gone beyond the original objective of grant of greater autonomy. While it has
become a tool in strategic management today, it is riddled with some inadequacies
that need to be removed. The article argues that a reformed MoU system will
go a long way in enhancing the contribution of these enterprises to India’s GDP.
Keywords
Performance contract, balanced scorecard, signalling system, offsets, company’s
vision, self-assessment
Introduction
The role of state-owned enterprises (SOEs) in India needs to be seen in the histori-
cal context. Industrial development under colonial India was ‘a history of slow
and arrested progress’ (Lokanathan, 1943). Lord Morley, Secretary of State for
India (1905–1911) is reported to have ‘set his face against any attempt on the
part of the [g]overnment to assist industrial development’ (ibid.). The First World
War (1914–1918), however, exposed the short-sightedness of such an approach as
supplies of essential commodities from abroad to India were cut off, either wholly
or partially. In the face of such a crisis, the iron and steel plant of JRD Tata, set up
in 1911 in Jamshedpur, was an exception and ‘stood the country in good stead
during the war’ (ibid.).
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