The performance appraisal system is the most important tool for any organization. Government organizations mostly use annual confidential reports to appraise their employees. Private organizations use the grading system and assessment methods to appraise the performance. As the performance appraisal increases the motivation level of employees, they can effectively be used for planning purposes and to identify problems and obstacles affecting employee’s performance. The performance appraisal system serves not only to determine how well an employee does his or her job but also to decide ways to improve the performance. For an effective appraisal system, mutual trust, clear objectives, standardizations, training, job relatedness, documentation, feedback, participation and the post appraisal reviews are some important factors which need to be considered. BSNL being a government organization, the performance appraisal doesn’t play a great role but it’s an important part of organization. This paper made an attempt to analyse about the effectiveness of performance appraisal practices implemented in BSNL, and also make an observation on the perceptions of employees towards their existing performance appraisal system.