Public Sector Enterprises

Importance of PSEs in Indian Economy

India has adopted a mixed economy model that recognizes importance of both the public as well as private sector enterprises. In India Central Public Sector Enterprises (CPSEs) were set up with the following objectives: (i) to serve the broad macro-economic objectives of higher economic growth, (ii) to achieve self-sufficiency in production of goods/services, to facilitate long-term equilibrium in balance of payments and (iv) ensure stability in prices and create benchmarks for prices of essential items.

Prior to independence, the public sector enterprises were coned primarily to select sectors including Railways, Posts & Telegraphs, Port Trust, Ordnance Factories, etc. After independence, the development of Public sector enterprises was identified as a key driver for self-reliant economic growth in the absence of signiant private capital. Consequently, the Industrial Policy Resolution, 1948 and 1956 laid emphasis on constituting public enterprises by the Central Government for industrial development in the core sectors.

Consequent to the initiatives taken during the Five Year Plans, the role of CPSEs in terms of contribution to the Indian economy has increased manifold. Thus, the number of CPSEs as on 31 March, 2009, was 246, with a total capital employed of nearly Rs. 5.3 lakh crores as against 5 CPSEs having a total investment of Rs. 29 crores on the eve of the First Five-year Plan. Independent India adopted planned economic development policies and drew up a roadmap for the development of Public Sector as an instrument for self-reliant economic growth. 1948 Industrial Policy Resolution envisaged development of core sectors through the public enterprises. Public Sector would correct the regional imbalances and create employment.

Industrial policy of 1991 has seen a sea change with most Central Government industrial controls being liquidated. The Central Public Sector Enterprises (CPSEs) were classified into ‘strategic’ and ‘non-strategic’. Strategic CPSEs were identified in the areas of (a) Arms & Ammunition and the allied items of defence equipments, Defence air-crafts and warships; (b) Atomic Energy (except in the areas related to the operation of nuclear power and applications of radiation and radio-isotopes to agriculture, medicine and non-strategic industries); and (c) Railway transport.

All other CPSEs were considered as non-strategic. Further, Industrial licensing by the Central Government has been almost abolished except for a few hazardous and environmentally sensitive industries. The largest share in this investment belonged to the service sector (40.40 per cent) followed by electricity (27.95 per cent), manufacturing (22.23 per cent), mining sector (8.83 per cent) and agriculture (0.04 per cent). The remaining 0.55 per cent belonged to CPSEs under construction.

Total investment in 320 CPSEs stood at Rs. 11,77,844 crore in 2015-16. Total paid up capital in 320 CPSEs as on 31.3.2016 stood at Rs. 2,28,334 crore. Capital Employed (Paid up capital plus reserve & surplus and long term loans) in all CPSEs stood at Rs. 19,68,311 crore on 31.3.2016

  • Profit of profit making CPSEs stood at Rs. 1,44,523 crore during 2015-16.
  • Loss of loss incurring CPSEs stood at Rs.28, 756 crore in 2015-16.
  • Overall net profit of all 244 CPSEs during 2015-16 stood at Rs 1,15,767 crore.
  • Net worth of all CPSEs went up from Rs 9,84,409 crore in 2014-15.
  • Dividend paid by CPSEs during 2015-16 is Rs. 70,954 crore.

Contribution of CPSEs to Central Exchequer by way of excise duty, customs duty, corporate tax, interest on Central Government loans, dividend and other duties and taxes increased to Rs 2,78,075 crore in 2015-16. Foreign exchange earnings through exports of goods and services decreased from Rs 1,03,071 crore in 2014-15 to Rs 77,216 crore in 2015-16.

CPSEs employed 12.34 lakh people (excluding contractual workers) in 2015-16. Total Market Capitalization Market Capitalization (M-Cap) of 46 CPSEs traded on stock exchanges of India is Rs. 11,06,766 crore as on 31.03.2016. M-Cap of CPSEs as per cent of BSE M-Cap decreased from 13.08% as on 31.3.2015 to 11.68% as on 31.3.2016.

Structure of PSEs in India

The PSEs in India are basically categorized under four broad types based on their ownership structure. These include: departmental undertakings, statutory corporations, government-owned companies and autonomous bodies set up as registered societies.

Departmental undertakings

Departmental undertakings are primarily meant to provide essential services such as railways. They function under the control of the respective ministries of Government of India (GoI). A departmental undertaking structure is considered suitable for activities the government aims to keep in its control in view of the public interest.

Statutory Corporations

Statutory corporations are public enterprises that came into existence by a Special Act of the Parliament. The Act defines the powers and functions, rules and regulations governing the employees and the relationship of the corporation with government departments.

Government-owned companies

Government-owned or controlled companies refer to companies in which 51% or more of the paid up capital is held by the central or any state government (partly or wholly by both). It is registered under the Indian Companies Act and is fully governed by the provisions of this Act.

Autonomous bodies

Autonomous bodies are set up whenever it is felt that certain functions need to be discharged outside the governmental setup with some amount of independence and flexibility without day-to-day interference from the governmental machinery. These bodies are set up by the concerned ministries or their departments and are funded through grants-in-aid, either fully or partially, depending on the extent which such institutes generate internal resources of their own. These grants are regulated by the Ministry of Finance (MoF) through their instructions. They are mostly registered as societies under the Societies Registration Act and in certain cases they have been set up as statutory institutions under the provisions contained in various Acts.

Leave a Reply

Your email address will not be published. Required fields are marked *