GROWTH AND PERFORMANCE OF CENTRAL PUBLIC SECTOR …€¦ · CPSEs in India and performance of CPSEs...

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International Journal of Management

Volume 11, Issue 07, July 2020, pp. 1551-1577. Article ID: IJM_11_07_139

Available online at http://www.iaeme.com/ijm/issues.asp?JType=IJM&VType=11&IType=7

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ISSN Print: 0976-6502 and ISSN Online: 0976-6510

DOI: 10.34218/IJM.11.7.2020.139

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GROWTH AND PERFORMANCE OF CENTRAL

PUBLIC SECTOR ENTERPRISES: A

COMPARATIVE ASSESSMENT BETWEEN UPA

1 AND NDA 1

CA Priti Sharma

Assistant Professor, Department of Commerce

Graphic Era Deemed to be University, Dehradun, Uttarakhand, India

Prof. Rupa Khanna Malhotra

Professor, Department of Commerce


Dr. Mohit Kumar Ojha*

Associate Professor, Department of Commerce


Neha Rani

Assistant Professor, Department of Commerce

Graphic Era Hill University, Dehradun, Uttarakhand, India

*Corresponding Author

ABSTRACT

Developing countries were struggling with the problems of income and regional

inequality, while at the same time low level of employment and lack of skilled man power

worsen the situation. In order to do with such problems and to tackle the situation,

governments followed a plan-led development strategy wherein Public Sector

Undertakings (PSU’s) were accorded with majority of roles. The Central Public Sector

Enterprises (CPSEs) have performed tremendously well in the initial years of its

inception but has been unable to keep up its performance on the desired level. There

are several reasons behind degrading performance of PSEs. The increased competition

and non-compliance with the changing environment can be attributed as the major

reasons for the downfall of PSEs; change in central government also laid problems in

functioning and performance of public sector enterprises because of varied policy

initiatives towards CPSEs. In this regard, present study finds its motivation to conduct

an descriptive research to compare and analyze the performance of CPSEs in India

CA Priti Sharma, Prof. Rupa Khanna Malhotra, Dr. Mohit Kumar Ojha and Neha Rani


during tenure of UPA government (from 2004-2009) and that of NDA government (from

2014-2019). The objective is to analyze the role of government towards promotion of

CPSEs in India and performance of CPSEs during tenures of UPA and NDA

governance.

Keywords: Public Sector Undertakings, Central Public Sector Enterprises, Economic

Reforms, UPA, NDA.

Cite this Article: CA Priti Sharma, Prof. Rupa Khanna Malhotra, Dr. Mohit Kumar

Ojha and Neha Rani, Growth and Performance of Central Public Sector Enterprises: A

Comparative Assessment Between UPA 1 and NDA 1, International Journal of

Management, 11 (7), 2020, pp. 1551-1577.

http://www.iaeme.com/IJM/issues.asp?JType=IJM&VType=11&IType=7

1. INTRODUCTION

Alongside industrial growth and development of Indian economy, Central Public Sector

Enterprises (CPSEs) have been playing a prominent role in dismantling accumulated problems

of unemployment, disparities of inter-regional, rural-urban, inter-class and technological

backwardness. Public sector undertakings play a major role in economic development of

developing economies and acts as a vital instrument of state intervention in economic activities

in the developing economies. Developing countries were struggling with the problems of

income and regional inequality at the same time low level of employment and lack of skilled

man power worsen the situation. Private investment was not encouraged because of low level

of savings and lack of proper infrastructure for economic growth. So, given the set-up of

economic system of developing countries, the states decided to come forward with a clear long-

term development strategy to promote regional growth and thereby contributing to economic

development. In order to achieve this, government followed a plan-led development strategy

wherein public sector was accorded with themajority of roles. Though the United Public

Alliance (here after referred as UPA) government was clearly committed to expand the public

sector, it did not go into areas where private enterprises were operating mainly due to

operational constraints and other practical considerations. Although a greater role has been

assigned to public sector in developing the Indian economy and making it self-sufficient, but it

has not performed up to the expectation. Then after a change in the central government from

United Public Alliance (UPA) to National Democratic Alliance (here after referred as NDA)

the more focus was towards disinvestment. The UPA government suffered because of its

policies while growth under NDA adversely affected by demonetization and GST. The Indian

Public Sector Enterprises (PSEs) have performed tremendously well in the initial years of its

inception but has been unable to keep up its performance on the desired level. There are several

reasons behind degrading performance of PSEs. The increased competition and non-

compliance with the changing environment can be attributed as the major reasons for the

downfall of PSEs. Further, change in central government also laid problems in functioning and

performance of public sector enterprises because of different policies and initiatives towards

CPSEs, but at the same time it also gives a new way to strategies and policies towards them.

In this regard, it is pertinent to know which government is more focused towards growth

and development of CPSEs. Further, this also becomes relevant because every now and then,

the question keep arising that whether UPA government is more focused towards development,

growth and promotion of CPSEs or whether NDA government is more concerned about

performance of CPSEs. The present study is an attempt to assess the role of UPA and NDA

government towards growth and promotion of CPSEs in India to examine the performance of

CPSEs during different tenures of UPA and NDA government. The study examine the

Growth and Performance of Central Public Sector Enterprises: A Comparative Assessment Between

UPA 1 and NDA 1


performance of CPSEs during first full tenure of UPA government, i.e., 2004-2009 (here after

referred to as UPA 1) and first full tenure of NDA government, i.e., 2014-2019 (here after

referred to as NDA 1). The basic reason behind choosing full tenure of both the governments

is that having full five year stint at the center gives the party ample time and scope for strategic

thinking, planning and implementation of decision made regarding CPSEs by respective

ministries of government. Further, the reason behind taking full stints of both UPA and NDA

after year 2000 is that the Economic Reforms were launched in 1991 and till 2000 there were

various policy initiatives and strategic reforms for CPSEs by the respective governments of that

time, hence, it is wise enough to take the tenure after 2000. And finally the basic premise behind

choosing first tenures of both UPA and NDA government (UPA has served back to back term

from 2004 to 2014; while NDA government has also started its second consecutive term in

2019) is that both UPA and NDA have taken the governance from their counterpart in their first

tenure and hence they cannot enjoy the benefit of their own earlier services like they can be

benefitted if we had taken second tenure of UPA. Further, the second consecutive term of NDA

has just begun in 2019 and hence comparison could not be made. The first tenures of UPA and

NDA have been classified as UPA 1 and NDA 1 in the study.

The study is structured in following way; next section deliberates about theoretical

background of CPSEs and their evolution followed by section on research methodology

adopted in the study. Research methodology section is followed by data analysis and discussion

section, which is followed by section highlighting major conclusion and recommendation from

the study. Finally, there is a section that deals with limitations and future scope of the study.

2. THEORETICAL BACKGROUND

2.1. Overview of Indian public sector

Central and State Public Sector Undertakings (PSUs) play a prominent role in India’s industrial

growth and economic development. Since independence, a number of socio-economic

problems required to be dealt with in a planned and systematic manner. A predominantly

agrarian economy,lack of industrial facilities&weak industrial base, low savings and inadequate

investments necessitated for state intervention so as to use public sector as an instrument for

steering the country’s underlying potential towards self-reliant economic growth.

Themacroeconomic objectives of Central PSUs have been derived from the various Industrial

Policy Resolutions and the Five Year Plans of India. State-level PSEs (state PSUs) were

established due to rising need for public utilities in states. These PSUs are operating in public

utilities like railways,airports, ports, post and telegraphand power and contributed significantly

towards infrastructure development. Since its inception during First Five Year Plan, a number

of public sector undertakings performed exceptionally well and has contributed in wealth

creation for the country.

Many Central PSUs, specially the Maharatnas, are already operating internationally and are

major global players matching the best global firms in their field of operations. One of the basic

reasons for this excellent performance of Central PSUs in recent years was the empowerment

of the boards of theseprofit making PSUs by the Government that leads to a greater autonomy

in decision making. As a result, such PSUs have effectively used this autonomy to enhance their

performance and operate on commercial lines.

2.2. Evolution of public sector enterprises in India

Public sector enterprises in India have rose from only five enterprises post-independence and

with an investment of 0.3 billion in the year 1951 to 249 enterprises as on Mar 31, 2010.

Aggregate investment in Central PSUs has been increasing continuously over the years. Total



investment, including equity plus long-term loans of Central PSUs went up from 5,135.32

billion in FY09 to 5,799.20 billion in FY10, growing at a rate 12.93%.

The evolution of PSUs can be divided into three distinguished phases: 1) The pre-

independence era; 2) The post-independence era; and 3) The post-liberalization period. The

fourth period could perhaps be stated as the one that follows the recent global economic crisis

during 2007-08. Pre-independence era witnessed few public enterprises, such as the

railways,the port trust, the posts and telegraph, All India Radio and the ordinance factories

among few other governments managed enterprises. The Industrial Policy Resolution (1956)

was implemented for the first time during the post-independence era. Moreover, various

strategies specific to the public sector were defined in policy statements of1973, 1977, 1980

and 1991. Post liberalization era which had its commencement from 1991 after the introduction

of New Economic Policy, saw the Government of India introducing the concept of Maharatna,

Navratna and Miniratna to accord greater financial and managerial autonomy to those PSEs

with the objective of incurring higher capital expenditure apart from forming Joint Ventures

(JVs) within the country as well as outside.

The fourth phase i.e. the period following the recent global economic downturn was one

where Government infusing capital into the economy. In order to boost sectors like agriculture,

real estate and small enterprises, Government of India, with the help of public sector banks,

provided capital at lower rates of interest. These initiatives by the Government helped to contain

serious after effects of the economic meltdown while keeping a tab on inflation.

So we will discuss the state of PSEs in two phases i.e. pre liberalization and post

liberalization.

Pre-Liberalization Phase: Pre-liberalization phase began after independence in 1947 and

continued till the introduction of New Economic Policy of 1991 by Dr. Manmohan Singh. This

period is also known as the Nehru Modal of Economic Development or Nehru-Mahalnobis

Modal. In Nehru Modal of Economic Development, both public and private sector were

assumed to contribute for the economic growth but larger role was given to public sector as it

is needed that government should work for the development of the nation. Private sector was

also allowed to contribute and operate in smaller sectors and major industries like iron & steel,

coal mines etc. and services like railways, telegraph, atomic energy, telecommunication,

aviation etc. were reserved for public sector. The overall responsibility of developing the

infrastructure is on the shoulders of public sector and private sector assumed responsibility of

supplementing the public sector overall this phase sees the evolution of Indian Public Sector to

an extent beyond imagination but soon it gets affected by increasing competition and changing

environment. Public sector does not keep pace with the changing environment and gets outdated

on various fronts of technology, input consumption and style of management and functioning.

The performance decreased to ever low levelsduring 1985-1991. This necessitates an

immediate change in the economic structure of the country to revive the public sector. This

emergence needs lead to the introduction of New Economic Policy in 1991.

Post-Liberalization Phase: Post liberalization period is also known as the period of

planned development. Various initiatives were undertaken by the then government to boost

Indian economy which was going through the phase of huge economic crisis with depleting

foreign exchange reserve and devaluing rupee against dollars. The phase of planned

development was started with the adoption of policy of liberalization and privatization where

by private sectors were also allowed to enter into the sectors previously reserved for public

sector. Indian economy was opened up and foreign trade was promoted. Policy of disinvestment

was adopted so as to revive the public sector.


UPA 1 and NDA 1


2.3. Role of public enterprises in India

The role of Public Sector in India’s macro-economic performance in general and in that of

industrial sector in particular is widely acknowledged (Nagraj, 1991). Public sector enterprises

in India cover a wide range of activities engaging directly or in directly. They are operating

almost all types of activities like advancing loans,promotional and developmental activities,

regulating trade, manufacturing heavy machinery, machine tools, instruments, electrical

equipment, chemicals, drugs and fertilizers, prospecting and drilling for oil and its refining;

operation of air, sea and road transport, building and construction, electricity generation and

distribution, mining of coal and mineral ores, smelting and casting of steel and other metals,

telecommunication, and so on.

Public enterprises operate primarily at three levels of the Indian administration: Central and

State. National Accounts Statistics provides break-up of public sector into:

a. Administrative Departments (offices and other bodies of the government)

b. Departmental Enterprises (railways, post and telecommunication)

c. Non-Departmental Enterprises (financial and non-financial enterprises, with 51% of

government equity)

2.4. Problems faced by public sector enterprises in India

Public Sector Enterprises are criticized on the ground that the efficiency is low and the net profit

does not represent the capital employed in it. PSEs faces a number of challenges in the external

environment and the changing in technology adopted pose a serious threat in front of PSEs.

Various problems faced by PSEs are:

• Under Utilization of Resources: This is the major reason for low level of productivity

and profitability. The capacity utilization in PSEs is not satisfactory resulting in wastage

of time and labour.

• Pricing Policy: Pricing policy adopted by PSEs was not appropriate. Changes to the

prices of goods and services produced by most public enterprises have lagged

developments in underlying inflation, exacerbating their poor financial performance.

• Over-Capitalization: PSEs were over-capitalized and resulting in low level of capital

productivity. Ideal resources add to the inefficiency in operations.

• Management Structure: Style of management followed in PSEs was outdated and

does not result in quicker decision making that was the need of the hour. The flow of

information from top management to lower management was not proper and lot of

communication delays took place resulting in work stoppage and inefficiency.

• Outdated Technology: Technology adopted by PSEs was obsolete and requiring

immediate installation of better and improved machines and equipments. The

technology was not updated as per the advancement of technology resulting in poor

quality products and services and increased wastages during production.

• Lack of Competitive Attitude: PSEs lacks competitive attitude and does not come up

with the increased competition from private sectors. This increased competition resulted

in lack of demand for PSEs. The lenient attitude of PSEs was a major issue to be dealt

for government.

These are only some of the issues facing Indian Public Sector which necessitated revival

action from government and to implement immediate policies so as to make public sector more

efficient and effective and make them able to fulfill their goal of social service and economic

development. This leads to the announcement of New Industrial Policy Resolution in 1991

under the New Economic Policy of India.



2.5. Initiatives undertaken by government of India under industrial policy

resolution (IPR) of 1991

• Government of India adopted some policy measures under the name of Structural

Adjustment Program (SAP) to restructure the inefficient and non-performing public

sector of India in the 1980s.

• Government revised the existing industrial policy with the implementation of SAP, and

announced new IPR in 1991, in which various policies for restructuring of PSEs,

including the relaxing or abolition of restriction on entry to key sectors were enunciated.

• The number of industries that are reserved for public sector was reduced from 18

(including iron and steel, heavy plant and machinery, telecommunications and telecom

equipment, minerals, oil, mining, air transport services and electricity generation and

distribution) to 8 in 1991 and further to 3 (defence aircrafts and warships, atomic energy

generation, and railway transport) in 2001.

• In 1987-88 BIFR was established for the restructuring of the inefficient CPSEs under

the provision of Sick Industrial Act, 1985. In 1991-92 74 CPSEs were referred to BIFR

for their review and restructuring out of which 57 were operating till 2005-06 and 16

were closed units.Further, the government encouraged the PSUs to participate in capital

market to raise funds for investment (Singh andChittedi, 2011).

• Common Minimum Program was introduced by government in 1996. The objective was

to develop professional management along with decision making autonomyso as to

make these enterprises operate more efficiently in competitive environment.

• Government entrusted certain profit making enterprises with the special status and

recognized them under the name of Navaratnas. The government declared 9 enterprises

as Navaratnas on July 4, 1997 and two more enterprises were added to this list in the

subsequent period. The criteria for giving this special statusto these enterprises were on

the basis of their size in relation to investment, turnover and profit in recent period.

Subsequently, government substantially enhanced the autonomy of Board of Directors

in decision making, so as to make these enterprises eligible to incur capital expenditure,

enter into joint-venture, creating and winding up post below board level.

• Government also identified certain profit making enterprises and given special

statusofMiniratnas. Basis objective behind this was to increase their autonomy in

decision making. The status was given in two categories i.e. Miniratna 1 and Miniratna

2. Where Miniratna 1is allowed incurring capital expenditure uptoINR 300 crore or

equal to their net-worth capital, whichever is lower without the approval of the

government whereas, Miniratna 2 can incur capital expenditure up toINR 150 crore or

50% of their net-worth capital, whichever is lower.

Table 1 Brief History of Public Sector Reforms in India Since Liberalization in 1991

Public Enterprise Reform

Process Time Period Key Reforms

Phase 1: New Industrial Policy July 1991-May 1996

“De-reservation” (involving

liberalization of previously closed

sectors dominated by state monopolies)

“Disinvestment” (including limited and

partial sale of government shares)

“Memoranda of Understanding” (a

performance evaluation system.)


UPA 1 and NDA 1


“Sick” CPSEs were referred to the Board

of Industrial and Financial Restructuring

(BIFR).

Phase 2: Empowerment of

Enterprises June 1996-March 98

Operational autonomy entrusted to very

large PSEs by providing them with the

special status under “Navaratna,

Maharatna and Miniratana”.

Professionalization of “Board of

Directors” in PSEs.

Establishment of “Disinvestment

Commission”.

Dramatic reduction in state compliance

guidelines and requirements.

Phase 3: Open Privatization April 1998 - May

2004

“More open privatization policies”(it

made apparent through the buy-back and

cross holding of some shares)

“Downsizing, restructuring and

professionalization of PSEs” and

governing bodies.

Shutting down selected sick PSEs.

3. OBJECTIVE OF THE STUDY

The objective of the study is to analyze the role of government towards promotion of CPSEs in

India and performance of CPSEs during tenures of UPA 1and NDA 1.Major issues addressed

in the study are financial performance of PSEs and their contribution to the economic

development and employment generation.

4. RESEARCH METHODOLOGY

Research methodology adopted for the study is descriptive research and conceptual in nature.

Data has been collected via secondary sources and only authentic government websites like

Economic Survey, Ministry of Disinvestment, Department of Public Enterprises, several

volumes of Economic Survey Reports, Public Enterprise Reports, and journals have been used

to ensure authenticity and reliability of data. Financial indicators collected from secondary

sources are analyzed and compared for tenures of UPA 1 and NDA 1.

5. DATA ANALYSIS AND DISCUSSION

5.1. Growth of CPSEs in India

The growth and performance of Central Public Sector Enterprises (CPSEs) go hand in hand

with the growth of the Indian economy. In fact, the PSUs have the potential for an even

dominant role to play in economic development on the back of number of yet-to-be listed

profitable Central PSUs that can go to the market. According to the data from the BSE as on

Dec 15, 2010 there are 98 unlisted Central PSUs that have made profit for the last three years,

clearly indicating their importance in the growth of the Indian economy. Further, according to

the public survey enterprises report of 2018 – 19, during first five year plan there were only

five public sector enterprises with a total investment of INR 29 crore while as on 31st March,

2019 the number increased to 348 with a total investment of INR16,40,328 crore. Many CPEs

have been set up under different projects during the past decade.The growth indicator of

CPSEsduring UPA 1 and NDA 1 is given below.



5.1.1. Number of CPSEs and corresponding investment in CPSEs

During the first phase of UPA government, the number of operating public enterprise reduces

from 227 to 213 while during first phase NDA governance, the number rises to 262. At the

same time, NDA government invest more in CPSEs as compared to UPA; companies like

National Textile corporation, British India Corporation Ltd., Andrew Yule & Company Ltd.,

Coal India Ltd. and its subsidiaries have been taken to nationalization from privatization. Figure

1a and 1b below highlight the number of CPSEs and year on year growth for both the phases

of UPA and NDA governance. Further, figure 2a and 2b shows the investment in CPSEs and

its year to year growth for the same period.

Figure 1a No. of CPSEs and YoY Growth Rate during UPA 1 (Source: Public Enterprise Survey

Report, 2008-09)

Figure 1b No. of CPSEs and YoY Growth Rate during NDA 1 (Source: Public Enterprise Survey

Report, 2018-19)

-4.5

-4

-3.5

-3

-2.5

-2

-1.5

-1

-0.5

0

205

210

215

220

225

230

2004 -05

2005 -06

2006 -07

2007 -08

2008 -09

Yo

Y G

row

th R

ate

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. o

f C

PS

Es

YearNo. of CPSEs YoY Grolwth

0

1

2

3

4

5

6

220

225

230

235

240245

250

255

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265

2014 -15

2015 -16

2016 -17

2017 -18

2018 -19

Yo

Y G

row

th R

ate

No

. o

f C

PS

Es

YearNo. of CPSEs YoY Grolwth


UPA 1 and NDA 1


Figure 2a Investment in CPSEs and YoY Growth Rate during UPA 1.0 (Source: Public

Enterprise Survey Report, 2008-09)

Figure 2b Investment in CPSEs and YoY Growth Rate during NDA 1.0 (Source: Public Enterprise

Survey Report, 2018-19)

Looking at figure 1a and 1b above, it can be concluded that NDA government is more

progressive in setting up CPSEs. Number of CPSEs during UPA 1 tenure kept on decreasing

and year to year growth was also negative, while during NDA governance it’s on increasing

trend. Further if investments are taken into consideration, NDA has fared well in this aspect as

well. Figure 2a and 2b shows that year to year growth rate for investment in CPSEs is increasing

at a faster rate during NDA 1 phase as compared to UPA 1.

0

2

4

6

8

10

12

0

50000

100000

150000

200000

250000

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350000

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2004 -05

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0

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2014 -15

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5.2. Macro-view performance of CPSEs

5.2.1. Net profit and growth rate of CPSEs

Overall the performance of CPSEs has been improved over the years but individually it is not

satisfactory. We will analyze the performance of CPSEs in two phases i.e. first tenure of UPA

government from (2004-2009) and first phase of NDA government (2014-2019).

During 2008-09, the profit of profit making CPEs is INR 98,652 crore as compared to INR

91,571 crore during 2007-08, showing a growth of 7.73%.If we compare the performance of

CPSEs between first phase of UPA government and first phase of NDA government, it can be

concluded that the performance was better during the period 2014-2019 as the overall growth

rate of profit is 38.99 percent as compare to overall growth in profit during the tenure of UPA

government which was 32.54 percent (refer to Figure 3a and 3b). In the first phase of UPA

government net profit increased significantly during third year but after there was a decrease in

growth rate during fourth and fifth year. During the tenure of NDA government profit increased

significantly although there is a negative growth rate during fourth year but in the fifth year

profit rises significantly. Schedule-III of companies Act, 2013 become applicable for

preparation of financial statements for the financial year beginning on or from 1 April

2014.Schedule III provides general instructions for preparation of financial statements of a

company.

Figure 3a Net Profit and YoY Growth Rate during UPA 1 (Source: Public Enterprise Survey Report,

2008-09)

Figure 3b Net Profit and YoY Growth Rate during NDA 1 (Source: Public Enterprise Survey Report,

2018-19)


UPA 1 and NDA 1


5.2.2. Employment

Employment in CPEs is spread across managerial/executive roles, supervisory and non-

executive roles as well as it includes casual employees, contractual employees and daily

worker.CPSEs provide lifetime employment to their employees and they have a skilled work

force, which is one of their basic strength. As public sector enterprises works in dynamic

environment some of them suffered with shortage of manpower while other may have a excess

manpower with them. A comparison of number of employees and growth rate during the first

five years of UPA and NDA government is discussed here. Referring figure 4a and 4b, it can

be assessed that under UPA governance, number of employees in CPSEs kept on decreasing

for the complete 5 year period, while more or less it is on increasing trend during NDA regime.

This again strengthens the fact that NDA government is more progressive towards development

and promotion of CPSEs as compared to their counterpart.

Figure 4a Number of Employees and YoY Growth Rate during UPA 1 (Source: Public Enterprise


Figure 4b Number of Employees and YoY Growth Rate during NDA 1 (Source: Public

Enterprise Survey Report, 2018-19)

-10.000

-5.000

0.000

5.000

10.000

15.000

20.000

25.000

0

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4

6

8

10

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2014 - 152015 - 162016 - 172017 - 182018 -1 9

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No

. of

Emp

loye

es

(in

Lak

hs)

YearNo. of Employees (in Lakhs) YoY Growth Rate



5.2.3. Contribution to government exchequer

Public sector enterprises contribute to the central exchequer by dividend payment as an owner,

interest on government loans as lender and taxes paid by these enterprises to the central

government as a taxpayer. In this study comparison will be made based on above three

components of central exchequer. During the phase of UPA government there is a significant

decline in total contribution of Public enterprises to the central exchequer which came down to

INR 151728 crore in 2008-09 from INR 165994 crore in 2007-08. This was primarily due to

reduction of contribution towards customs, excise duty, corporate tax and dividend tax.

During the phase of NDA 1, the total contribution of public enterprises to the central

exchequer shows an increasing trend compared to previous years. The total contribution during

the year 2018-19 has increased to INR 368,603 crore as compared to INR 352,361 crores in

2017-18. A comparative study of contribution of Public sector enterprises for all the three

variants is discusses below.

5.2.3.1. Contribution of dividend towards government exchequer

Figure 5a and 5b shows that contribution of dividend to government exchequer during UPA 1

regime increased significantly in 2005-06 from 2004-05, recording a walloping growth rate of

27.58 per cent. Since then the growth rate was very minimal and ranged between ± 2 per cent.

Considering the performance under NDA 1 regime, dividend contribution increased

significantly after first year of governance, i.e., in 2015-16 from 2014-15 (14.58 per cent), but

dipped sharply for next two years and registering a minimal growth rate of 3.36 per cent in year

2016-17and a negative growth rate of -6.38 per cent for 2017-18. Growth rate again restored to

positive in 2018-19 registering a positive growth rate of 2.94 per cent as compared to -6.38 per

cent for previous year. Overall it may be asserted that contribution of CPSEs to government

exchequer by way of dividend income is similar in both UPA and NDA regime.

Figure 5a Contribution of Dividend to Government Exchequer and YoY Growth Rate during

UPA 1 (Source: Public Enterprise Survey Report, 2008-09)

-5

0

5

10

15

20

25

30

0

5000

10000

15000

20000

25000

2004 -05

2005 -06

2006 -07

2007 -08

2008 -09

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ide

nt

Co

ntr

ibu

tio

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in c

rore

)

Year

Dividend (in crore) YoY Growth Rate


UPA 1 and NDA 1


Figure 5b Contribution of Dividend to Government Exchequer and YoY Growth Rate during NDA 1

(Source: Public Enterprise Survey Report, 2018-19)

5.2.3.2. Contribution of interest expense towards government exchequer

Figure 6a and 6b shows that contribution of interest expense to government exchequer during

UPA 1 regime dipped significantly from INR 731.67 crore in 2004-05 to INR 138.22 crore in

2005-06 registering a negative growth rate of 81.11 per cent. In the very next year, the

contribution increased by a walloping 1328.93 per cent jumping to INR 1975.08 crore in 2006-

07. The contribution dipped for next two years in row and registering negative growth rate of

62.08 per cent and 25.39 per cent respectively. If we look upon the performance of CPSEs in

context of interest contribution towards government exchequer under NDA governance, we

may conclude that the performance is much more satisfactory under NDA regime, as growth

rate in contribution increased to an astounding INR 7,843 crore in 2015-16 from mere INR 700

crore in 2014-15, registering and unimaginable growth rate of 1020.43 per cent. Next year, i.e.,

2016-17, growth rate dipped to -93.92 per cent as contribution came down significantly to only

INR 477 crore. Growth rate recorded a negative trend in following year as well, but restored

itself to positive one by registering and excellent growth rate of 203.07 per cent. In this case, it

can be stated that performance of CPSEs in terms of contribution to government exchequer by

way of interest is much better in NDA regime as compared to UPA regime.

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36000

38000

40000

42000

44000

46000

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in c

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Figure 6a Contribution of Interest to Government Exchequer and YoY Growth Rate during

UPA 1 (Source: Public Enterprise Survey Report, 2008-09)

Figure 6b Contribution of Interest to Government Exchequer and YoY Growth Rate during NDA 1


5.2.3.3. Contribution of taxes and duties towards government exchequer

Looking at figure 7a and 7b, it can be said that the performance of CPSEs in terms of

contribution to government exchequer by way of taxes and duties during UPA 1 regime has

fared well except in last year of governance, i.e., 2008-09. The growth rate in contribution

remained healthy initially, registering a growth rate of 11.81 per cent, 20.77 per cent and 14.06

per cent in year 2005-06, 2006-07 and 2007-08 respectively. In the last year, the contribution

has dipped slightly and recorded a negative growth rate of 9.63 per cent. Taking about the

performance of taxes and duties towards contribution to government exchequer under NDA

government, contribution has increased to INR 2,26,866 crore in 2015-16 from INR 1,62,027

crore in 2014-15 registering a growth rate of around 40 per cent. In the next year as well, the

growth rate maintained its level and registered a growth rate of around 39 per cent in

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UPA 1 and NDA 1


contribution of taxes and duties. In 2017-18, the contribution dipped marginally registering a

negative growth rate of mere 1.74 per cent, before restoring to increasing trend in 2019-19 when

the growth rate was registered at 4.65 per cent. In this case as well, it can be stated that

performance of CPSEs in terms of contribution to government exchequer via taxes and duties

is much better in NDA regime as compared to UPA.

Figure 7a Contribution of Taxes & Duties to Govt. Exchequer and YoY Growth Rate during UPA 1

(Source: Public Enterprise Survey Report, 2008-09

Figure 7b Contribution of Taxes & Duties to Govt. Exchequer and YoY Growth Rate during NDA 1


5.2.4 Export earning

Export is one of the major sources of foreign exchange. The export earnings of the CPSEs rise

significantly during the phase of UPA government (refer to Figure 8a). There was a remarkable

growth of 42.79 percent in the year 2006-07 and it continue to increase with a steadily

rate.During the phase of NDA government, the export earnings fared very inconsistently (refer

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to Figure 8b). It recorded a negative growth rate of 30.17 per cent in year 2015-16, but returned

to positive trend and registered a positive growth rate of 37.70 per cent but only to fall again

when it recorded a very low negative growth rate of 0.28 per cent in 2017-28. It again restored

itself to positive trend and recorded a growth rate of 33.54 per cent. This mixed response may

be because the export of goods decreased while the overall foreign exchange earnings increased.

This rise is due to increase in interest and dividend and other income.

Figure 8a Export Earnings of CPSEs and YoY Growth Rate during UPA 1 (Source: Public Enterprise


Figure 8b Export Earnings of CPSEs and YoY Growth Rate during NDA 1 (Source: Public Enterprise


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5.2.5. Number of profit- and loss-making enterprises

Oil and Natural gas Corporation Limited, Indian oil Corporation Ltd., and NTPC were ranked

among the top 10 profit making enterprises in India. Every year Central government declares

top ten profit and loss making enterprise in Public Enterprises Survey Report. Figure 9a and 9

b clearly shows that NDA government has beaten UPA government hands down in terms of

profit making CPSEs. The number of profit making CPSEs in UPA tenure were 143, 160, 154,

161 and 158 respectively for a period of five years, i.e., from 2004-05 to 2008-09. The

corresponding figures for NDA tenure are much better and number of profit making CPSEs are

159, 164, 175, 183 and 178 respectively for 5 year tenure of NDA government between 2014-

15 to 2018-19. The year on year growth rate in terms number of profit making CPSEs is

somewhat similar for both the tenures, i.e., UPA 1 and NDA 1.

Further if we talk about number of loss making CPSEs, UPA government has fared much

better in bringing the numbers down throughout its first tenure except for year 2008-09 when

number of loss making CPSEs increased to 54 in 2008-09 (in 2007-08, number of loss making

CPSEs was 52) (refer to Figure 9a). Under NDA rule, the number of loss making CPSEs

increased in first two years (from 76 to 79 in 2015-16 and further to 81 in 2016-17) but the

numbers have decreased for the last two years (72 in 2017-18 and 70 in 2018-19) of NDA

tenure (refer to Figure 9b). It can hence be concluded that both the governments have

consistently tried and launched initiatives to improve the financial performance of CPSEs, the

performance of NDA 1 government is slightly better in terms of making CPSEs profitable

ventures as compared to UPA 1.

Figure 9a No. of Profit and Loss Making CPSEs and YoY Growth Rate during UPA

1(Source: Public Enterprise Survey Report, 2008-09)

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Number of loss making enterprises

YoY Growth Rate (profit making CPSEs)

YoY Growth Rate (loss making CPSEs)



Figure 9b No. of Profit and Loss Making CPSEs and YoY Growth Rate during NDA 1 (Source:

Public Enterprise Survey Report, 2018-19)

5.2.6. Profitability ratios of CPSEs

In order to measure the performance of CPSEs, various profitability parameters have been

studied. The profitability ratios give an indication of how well CPSEs have fared in terms of

financial profitability during UPA and NDA regime.

5.2.6.1. Dividend payout ratio

A comparison of profitability related ratios shows a general improvement in profitability of

Central Public Sector Enterprises over the year. During 2004-09, Dividend payout ratio of the

enterprises shows a stable graph while it decreased in the last year of UPA tenure, i.e., 2008-

09. It dipped to 30.27 per cent as compared36.06 per cent in 2007-08 (refer to Figure 10). In

case of NDA 1, dividend payout ratio increasedfor first three years and rose to 62.26 per cent

in 2016-17 from 54.95 per cent in 2014-15. In fourth year, it dipped slightly to 61.42 per cent

before falling significantly and reaching a low of 50.31 per cent in 2018-19 (refer Figure 10).

The performance of both UPA and NDA seemed to be similar in terms, but if we compare the

figures year on year basis, the ratio is much better for NDA government.

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Year

Number of Profit making enterprises

Number of loss making enterprises

YoY Growth Rate (profit making CPSEs)

YoY Growth Rate (loss making CPSEs)


UPA 1 and NDA 1


Figure 10 Dividend Payout Ratio of CPSEs during UPA 1 and NDA 1 (Source: Public Enterprise

Survey Report, 2008-09 and 2018-19)

5.2.6.2. Turnover to capital employed ratio

Figure 11 shows that turnover to capital employed ratio follows an increasing trend during the

tenure of UPA 1 (except for second year when it has decreased), while during NDA 1 tenure,

for the first two years, it has shown a decreasing trend but has restored to increasing trend

thereafter. If we compare the figures on year to year basis, the ratio is much better for UPA 1

as compared to NDA 1. In UPA 1 the ratio ranged between 143 to 159 per cent registering an

average turnover to capital employed ratio of 149.33 per cent. If we compare the figures for

NDA 1 regime, the ratio ranged between 82 to 108 per cent registering an average turnover to

capital employed ratio of 90.38 per cent, which is way below UPA 1 figures (refer to Figure

11)

.

Figure 11 Turnover to Capital Employed Ratio of CPSEs during UPA 1 and NDA 1 (Source: Public

Enterprise Survey Report, 2008-09 and 2018-19)

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5.2.6.3. Net profit to capital employed ratio

Net profit to Capital employed ratio is much higher in UPA1 as compared to the NDA 1. The

ratio has shown a decreasing trend in UPA 1 tenure and has dipped from 12.88 per cent in 2004-

05 to 10.61 per cent in 2008-09; it has remained more or less constant during NDA 1 tenure

registering a slight decline from 5.61 per cent in 2014-15 to 5.56 per cent in 2018-19 (refer to

Figure 12). Though if we compare the figures on year to year basis, we can conclude that the

ratio were much better during UPA 1 regime then NDA 1 (refer to Figure 12).

Figure 12 Net Profit to Capital Employed Ratio of CPSEs during UPA 1 and NDA 1 (Source: Public


5.2.6.4. Net profit to total income ratio

Net profit to total income ratio has more or less shown same trend for both UPA 1 and NDA 1

regime. The year to year comparison of ratio shows that figures are slightly better during UPA

1 as compared to NDA 1. On an average the net profit to total income ration for UPA 1 tenure

fared around 8 per cent per annum, while its is slightly low at 6 per cent per annum during NDA

1 tenure (refer to Figure 13).

Figure 13 Net Profit to Total Income Ratio of CPSEs during UPA 1 and NDA 1 (Source: Public


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5.2.6.5. Net profit to net worth ratio

Figure 14 shows that, during UPA 1 tenure, net profit to net worth ration has constantly dropped

year on year basis, while during NDA 1 tenure, it has show an increasing trend year on year

basis. The net profit to net worth ratio has decreased from 19.02 per cent in 2004-05 to 14.38

per cent in 2008-2009; while it has increased from 10.69 per cent in 2014-15 to 12.11 per cent

in 2018-19 during 5 year tenure of NDA 1. If we compare the figures on year to year basis, it

may be concluded that ratio were slightly better during UPA 1 regime.

Figure 14 Net Profit to Net worth Ratio of CPSEs during UPA 1 and NDA 1 (Source: Public


5.2.6.6. Tax provision to PBEET ratio

CPSEs have shown similar performance in terms of tax provision to PBEET ratio during both

UPA 1 and NDA 1 tenure. Except for the first year for their respective tenure, tax provision to

PBEET ratio is more or less identical and follow identical growth trend as well (refer to Figure

15). It is hence concluded that there is no difference in tax provision to PBEET ratio between

different tenures of UPA 1 and NDA 1.

Figure 14 Tax Provision to PBEET Ratio of CPSEs during UPA 1 and NDA 1 (Source: Public


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6. CONCLUSIONS AND RECOMMENDATION

It can be concluded that the performance of PSEs has improved during the NDA 1 phase as all

the financial indicators show favorable trends except some of the profitability ratios. According

to the Department of Public Enterprise (DPE) data, there are 348 CPEs as on 31 March 2019,

as compared to 290 CPEs on 31 March,2014.In the five years period, the NDA government has

set up 58 more central government owned companies. The increase in number of CPEs

increases the role of government in business. Although, government is consistent on the policy

of disinvestment either by selling the companies to private sector entities or by bringing down

the government stake to less than 50 percent, the number of profit making CPSEs has increased

from 158 in 2009 to 178 in 2019 and the number of loss making CPSEs increased from 51 in

2009 to just 70 in 2019.

The net profit after tax and overall net profit also increasedduring NDA 1 phase with a better

growth rate as compare to growth rate of UPA 1.During the tenure of NDA government the

total number of employment in the public enterprises rises considerably in the year 2016-17

with a growth rate of 21.99 percent.

The policy of disinvestment to revive the PSEs has shown tremendous results as

government has realized Rs. 1,36,018 Crore from 2014 to 2019. This has resulted in improved

performance of PSEs and reducing the budgetary deficit. Although the realization was much

lower than targeted which shows a lot more concentrated efforts are needed from the part of

government, as government is not trying to find out the issues for this low realizations. PSEs

have also contributed significantly to central exchequer and it is continuously increasing. The

share of public sector GDP to total GDP is decreasing after 1997 which is a major concern as

it indicates that private sector is contributing more to the GDP. So, this issue has to be addressed

because public sector has been given prominent role for economic development and its

decreasing share in GDP is not justified.

As this study compares the first phase of UPA and NDA government, and the results are

more favorable towards NDA phase, yet the profitability ratios are not satisfactory. During

2018-19 turnover to capital employed ratio reduces to 92.6 as compare to 159.1 on 2008-09.Net

profit to capital employed ratio also reduced significantly. However, net profit to total income

ratio gives a stable position.Net Profit to net worth ratio also increases during 2014-2019 which

is a sign of relief. But government needs to take up the policies which help in improving

profitability ratios. Overall it is concluded that the policies of NDA 1have better impact on

overall performance and growth of public sector enterprises as compared to policy initiatives

of UPA government.

7. LIMITATIONS OF RESEARCH

The major limitation of this research can be attributed to the fact that it has considered a time

period of 5 years for both UPA 1 and UPA 2; future research is welcomed to analyze the

performance of PSU’s incorporating second tenures of UPA and NDA government as well.

Further, study adopted descriptive method for performance analysis; more advanced statistical

techniques may be applied to gauge deeper insights into the performance and evolution of

PSU’s in India.

REFERENCES

[1] Chandra, G. Performance of Public Sector Enterprises: Selection of Criterion. Analysis of Public

& Co-operative Economy, 46(1), 1975, pp. 13-22.

[2] Department of Public Enterprises (2004-05). Public Enterprise Survey Report, 2005, Ministry of

Heavy Industries and Public Enterprises. Retrieved from

http://dpe.nic.in/e_documents/archives/newsite/sur0607/survey01/pesurvey3


UPA 1 and NDA 1



Heavy Industries and Public Enterprises. Retrieved from https://dpe.gov.in/pe-survey-report/pe-

survey-2005-06



survey-2006-07



survey-2007-08



survey-2008-09



survey-2014-15


Heavy Industries and Public Enterprises. Retrieved from

https://dpe.gov.in/pesurveyreports/public-enterprises-survey-2015-16


Heavy Industries and Public Enterprises. Retrieved from https://dpe.gov.in/public-enterprises-

survey-2016-17

[10] Department of Public Enterprises (2017-18). Public Enterprise Survey Report, 2018, Ministry

of Heavy Industries and Public Enterprises. Retrieved from https://dpe.gov.in/public-enterprises-

survey-2017-18


Heavy Industries and Public Enterprises. Retrieved from https://dpe.gov.in/public-enterprises-

survey-2018-19

[12] Kaur, S. Reforming Indian Public Sector Enterprises the Efficiency Dimensions. Journal of

Management Research, 1(3), 2001. pp. 173-190.

[13] Nagaraj, R. Public Sector Performance in the Eighties- Some Tentative Findings. Economics &

Political Weekly, 26(50), 1991, pp. 2877-2883.

[14] Planning Commission. Report of “Panel of Experts on Reforms in Central Public Sector

Enterprises (CPSEs), Governmen. of India, 2011.

[15] Singh, J and Chittedi, R. K. Performance of Public Sector Enterprises in India: A Macro-Level

Analysis. The IUP Journal of Managerial Economics, 9(3), 2011, pp. 7-25.

ANNEXURE

Table 2 Number of Operating CPSEs

UPA 1 NDA 1

Year No. of CPSEs YoY Growth Year No. of CPSEs YoY Growth

2004 - 05 227 2014 - 15 235

2005 - 06 226 -0.440528634 2015 - 16 244 3.829787234

2006 - 07 217 -3.982300885 2016 - 17 257 5.327868852

2007 - 08 214 -1.382488479 2017 - 18 258 0.389105058

2008 - 09 213 -0.46728972 2018 -1 9 262 1.550387597

Source: Public Enterprise Survey Report, 2008-09 and 2018-19



Table 3 Amount of investment

UPA 1 NDA 1

Year Investment (in

crore)

YoY

Growth Year

Investment (in

crore) YoY Growth

2004 - 05 357849 2014 - 15 1096057

2005 - 06 393057 9.838786751 2015 - 16 1171844 6.914512658

2006 - 07 403706 2.709276263 2016 - 17 1250373 6.701318606

2007 - 08 421089 4.305856242 2017 - 18 1373412 9.840183689

2008 - 09 455367 8.14032188 2018 -1 9 1640628 19.45636124


Table 4 Overall Net Profit of CPSEs

UPA 1 NDA1

Year Net Profit YoY Growth Year Net Profit YoY Growth

2004 - 05 74432 2014 - 15 102866

2005 - 06 76382 2.619840929 2015 - 16 114239 11.05613128

2006 - 07 89581 17.28024927 2016 - 17 125498 9.855653498

2007 - 08 91571 2.22145321 2017 - 18 123751 -1.392054057

2008 - 09 98652 7.732797501 2018 -1 9 142951 15.51502614


Table 5 Total Number of Employees in CPSEs

UPA 1 NDA 1

Year No. of Employees

(in Lakhs)

YoY

Growth Year

No. of Employees

(in Lakhs)

YoY

Growth

2004 - 05 17 2014 - 15 12.91

2005 - 06 16.49 -3.000 2015 - 16 12.32 -4.570

2006 - 07 16.14 -2.122 2016 - 17 15.03 21.997

2007 - 08 15.65 -3.036 2017 - 18 15.54 3.393

2008 - 09 15.35 -1.917 2018 -1 9 15.14 -2.574


Table 6a Contribution to Government Exchequer

UPA 1

Year Dividend

(in crore)

YoY

Growth

Interest

(in crore)

YoY

Growth

Taxes and Duties

(in crore)

YoY

Growth

2004 - 05 15200.85 731.67 94671.15

2005 - 06 19393.16 27.58 138.22 -81.11 105852.94 11.81

2006 - 07 18967.43 -2.20 1975.08 1328.94 127840.75 20.77

2007 - 08 19423.47 2.40 749.03 -62.08 145821.27 14.06

2008 - 09 19387.36 -0.19 558.79 -25.40 131781.89 -9.63

Source: Public Enterprise Survey Report, 2008-09


UPA 1 and NDA 1


Table 6b Contribution to Government Exchequer

NDA 1

Year Dividend

(in crore)

YoY

Growth

Interest

(in crore)

YoY

Growth

Taxes and Duties

(in crore)

YoY

Growth

2014 - 15 38166 700 162027

2015 - 16 43726 14.57 7843 1020.43 226866 40.02

2016 - 17 45196 3.36 477 -93.92 315142 38.91

2017 - 18 42308 -6.39 391 -18.03 309662 -1.74

2018 -1 9 43552 2.94 1185 203.07 324066 4.65


Table 7 Export Earning of CPSEs

UPA NDA

Year

Export

Earnings (in

crore)

YoY Growth Year Export Earnings

(in crore) YoY Growth

2004 - 05 42264 2014 - 15 84732.20

2005 - 06 45954 8.73 2015 - 16 59165.06 -30.17

2006 - 07 65620 42.79 2016 - 17 81470.80 37.70

2007 - 08 67678 3.14 2017 - 18 81238.88 -0.28

2008 - 09 74184 9.61 2018 -1 9 108492.66 33.55


Table 8a Number of Profit and Loss Making Enterprises

UPA 1

Year Number of Profit

making enterprises

YoY

Growth

Number of loss

making

enterprises

YoY Growth

2004 - 05 143 73

2005 - 06 160 11.89 63 -13.70

2006 - 07 154 -3.75 61 -3.17

2007 - 08 161 4.55 52 -14.75

2008 - 09 158 -1.86 54 3.85


Table 8a Number of Profit and Loss Making Enterprises

UPA 1

Year Number of Profit

making enterprises

YoY

Growth

Number of loss

making

enterprises

YoY Growth

2014 - 15 159 76

2015 - 16 164 3.14 79 3.95

2016 - 17 175 6.71 81 2.53

2017 - 18 183 4.57 72 -11.11



2018 -1 9 178 -2.73 70 -2.78


Table 9 Dividend Payout Ratio

Year UPA 1 Year NDA 1

2004 - 05 31.89 2014 - 15 54.95

2005 - 06 32.91 2015 - 16 60.03

2006 - 07 34.8 2016 - 17 62.26

2007 - 08 36.06 2017 - 18 61.42

2008 - 09 30.27 2018 -1 9 50.31


Table 10 Turnover to Capital Employed Ratio


2004 - 05 147.56 2014 - 15 108.83

2005 - 06 143.01 2015 - 16 83.34

2006 - 07 145.9 2016 - 17 82.11

2007 - 08 151.09 2017 - 18 85.02

2008 - 09 159.1 2018 -1 9 92.6


Table 11 Net Profit to Capital Employed Ratio


2004 - 05 12.88 2014 - 15 5.61

2005 - 06 11.88 2015 - 16 5.61

2006 - 07 12.26 2016 - 17 5.87

2007 - 08 11.22 2017 - 18 5.33

2008 - 09 10.61 2018 -1 9 5.56


Table 12 Net Profit to Total Income Ratio


2004 - 05 8.73 2014 - 15 5.23

2005 - 06 8.31 2015 - 16 6.48

2006 - 07 8.4 2016 - 17 6.89

2007 - 08 7.43 2017 - 18 6.09

2008 - 09 6.67 2018 -1 9 5.86


Table 13 Net Profit to Net Worth Ratio


2004 - 05 19.02 2014 - 15 10.69

2005 - 06 17.7 2015 - 16 10.58


UPA 1 and NDA 1



2006 - 07 17.91 2016 - 17 11.76

2007 - 08 15.68 2017 - 18 11.27

2008 - 09 14.38 2018 -1 9 12.11


Table 14 Tax Provision to PBEET Ratio


2004 - 05 25.32 2014 - 15 32.04

2005 - 06 26.86 2015 - 16 28.00

2006 - 07 30.80 2016 - 17 29.91

2007 - 08 33.83 2017 - 18 33.31

2008 - 09 32.81 2018 -1 9 32.41


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