Finance minister Arun Jaitley has said in Parliament that public sector undertakings must learn to function like any other business organisation in a competitive environment and should not be run like a government department. Jaitley’s stern message came when he was answering a question relating to sick PSUs in the Rajya Sabha.
No one can argue with the FM’s stand but the government is also partly responsible for the rampant losses in the public sector—79 central public sector enterprises have incurred losses, of which 49 are sick. There is an urgent need to introduce another wave of reforms in PSEs if the problem of sickness is to be tackled. Freeing PSUs from the control of administrative ministries should be the first step in this direction.
There is also a need to tackle the viability of public companies. Around 80 CPSEs have been reporting losses in the last five years despite the government investing R1.57 lakh crore over the years. According to the records submitted in Parliament, public limited companies incurred a combined loss of R65,650 crore for the three financial years 2009-10 to 2011-12.
The government has attributed the reasons for losses to high input cost, technology obsolescence and market competition. In order to revive 48 sick CPSEs, the government is looking at infusing R41,000 crore, besides winding up four companies.
And yet, between 2008-09 and 2013-14, the central government registered 235 public limited companies having a combined paid-up share capital of R56,700 crore. Thankfully, there is a sharp decline in the number of companies incorporated in the last three years. From a high of 64 such companies being incorporated in 2008-09, the figure has come down to 16 in 2013-14. In the past four months, the Centre has registered less than five public limited companies. Experts say the incorporating-to-winding up ratio of central government companies is abysmal.
As opposed to registering around 250 CPSEs in the past six years, only six have been closed in the country, namely Bihar Drugs & Organic Chemicals Ltd (Bihar), Indian Oil Technologies Ltd (Delhi), Brushware Ltd (UP), Pyrites Phosphastes & Chemicals Ltd (Bihar), National Instruments Ltd (West Bengal) and Bharat Yantra Nigam Ltd (UP.). That speaks volumes about the government's intent on the public sector.
The revival of 44 sick CPSEs, as envisaged in 2012-13, was supposed to come at a total assistance of R27,250 crore, including cash assistance of R4,825 crore via