The PSU story unfolds

The public sector has always been the backbone of Indian economy, saving it in crucial times. What makes it work and what is its real potential?

shubhendu

Shubhendu Parth | December 24, 2015



 The financial year 2014-15 was not a typically good year for the global economy – largely due to the weaker-than-expected global activity in the last quarter (January to March) of 2013-14 and a consecutive weak April-June quarter of 2014. This compelled the IMF to lower its 2014 growth forecast for the world economy to 3.3 percent. This was 0.4 percentage point lower than the April 2014 World Economic Outlook (WEO) number.


India, however, not only managed to negate the impact, it remained unscathed to emerge as one of the most promising economies; thanks to the initiatives targeted at controlling inflation. The Reserve Bank of India took steps to tighten the monetary policy that in turn helped manage the demand pressures better. This also enabled the nation create a buffer against external global shocks. The year also saw a relatively stable rupee and the rise in domestic demand. 

What also worked in India’s favour was the decline in global oil prices and the ‘Make in India’ push that helped the country bring in some massive investments. But this is where the story of the public sector companies – state capitalism to be precise – belies the otherwise logical conclusion of a good overall industry growth, with 38 percent of the Governance Now Top 100 PSUs and 42 percent of the top 200 firms by revenues reflecting negative growth. 

During 2014-15 GN PSU 100 clocked an overall revenue of '2,071,714.69 crore, 5 percent lower than '2,172,225.31 crore revenue registered by the top 100 public sector enterprises in 2013-14 with 10 percent growth over the previous fiscal (2012-13).

The story gets complicated further when we look at the Top 10 giants that include six petroleum behemoths. The fact that all of them – Indian Oil Corporation, Bharat Petroleum Corporation, Hindustan Petroleum Corporation, ONGC, Mangalore Refinery and Petrochemicals, and Chennai Petroleum Corporation – reported negative growth despite a stable rupee and falling global oil prices forces one to believe that all is not well with the PSUs. Food Corporation of India and NTPC, on the other hand, fared slightly better with 6.2 percent and 3.5 percent growth respectively.

Overall, 27 of the Top 100 PSUs have registered negative growth despite a positive result during the previous fiscal – Western Coalfields with the least (-0.74 percent), while MTNL and Mazagon Dock Shipbuilders sliding the most with negative growth figures of -74.97 percent and -74.83 percent respectively.

While the Governance Now-M76 Analytics research indicates that over 53 percent of the PSUs have performed better than the industry on profitability front, the report also highlights that over 40 percent of PSUs have scored better than the industry standards when it comes to asset utilisation. This also unfolds the true story of the PSUs in India: majority of them have been able to stay afloat due to better management of their assets and legacy factor, which in the now glocal economy is bound to lose shine in the days to come. 

It also highlights the lack of fruitful investments and proactive strategy as discussed in the analysis that we are presenting in this special annual issue. 

As the government now aims to disrupt the legacies, as a necessity to ensure that India stays relevant in an increasingly digitised global economy, PSU revenues are likely to feel further pressured if they continue to stay in their comfort zones. In order to get back into consistent growth territories, they need to excel at innovation too – and not just operations and asset management.

For PSUs, the need of the hour is also to align, or realign, with the strategic goals and directions that the government has identified and which are duly manifested in programmes like Make in India and Designed in India. 
 
parth@governancenow.com

 

Comments

 

Other News

Is the government spending enough on dalits?

The Narendra Modi government has set aside Rs 52,393 crore in 2017-18 for the welfare of the dalits. On the face of it, the amount is substantial. However, an analysis of the past actual allocation shows that there has in fact been a dip in spending on schemes that are specifically meant only for dalits.

President’s post above politics: Kovind

“I will always try and it is also my belief that the president’s post should be above politics,” said NDA’s presidential candidate Ram Nath Kovind who filed the nomination papers on Friday.   “Since the time I became governor,  I am no longe

Unaffordable sacredness of our cattle

A lot of debate that we witness in the media on the cattle question these days suffer from the disease of speculative utopian imagination of a ‘cow-nation’ and relentless abuses for those beef-eating ‘others’.   Political debates over the question of o

“Gandhi and Tagore are the two Indian authors who redefine civilisation as a moral compass and a space of dialogue”

Ramin Jahanbegloo is a renowned philosopher who is now associated with the Jindal Global University. His latest work, The Decline of Civilization, calls for countering the ‘decivilising’ tendencies of our times by returning to Gandhi and Tagore. Jahanbegloo answered s

Should CBSE prepone the board exams?

Should CBSE prepone the board exams?

Cricket, not just a sport

In this nationalistic age, sports seem to play an important role, and in India, this can be seen during cricket matches. For most, a victory symbolises prestige and supremacy.   On Sunday, India lost to Pakistan in the final match of the ICC Champions Trophy. The defea



Video

अब पासपोर्ट हिंदी और अंग्रेजी दोनों भाषा में होगा

Current Issue

Opinion

Facebook    Twitter    Google Plus    Linkedin    Subscribe Newsletter

Twitter