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

A great literary feast (that could’ve been even more sumptuous)

A Case of Indian Marvels: Dazzling Stories from the Country’s Finest Writers Edited by David Davidar Aleph, 390 pages, Rs 999 Change is the only constant, and India has always been doing so. Yet, after independence, if there was a year when the p

Govt e-Marketplace sellers report more business

“My volume of business has increased ever since I registered on GeM (Government e-Marketplace) in 2017. Earlier, I could supply items only in the vicinity of my shop in Fort area and only within Mumbai. Now, I ship my products all over the country! I have tied up with India Post and three private cou

How the Hindi Newspaper Business Changed

The Journey of Hindi Language Journalism in India: From Raj to Swaraj and Beyond By Mrinal Pande Orient BlackSwan, 188 pages, Rs 1,195.00 In India, the English-language media is considered the ‘national media’, while the language press

More reforms in telecom sector in offing: Ashwini Vaishnaw

The telecom sector in the country will witness more reforms in the coming years, minister for communications, electronics & IT and railways Ashwini Vaishnaw has said. He also asserted that the industry too will have to do its bit and reciprocate by improving quality of service significantly.

Left-wing extremism: challenges and response

Left-wing extremism is in existence right from India’s independence, but it became prominent in 1967 under the name of Naxalism. The nomenclature of this movement has changed from time to time and place to place depending upon the leadership. Before 2014 more than 15 states were facing this problem w

Agri Min organises events ahead of International Year of Millets 2023

A series of pre-launch events and initiatives have been organised by the Department of Agriculture and Farmers Welfare on the MyGov platform in the run-up to the International Year of Millets 2023 to create awareness and a sense of participation in the country  around the ancient and forgotten golden

Visionary Talk: Amitabh Gupta, Pune Police Commissioner with Kailashnath Adhikari, MD, Governance Now


Archives

Current Issue

Opinion

Facebook    Twitter    Google Plus    Linkedin    Subscribe Newsletter

Twitter