Friday, November 15, 2013

Jewels & Pebbles: Public Sector Companies in India

In "The Idea of India", Sunil Khilnani notes that under Nehru’s rule:
"...the state was enlarged, its ambitions inflated, and it was transformed from a distant alien object to one that aspired to infiltrate the everyday lives of Indians, proclaiming itself responsible for everything they could desire: jobs, ration cards, educational places, security, cultural recognition."
Much of this infiltration has been accomplished by Public Sector Enterprises (PSEs, aka PSUs). As the first 'Five Year Plan' led to the next ones, the scale & scope of PSUs was steadily expanded. While there were only five central PSUs with a total investment of Rs. 2900 crore at the time of the First Five Year Plan, there were as many as 260 (excluding 7 Insurance Companies) with a total investment of Rs. 7, 29,228 crore,as on 31st March, 2012.

The point worth highlighting here is that these 260-odd PSU's include only those owned directly by the central government.

The ones that are doing well have been ranked into three categories:

  1. Maharatnas ('great-jewels') - 7
  2. Navaratnas ('nine-jewels')- actually there are 14 here!
  3. Miniratnas-I & II ('small-jewels') - 70

In order to qualify as a minor jewel (Miniratna-II) a company has to be profitable for three consecutive years. Since this is the lowest bar, we can safely conclude that all other central PSUs (260-91=169) are loss-making companies.

Apart from the 260-odd central PSUs, each of the states have their own companies. Then there are also companies that have been floated indirectly by the government through its financial intermediaries.

If 65% of public enterprises owned by the government of India are sending taxpayers money down the drain, how much more is being wasted by the dud companies created by the state governments and public financial institutions?

Now that is something worth figuring out...


* MiniRatnas --
- EPIL -

* Early history of EIL --

* Parmatam Parkash Arya, B. B. Tandon (): "Economic Reforms in India: From First to Second Generation and Beyond" -- at Google Books

* Parliament debate on disinvestment --

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