Contrary to propagation by many that public sector was heavily dependent on government for survival; the Central Public Sector Enterprises have once again demonstrated their overall financial strength and independence. The sector increased its contribution to Central exchequer by way of dividend, interest and host of taxes by over Rs.!4,000 crore in two years ending 2000 – 01 to a total of Rs.60, 977.97 crore. On the other hand, it also cut down its reliance on budgetary support which accounts for less than 10 per cent of the total plan outlay of Rs.47, 526 crore for the year, says the Public Enterprises Survey for 2000-01.

Such a trend, obviously, could not be possible without increasing efficiency and generation of more profits. The annual report of the performance of CPSEs, brought out by the Government itself, bears testimony to this as it reports that net profit of these undertakings increased to Rs.15, 653 crore in the year under consideration from Rs.14, 331 crore in 1999-2000, reflecting a growth of 9.22 per cent. This shows a return on equity (net profit to paid-up capital ratio) was 18.17 per cent for 2000 – 01 as against Rs.17.66 in the previous year. This intrinsic strength of the sector can be easily gauged by the fact that government sold its shares of Rs.631 crore (at par) since April 2000 to fetch a total of Rs.6771 crore, according to Disinvestment Secretary Mr. Pradeep Baijal.  What Mr. Baijal is saying is not a figment of imagination. Indeed the much-hyped corporate sector perceives the value of PSE nearly ten times higher than the par value and had willingly purchased government equity in the same proportion.

It is also a fact that top PSUs both in terms of profits and turnover – Indian Oil Corporation and Oil and Natural Gas Corporation – are way ahead of top private entity.  Reliance even after it merged Reliance Petroleum Limited with Reliance Industry, became a nearly Rs.60, 000 crore entity with net profit of Rs.4, 000 crore.  Against this, Indian Oil Corporation has a turnover of over Rs.111, 000 crore while Oil and Natural Gas Corporation has a net profit level of over Rs.6, 000 crore. No wonder Ambanis, promoters of Reliance, have listed just these companies in the Indian Peer Group in the oil sector. Government too has acknowledged that out of 107 MoU signing CPSEs evaluated, as many as 49 were rated as “Excellent” and another 26 as “Very Good”. Indeed such a proportion of success at a time of global and domestic slowdown would be and should be considered exceptionally good even by the protagonists of private sector and privatization.

Out of 234 operating CPSEs, including 78 in the service sector, as many as 122 were profitable during 2000 - 01 as against 126 in the previous year. Likewise the number of making units also increased to 111 from 105 in 1999-2000. Yet overall profits of the PSEs increased from Rs.14, 330, 93 crore to Rs.15, 652.85 crore during the year under review. This was on a turnover or operating income of Rs.458, 226.97 crore in 2000 –01 against Rs.389, 198.98 crore in the previous year, which reflects a growth of 17.74 per cent.

Led by companies like IOC, ONGC, NTPC, BSNL and VSNL, net profits of profit making PSEs shot up to Rs.28, 491.63 crore during 2000-01 from Rs.24, 232.82 crore in the previous year. However, over two third of this was accounted by just ten companies which together net profit of Rs.19, 603.70 crore during the year under review. Oil and Natural Gas Corporation led the tally with net of Rs.5, 228.78 crore followed by NTPC at Rs.3733.80 crore, IOC at Rs.2720.33 crore and VSNL at Rs.1778.83 crore. Table-1 lists the top ten profit making enterprises.

It is needless to hide some of the weaknesses of the public sector which otherwise would be evident from the number and extent of the loss making PSEs. A total of 111 PSEs, coming under the loss making head during 2000-2001, accounted for a total loss of Rs.12, 838.78 crore as against Rs.10, 301.89 crore.  Here it is significant to point out that about two third of the losses at Rs.7942.69 crore were accounted for by just 10 companies led by Hindustan Fertilizers. This fertilizer monolith posted a loss of Rs.1956.58 crore followed by Bharat Coking Coal Ltd. at Rs.1276.70 crore and Fertilizer Corporation of India at Rs.948.84 crore Table-2 lists the ten enterprises that have the dubious distinction of being the top loss making CPSEs.
 

Profitability and Trends in Performance of CPSEs
In the face of the liberalization and economic reforms, that many consider having a tilt in favour of the private sector, initiated in 1991 and pursued by successive governments in India, the public sector has continued to perform well during the decade gone by. Despite growing competition, net profit of the sector increased by a whopping 564.39 per cent at Rs.15, 653 crore during 2000-01 from just Rs.2356 crore in 1991-92.  Likewise return on investment as measured in terms of profits before interest and tax to capital employed has gone up from 11.6 per cent to 14.7 per cent during the period.  Table-3 gives a detailed trend analysis of the profitability and other performance parameters of the CPSEs since 1991-92.

During this period, capital employed has gone up by nearly three fold at Rs.330, 649 crore in 2000-01 from Rs.117,991 crore. On this profit before depreciation, interest and tax has increased from Rs.22,224 crore in 1991-92 to Rs.69,228 crore in 2000-01, thereby registering a growth of  211.17 per cent. Of this, depreciation alone accounted for Rs.20, 520 crore in 2000-01 as against Rs.8,548 crore in 1991-92.

Performance during first half of 2001-02
As per the flash results furnished by 202 out of 234 operating enterprises, the sector appears to have been afflicted by the general slowdown in the economy.  It is reflected from the fact that net profit of the sector decreased by Rs.306 crore during the first half of the fiscal at Rs.7520 crore from Rs.7826 crore in April-September 2000-01.  This is despite the fact that the number of profit making enterprises has increased from 88 to 97.  Despite the lower profit margins, the sector continued to pump in more money as the capital employed in the sector increased to Rs.3, 20,566 crore from Rs.2, 94,957 crore, reflecting a growth of 8.68 per cent. During this period, the CPSEs recorded a turnover/operating income of Rs.2, 20,179 crore which is Rs.9479 crore higher than that in April- September 2000-01.

Contribution to National Economy
The public sector continued to occupy a key position in the nation’s economy in several sectors, according to the survey, which listed the achievement of the sector in last three decades. The sector contributed 97.05 per cent of the total coal production in the country during the 2000-01 as against just a 17.66 per cent share way back in 1968-69. Besides accounting for complete lignite production, CPSEs accounted for lion’s share of produced in petroleum, basic metals and non-ferrous metals.  It accounted for 87.39 per cent of crude oil production, 87.89 per cent of Natural Gas and 68.61 per cent of refined crude. Besides the sector accounted for 32.35 per cent of steel, 49.34 per cent of aluminium, 73.62 per cent of lead and over 80 per cent of zinc produced in the country during 2000-01 and, the sector recorded export earnings of Rs.19,714 crore at the same level as that in 1999-00 despite the global dip in international trade.
 

Investment
The investment in public sector grew from meagre Rs.29 crore as on April 1951 to a Rs.274, 114 crore as on March 31, 2001. Against this the sector has net fixed assets of Rs.244, 836 crore in March 2001 as compared to Rs.232, 790 crore in March 2000.  During the year 2000-01 plan outlay for the sector increased to Rs.47, 526.76 crore as against Rs.35, 474.98 crore in the previous year.  Out of this the sector mobilized Rs.25, 046.96 crore as internal resourses while another Rs.18, 007.71 crore by way of extra budgetary resources.  Budgetary support for this was just Rs.4472.79 crore.

Dividend and Contribution to Exchequer
During 2000-01 as many as 84 companies declared dividend of Rs.8260 crore as against Rs.5455 crore dividend declared by 85 companies in the previous year. Out of this Government received Rs.3492.38 crore during the year under review.  Besides, the CPSEs paid a total of Rs.1958.31 crore to the government as interest against Rs.2252.81 crore paid in the previous financial year.  The public sector also accounts for a major share of government tax kitty. During the year it contributed Rs.55, 500.28 crore by way of excise and customs duty, corporate tax, dividend tax and other levies.

Production and Management of Inventories
The economic justification of the sector could be made by the fact that the CPSEs engaged in manufacturing and selling goods added value worth Rs.105, 133.12 crore during the year under review.  As many as 144 CPSEs performed at more than 75 per cent of the capacity while another 33 had a capacity utilization ranging between 50 per cent and 75 per cent, according to the survey. This along with management of material has had a positive reflection on the performance of PSEs.  The survey revealed that inventory level of 43 days of production on turnover during 2000-01 at Rs.50, 439 crore was quite an improvement over 54 days of inventory valued at Rs.52, 414 crore in the previous year.

Overall the performance of CPSEs has been much better in terms of almost all the parameters with average annual per capital emoluments of Rs.219, 546 for a workforce of 17.42 during 2000-01.  In the previous year, over 18 lakh employees got emoluments at an average of Rs.1, 68,339 the survey says admitting that the organizations were also sought to be made leaner by reducing surplus staff through schemes like VRS. About three lakh and sixty nine thousand employees opted for VRS till March 2001.

Going by the investment plans of the PSEs for the next financial year and a review of the current financial year, it is a foregone conclusion that the PSEs would continue to play a major role in the growth of the economy.  The PSEs where capital employed stands at a whopping Rs.330,649 crore, are increasingly being used as cash cows, be it by way of mopping up funds through sale of equity or granting of fresh loans.  Yet, of late, the public sector is not getting the kind of attention and recognition that it rightfully deserves.