ROLE OF PUBLIC SECTOR UNITS IN THE GROWTH OF INDIAN ECONOMY

ROLE OF PUBLIC SECTOR UNITS IN THE GROWTH OF INDIAN ECONOMYSUBMITTED TO SUBMITTED BYDR. DIPTI SHARMA JAIN KUMAR(2011UCP1190) Assistant Professor JITENDRA KHATRI(2011UCP1192) MNIT JAIPUR ADARSH KUMAR(2011UCP1166) PERMESHWAR LAL(2011UIT)INTRODUCTIONThe government-owned corporations are termed as Public Sector Undertakings (PSUs) in IndiaIn a PSU majority (51% or more) of the paid up share capital is held by central government or by any state government or partly by the central governments and partly by one or more state governments.The public sector might provide services that non-payer cannot be excluded from (such as street lighting), services whichbenefitsall ofsocietyrather than just the individual whousesthe service (such as public education), and services that encourage equal opportunity.

Arms & Ammunition and the allied items of defence equipment, defence air-crafts and warshipsRailways transport, air transport etc. come under PSUs.

Performance status

In 2014-15, there were 251 Central Public Sector Enterprises in India, as compared to 247 in 2005-06.Overall performance of these number of CPSEs in the last 10 years is given in Table.The following observations are made regarding the performance of CPSEs during 2003-04 to 2012-13.

The capital employed has increased from Rs. 4,52,336 Crores in 2003-04 to Rs.15,10,373 Crores in 2012-13 recording a growth of 233%.

Number of loss incurring CPSEs, it has come down from 89 in 2003-04 to 79 in 2013-14.

Turnover increased to Rs.19,45,777 Crores in 2012-13, from Rs. 6,30,407Crores in 2003-04 recording a net worth growth of 208% increased from Rs.2,91,828 Crores to Rs.8,51,245 Crores in 2012-13 recording a growth of 191%.

Net profit has increased by 117% in 2012-13 in comparison to 2003-04 Rs.52,943 Crores, and is currently to the tune of Rs. 1,15,298 Crores OBJECTIVES OF PUBLIC SECTOR UNITS

Maximizing the rate of economic growthDevelopment of capital-intensive sectorDevelopment of agricultureBalanced regional developmentExport promotionIncreasing employment opportunities

Cont

Import substitutionProduction and salesMobilization of resourcesResearch and developmentEstablishment of a socialist pattern

OBJECTIVES OF PUBLIC SECTOR UNITSEconomic developmentPublic enterprises were set up to accelerate the rate of economic growth in a planned manner.These enterprises have created a sound industrial base for rapid industrialisation of the country.They are expected to provide infrastructure facilities for promoting balanced and diversified economic structure of development.

Growth of investment in CPSEsParticularsTotal investment(Rs. in crore)Enterprises (Numbers)On the eve of the 1st Five Year Plan (1.4.1951)295On the eve of the 2nd Five Year Plan (1.4.1956)8121On the eve of the 3rd Five Year Plan (1.4.1961)94847At the end of 3rd Five Year Plan (31.3.1966)241073On the eve of the 4th Five Year Plan (1.4.1969)389784On the eve of the 5th Five Year Plan (1.4.1974)6237122At the end of 5th Five Year Plan (31.3.1979)15534169On the eve of the 6th Five Year Plan (1.4.1980)18150179On the eve of the 7th Five Year Plan (1.4.1985)42673215At the end of 7th Five Year Plan (31.3.1990)99329244On the eve of the 8th Five Year Plan (1.4.1992)135445246ContParticularsTotalinvestment(Rs. in crore)Enterprises(Numbers)At the end of 8th Five Year Plan (31.3.1997)213610242At the end of 9th Five Year Plan (31.3.2002)324614240At the end of 10th Five Year Plan (31.3.2007)421089247At the end of 11th Five Year Plan (31.3.2012)GROWTH OF CPEs IN INDIACONTIRBUTION OF CPSEs IN INDIAs GDP

Turnover ranged between 20-24%Highest contribution in FY09 was 24%Decline in turnover in FY10 primarily due to reduction in sale of refined petroleum, steel, fertilizer, and telecom sectorsAgain in FY12 it has incresed to 22.1%

CONTRIBUTION IN INDIAS EXPORT

PSUs are increasingly focusing on international trade in goods and services, which directly has a bearing on the foreign exchange earnings of the country CPSEs foreign exchange earnings primarily through export of goods and merchandise, income from royalty and consultancy servicesForeign earning is accounted for 9% of the total export earning during FY08-FY12The share of forex earnings to overall turnover of the PSUs has averaged to 6% during FY08-FY12 and stood at 6.8% in FY12Approximate 90% of earning from the export of goods and merchandise.

TREND IN SECTRO WISE TURNOVER

The turnover of the CPSEs during FY12 grew from 14,980.2 bn in FY11 to 18,419.2 bn in FY12.The turnover of CPSEs has grown at 13.9% CAGR during FY08-FY12.The sector witnessed the highest CAGR of 29.5% during FY08-FY12, followed by the electricity sector with 17.4% CAGR.

TREND IN PROFITABILITY(SECTOR WISE NET PROFIT/LOSS)The net profit of CPSEs in FY12 registered 5.9% Y-o-Y growth, as against 0.08% decline witnessed in FY11.Profits of the manufacturing sector declined 23% y-o-y inFY12.The mining sector witnessed the highest CAGR growth at 17.1% during FY08-FY12.Electricity sector witnessed 9.8% CAGR during FY08-FY12.Services sector made losses, which increased from`49 bn in FY11 to`90.1 bn in FY12.Agriculture sector suffered losses of`0.01 bn in FY12.

PROFIT/LOSS MAKING CPESs AND THEIR PROFIT AND LOSS225 operating CPSEs in FY12, a majority i.e. 161 CPSEs (72%) were profit making and 63 CPSEs incurred lossesThe number of profit making CPSEs marginally increased from 160 in FY08 to 161 in FY12.The profit of these profit making CPSEs increased from`915.7 bn in FY08 to`1,251.2 bn in FY12.The number of loss making CPSEs has also grown from 54 in FY08 to 63 in FY12 and the loss of these loss-making CPSEs has increased from`103.3 bn in FY08 to`276 bn in FY12.

EMPLOYMENT GENERATIONPSUs have very important role for generating employment in country.Approximate 5% employment of organized sector.In FY12, they employed 1.4mn people , of which 25% belonged to the managerial and supervisory cadre, indicating that PSUs have a high percentage of skilled workforces.The total no. of employees has a declined trend from FY08-FY12 at -2.8% CAGR.Average Annual Per Capita Emoluments is increasing.

SELF-RELIANCEAnother aim of public enterprises is to promote self-reliance in strategic sectors of the national economy.For this purpose, public enterprises have been set up in transportation, communication, energy, petro-chemicals, and other key and basic industries.

Development of backward AreasSeveral public enterprises were established in backward areas to reduce regional imbalances in development. Balanced development of different parts of the country is necessary for social as well as strategic reasons.

EGALITARIAN SOCIETYAn important objective of public enterprises is to prevent concentration of economic power and growth of private monopolies.Public sector helps the Government to enforce social control on trade and industry for ensuring equitable distribution of goods and services.Public enterprises protect and promote small scale industries.

Employment and Average Annual Emoluments in CPSEsYearEmployees (in lakh)(Excluding contract workers)Total Emoluments (in crore)Per capita Emoluments(Rupees)2006-0716.14525863258692007-0815.65643064108982008-0915.33830455417162009-1014.90877925892102010-1114.40984026833472011-1214.501056487286062012-1314.04116375828882CONSUMER WELFAREPublic enterprises seek to protect consumers from exploitation and profiteering by ensuring supply of essential commodities at cheaper prices.They aim at stabilising pricesPUBLIC UTILITIESPrivate sector is guided by profit motive. Therefore, it is reluctant to invest money in public utility services like water supply, gas, electricity, public transport.Therefore the Government has to assume responsibility for providing such services

DEFENCEGovernment has to set up public enterprises for production of defence equipment.Supply of such equipment cannot be entrusted for private sector due to the reason of the security.

Labour welfarePublic enterprises serve as model employers.They ensure welfare and social security of employees.Many public enterprises have developed townships, schools, college and hospitals for their workers.DIFFERENT TYPES OF CPEs MAHARATNANAVRATNAMINIRATNAMAHARATNA

CRITERIAThree years with an annual net profit of overRs.2500croreNet worth of Rs. 10,000 croreTurnover of Rs. 20,000 crore

NAVRATNA

CRITERIAThe company must obtain a score of 60 (out of 100) The score is based on six parametersNet profit to net worthCost of servicesPBDIT(Profit Before Depreciation, Interest and Taxes)to turnoverPBDIT to capital employedEPS (Earning Per Share).Inter-sectoral performance.

MINIRATNA

CRITERIACategory IThese miniratnas granted certain autonomy like incurring capital expenditure without government approval up to Rs. 500 crore or equal to their net worth, whichever is lower

Category IIThese miniratnas granted certain autonomy like incurring capital expenditure without government approval up to Rs. 300 crore or equal to their net worth, whichever is lower.

Maharatna CPSEsBharat Heavy Electricals LimitedCoal India LimitedGAIL (India) LimitedIndian Oil Corporation LimitedNTPC LimitedOil & Natural Gas Corporation LimitedSteel Authority of India Limited

Navratna CPSEsBharat Electronics LimitedBharat Petroleum Corporation LimitedContainer Corporation of India LimitedEngineers India LimitedHindustan Aeronautics LimitedHindustan Petroleum Corporation LimitedMahanagar Telephone Nigam LimitedNational Aluminium Company LimitedNational Buildings Construction Corporation LimitedNMDC Limited

Miniratna Category - I CPSEsAirports Authority of IndiaAntrix Corporation LimitedBalmer Lawrie & Co. LimitedBharat Coking Coal LimitedBharat Dynamics LimitedBEML LimitedBharat Sanchar Nigam Limited

Miniratna Category-II CPSEsBharat Pumps & Compressors LimitedBroadcast Engineering Consultants (I) LimitedCentral Mine Planning & Design Institute LimitedCentral Railside Warehouse Company LimitedEd.CIL (India) LimitedEngineering Projects (India) LimitedFCI Aravali Gypsum & Minerals India LimitedFerro Scrap Nigam LimitedHMT (International) LimitedHSCC (India) Limited

Problems in Public Sector:

Even though the public sector is going in a correct path, some problems and short comings are there. The main short comings are as follows.1.Delay in completion:Often a very long time is taken in the establishment and completion of public enterprises. Delay in completion leads to increase in the cost of establishment and benefits extracted from them are delayed.2.Faulty evaluation:There is no proper evaluation of demand and supply and expected costs and benefits. There are no clear cut objectives and guidelines.3.Heavy overhead costs:Public enterprises often spend huge amounts on providing housing and other amenities to employees. Though such investment is useful for employees but it takes away a large part of capital and the project suffers from financial difficulties.

4.Poor returns:Majority of the public enterprises in India are incurring loss. In some of them the profits earned do not yield a reasonable return on huge investment. wasteful expenditure and dogmatic pricing policy result in losses.5.Inefficient management:High level posts are often occupied by persons lacking necessary expertise but enjoying political support.6.Political interference:Such interference leaves little scope for initiative and freedom of action. Public enterprises enjoy little autonomy and flexibility of operations.7.Labour problems:In the absence of proper manpower planning public enterprises suffer from over-staffing. Jobs are created to fulfil employment goals of the Government. Guarantee of job in these enterprises encourages trade unions to be militant in pursuing their aims.

Suggestions to Improve the Performance of Public Sector Enterprises

Controlling the cost at every level of public sector enterprises.Increase the production. Reforms in capital base.Increase the standard of public sector enterprises to manage the competition from both domestic and foreign competitors.Identifying redundant manpower and dealing with it through means a retraining, redeployment and encouraging self-employment etc.

CONCLUSIONOver the years, PSUs have expanded their presence in diverse sectors such as manufacturing, engineering, steel etc. Due to enhanced empowerment and autonomy of the CPSEs by the government. Due to enhanced empowerment and autonomy of the CPSEs by the government.