New Scope chairman takes a look at PSUs? journey, ahead of the Public Sector Day on April 26

c s verma

Post-Independence, India adopted a planned government intervention strategy to build its predominantly agrarian economy. The country put in place a socialistic economic development policy with exclusive public ownership of key industries, including defence, railways, cement, fertilisers, and iron & steel.

The objectives of public sector enterprises (PSEs) were to build infrastructure for economic development, create employment opportunities, promote balanced regional development and generate development resources. Investment in PSEs? infrastructure spurred growth and prosperity. PSEs played a strategic and commanding role in the nation?s economic development.

With the introduction of economic reforms and liberalisation in 1991, the government initiated a systemic shift to a more open economy with greater reliance on market forces and a larger role for the private sector, including foreign direct investment. As a result, the PSEs were exposed to competition from domestic private sector companies as well as foreign MNCs.

To sustain themselves in a growing competitive environment, PSEs have undertaken several steps to perform and operate on a par with their private peers, such as adopting state-of-the-art technologies, focusing on improving productivity, giving performance-related pay, offering additional welfare benefits to employees, establishing brands and increasing marketing efforts.

It is worth appreciating that the public sector contributed significantly to India?s resilience against the impacts of the global meltdown witnessed from mid-2008. Much against the apprehensions about their competitiveness, the central PSEs strode ahead to take the challenges head-on.

Displaying strong immunity to the global and economic slowdown, the public sector continued to show impressive performance by maintaining the highest orders of governance and ethical practices. Within a short span of time, many CPSEs have progressed to the status of Maharatna and Navratna.

During the first five-year plan (1950-51 to 1955-56), there were only five CPSEs with a total investment (including equity plus long-term loans) of R290 million, whereas in FY11, there were 248 CPSEs with a total financial investment of R6,669 billion as on Mar 31 2011, showing a CAGR of around 6% during the same period.

The public sector banks (PSBs), which have played an important role in shaping up the Indian economy from the pre-Independence period continue to dominate the Indian banking sector, accounting for more than 70% share of the total banking business in India. In other vital sectors, too, CPSEs maintain dominance as in coal (over 80%), crude oil (over 70%), refineries (over 55%), wired lines (over 80%) and electricity (over 37%). On an aggregate basis, CPSEs are estimated to have a presence of 36% in the services sector, 17.9% in manufacturing and 7.3% in mining.

It can indeed be said that the public sector not only proved to be a reliable partner in meeting the government?s agenda of inclusive sustainable development but also proved its mettle in the liberalisation era and during global and domestic recessions. In this context, many important policy initiatives taken by the government over the last few years with a view of strengthening and revitalising the public sector certainly needs appreciation.

During the year 2011-12, the turnover of all PSEs grew by almost 23% to R18,41,927 crore from R14,98,018 crore in the previous year. Similarly, the net worth and net profit also maintained positive growth. Net worth grew by 8.38% to R7,77,8 12 crore from R7,17,641 crore while net profit grew by 5.84% to R97,513 crore from R92,128 crore.

CPSEs? contribution to the central exchequer by way of dividend payment, interest on government loans and payment of taxes and duties, increased to R1,60,801 crore in 2011-12 from R1,56,751 crore in 2010-11. Equally impressive is the fact that CPSEs are increasingly funding their expansion and investments from internal resource generation, thereby reducing their dependence on government budgetary support.

CPSEs have also been contributing substantially to the country?s foreign exchange earnings, thereby enhancing the global image of the country. During the year 2011-12, foreign exchange earnings of CPSEs increased to R1,24,492 crore from R91,774 crore in 2010-11, showing a growth of 36%. This is a reflection of their high creditworthiness and global competitiveness.

Many CPSEs have forged joint ventures and strategic alliances with domestic and global entities, demonstrating the spirit of public-private- partnership. These moves would also help the Indian economy to a commanding position globally.

CPSEs also have substantial investments planned to be made in the coming years. For FY?13 alone, the projected investment is more than R40,000 crore for ONGC, R20,000 crore for NTPC, about R10,000 crore each for OIL, IOCL, SAIL, CIL & GAIL. Such massive investments being made by the PSEs are bound to strengthen them and also have a multiplier effect on the economy.

The public sector personnel have become an impressive source of manpower even for the multinationals and the Indian private enterprises. This talent pool has been developed by adopting and assimilating modern day management and skilled human resources development techniques. The public sector has also an unparalleled record of contributing and shouldering the corporate social responsibility that was the basic charter given to the sector at its very inception.

The public sector has played a pivotal role in India?s planned inclusive and sustainable growth. The sector will continue to strive towards ensuring India?s march towards becoming a global economic power.

The author is chairman, Scope and SAIL