Increased profitability of state-run oil companies — thanks to decontrol of product prices and soft global crude prices that allowed complete pass-through without a major political backlash — had boosted central public sector enterprises’ (CPSEs) net profit in 2015-16 and 2016-17, despite their sales growth decelerating. According to the latest volume of CPSE survey reviewed by FE, the aggregate net profit of 257 CPSEs (174 of them were profit-making) in the country grew 11.7% to Rs 1,27,602 crore in 2016-17, compared with 11.1% growth in 2015-16. In 2014-15, these CPSEs had seen a 20% year-on-year decline in overall net profit. On the sales front, the CPSEs had posted a growth of just 6.5% in 2016-17 to Rs 19,54,616 crore; their gross sales had declined 3.2% in 2015-16 to Rs 18,34,635 crore. Prodded by the Centre, the CPSEs have paid a very generous dividend to shareholders with the dividend payout ratio at 61.23% of net profit in 2016-17, sharply higher than 43.23% 2012-13. High dividend payments coupled with buyback of shares by many cash-rich PSUs under the Centre’s directives have dwindled these firms’ cash surpluses in recent years (see chart). In keeping with this trend, the surplus declined 18.4% to Rs 1,94,802 crore in 2016-17 from the previous year. Higher capex by some of these firms also drained cash surplus.
There was a sharp jump in profits of oil PSUs due to moderation in oil prices and the government’s decision to give them full immunity from under-recoveries. PSU oil firms’ share in fuel subsidy came down from Rs 69,097 crore in FY14 to Rs 1,270 crore in 2015-16 and nil in 2016-17. The oil PSUs together contributed 47% of the total profit by PSUs in 2016-17, up from 37.4% in 2015-16. Indian Oil Corporation was the most profitable CPSE in 2016-17, with a share of about 12.5% in the total net profit of Rs 1,52,647 lakh crore reported by the 174 profitable PSUs. Bharat Sanchar Nigam, bogged down by high wage bills and stagnant revenues, made the highest losses among CPSEs in the year with a share of 19% in the aggregate losses of Rs 25,045 crore incurred by the 82 companies in the red.
Ten top loss-making CPSEs which included BSNL, Air India, MTNL and Hindustan Photo Films contributed 84% of the total losses of the firms in the red in 2016-17. Despite the number of employees of CPSEs going down by 4.5% to 11.31 lakh in 2016-17 from the year-ago period, the wage cost of these firms went up 10.38% to Rs 1,40,384 crore. The group-wise analysis of the sectors shows that petroleum (refining & marketing) contributed 51.94% of the CPSEs’ turnover in 2016-17, followed by trading and marketing services (8.7%),power generation (5.87%), transport & logistics (5.25%) and crude oil (5.07%).