Monday, April 2, 2012

PSEs - Performance Overview

Public sector enterprises have been set up to serve the broad macro-economic objectives of higher economic growth, self-sufficiency in production of goods and services, long term equilibrium in balance of payments and low and stable prices.  While  there were only five Central Public Sector Enterprises (CPSEs) with a total investment of  Rs. 29.00 crore at the time of the First Five Year Plan, there were as many 248 CPSEs (excluding 7 Insurance Companies) with a total investment of Rs. 6,66,848 crore as on 31st March, 2011. 
            A large number of CPSEs have been set up as Greenfield projects consequent to the initiatives taken during the Five Year Plans.  CPSEs such as National Textile Corporation, Coal India Ltd.(and its subsidiaries) have, however, been taken over from the private sector consequent to their ‘nationalization’.  Industrial companies such as Indian Petrochemicals Corporation Ltd., Modern Food Industries Ltd., Hindustan Zinc Ltd., Bharat Aluminium Company and Maruti Udyog Ltd., on the other hand, which were CPSEs earlier, ceased to be CPSEs after their ‘privatization’.
            Along with other public sector majors such as State Bank of India in the banking sector, Life Insurance Corporation in the insurance sector and Indian Railways in transportation, the CPSEs are leading companies of India with significant market-shares in sectors such as petroleum, (e.g. Coal India Ltd. and NMDC), power generation (e.g. NTPC and NHPC), power transmission (e.g. Power Grid Corporation of India Ltd.), heavy engineering (e.g. BHEL), aviation industry (eg. Hindustan Aeronautics Ltd. and Air India Ltd.) storage and public distribution system (eg. Food Corporation of India and Central Warehousing Corporation), shipping and trading (eg. Shipping Corporation of India Ltd. and State Trading Corporation  Ltd.) and telecommunication (eg. BSNL and MTNL).

            With economic liberalization, post-1991, sectors that were exclusive preserve of the public sector enterprises were opened to the private sector.  The CPSEs, therefore, are faced with competition from both domestic private sector companies (some of  which have grown very fast) and the large multi-national corporation (MNCs).  The turnover of CPSEs like Cotton Corporation of India, ITI Ltd., Mazgaon Dock LTd., MSTC Ltd., STC Ltd., ONGC Videsh Ltd. and Bharat Sanchar Nigam Ltd. declined significantly during 2010-11.  CPSEs like Air India Ltd., Bharat Sanchar Nigam Ltd., Mahanagar Telephone Nigam Ltd., Hindustan Photofilms & Manufacturing Co. Ltd., and Indian Drugs & Pharmaceuticals Ltd. suffered losses during 2010-11.
Indian Economy (2010-11) and CPSEs
            The CPSEs play a critical role in the Indian economy.  They influence the growth in the economy and are affected by the overall growth in the economy.  As against the nominal GDP growth of 18.80 per cent (at current market price) in 2010-11, the gross value addition by all the CPSEs (exclusive of under-recoveries) grew by 10.03 per cent during the year (if however,  ‘the under recoveries’ are added, then the gross value addition by all CPSEs during the year increased by 13.40 per cent).  The turnover of petroleum (Refinery & Marketing), services (Trading & Marketing), electricity (Generation), heavy engineering, minerals & metals and coal & lignite showed a significant increase during the year.  Profits/losses of the different CPSEs did not necessarily correspond to increase or decrease in turnover, a several factors came into play like higher input costs, lower prices, increase in salary and wages, heavy interest burden and exchange rate fluctuations. 
            The turnover of all 220 operating CPSEs stood at Rs. 14,73,319 crore as compared to Rs. 12,44,805 crore in the previous year.  During the year 2010-11, the CPSEs earned foreign exchange equal to Rs. 97,004 crore as compared to Rs. 84,224 crore in 2009-10.  The foreign exchange outgo on imports and royalty, know-how, consultancy, interest and other expenditure, on the other hand, increased from Rs. 4,24,207 crore in 2009-10 to Rs. 5,22,577 crore in 2010-11 showing an increase of 23.19%. 
            The total employee strength in CPSEs was 14.44 lakh (excluding casual labours) in 2010-11 as compared to 14.90 lakh in 2009-10.  The total strength of the employees in CPSEs has gone down by 45,981 persons due to superannuation, voluntary retirement etc.  The salary and wages in all the CPSEs went up from Rs. 87,792 crore in 2009-10 to Rs. 96.210 crore in 2010-11, showing a growth of 9.58%. 
Turnover in CPSEs
Gross sales/turnover of CPSEs has been robust during 2010-11.  The turnover of CPSEs (at the aggregate level) increased by 18.36 per cent in 2010-11 over 2009-10 against decline of 2.10 per cent in 2009-10 over 2008-09. 
            The agriculture sector recorded the highest growth in turnover (23.03%) during   2010-11.  This was followed by ‘manufacturing’ with a (20.64%) growth against a negative growth (-7.76%) in 2009-10.  The ‘mining’ sector had 15.66 per cent growth in turnover during the year as against a negative growth of 0.68% during 2009-10.  The turnover in ‘electricity’ and ‘service’ sector showed marginal improvement over the previous year with a growth of 17.96% and 12.85% respectively during 2010-11.
            There was, moreover, much variation from industry to industry.  There was significant decline in turnover of CPSEs belonging to industries like medium & light engineering, transportation equipment and telecommunications services. 
Aggregate Profit and Loss of CPSEs
            The profit of profit making CPSEs stood at Rs. 1,13,770 crore in 2010-11 compared to Rs. 1,08,434 crore in 2009-10.  The loss of loss making CPSEs, on the other hand, was Rs. 21,693 crore in 2010-11 compared to Rs. 16,231 crore in 2009-10.  At the aggregate level, the net profit of all CPSEs (aggregate net profit- aggregate net loss) stood at Rs. 92,077 crore in 2010-11 compared to Rs. 92,203 crore during 2009-10.
            Cognate group-wise, the best results were achieved by the ‘mining’ sector with 22.32 per cent growth in profit over the previous year.  This was followed by 12.97 per cent growth in profits achieved by electricity sector.  The ‘services’ sector suffered a loss of Rs. 7,639 crore during 2010-11, which was higher than the loss of Rs. 3,279 crore in 2009-10.  This was mainly due to the loss suffered by Air India Ltd. in both these years.  In the other industry groups, CPSEs belonging to transport services, telecommunication services and consumer goods were equally under stress, and their losses increased during 2010-11.  Under the manufacturing sector, steel petroleum and textile showed a decline in profits.  CPSEs belonging to medium and light engineering industries, suffered losses during the year in comparison to profit in the previous year.  CPSEs in the chemicals & pharmaceuticals sectors, on the other hand, reduced their losses during 2010-11. 
Top Ten Profit Making CPSEs
            Oil & Natural  Gas  Corporation Ltd., NTPC Ltd., and Indian Oil Corporation Ltd have ranked first, second and third CPSEs respectively amongst the top ten profit making CPSEs.   They are followed by  NMDC Ltd., Bharat Heavy Electricals Ltd., Steel Authority of India Ltd., Coal India Ltd., GAIL(India) Ltd., Oil India Ltd. and Power Grid Corporation of India Ltd.  All the top ten profit making companies are, more or less same in 2010-11 as in 2009-10 (with ranking slightly changed) except for Power Grid Corporation that has replaced the Power Finance Corporation. 

Top Ten Loss Making CPSEs

            Amongst the loss making companies, Air India Ltd., Bharat Sanchar Nigam Ltd. and Mahanagar Telephone Nigam Ltd. were the top three loss making enterprises during 2010-11.  They are followed by Hindustan Photo Films Manufacturing Co. Ltd., Indian Drugs & Pharmaceuticals Ltd., Hindustan Cables Ltd., Fertilizer Corporation of India Ltd., Air India Charters Ltd., Hindustan Fertilizer Corporation Ltd. and ITI Ltd.  The top ten loss making Companies covered nearly 92.55% of the total loss made by all the (62) CPSEs during the year.  The top three CPSEs namely Air India Ltd., BSNL and MTNL alone have incurred a loss equal to 74% of the total loss of all CPSEs in 2010-11.  Intense price war and cut-throat competition from new entrants, increase in salary & wages and increase in operating cost as well as increase in interest cost contributed to greater losses during the year.  While the loss of Air India and MTNL have gone up by 24% and 54% respectively, the loss of BSNL increased by 145% in 2010-11 over 2009-10. 
Contribution to GDP
Gross Value Addition by CPSEs
            The share of ‘gross value addition’ in CPSEs (net value addition + depreciation) in Gross Domestic Product (at current market price) stood at 5.96 per cent in 2010-11 against a share of 6.44 per cent in 2009-10.  If, however, the under-recoveries of oil marketing companies (amounting to Rs. 37,190 crore in 2010-11 and Rs. 29,951 crore in 2009-10) are included, then the share of all CPSEs in GDP goes up to 6.45 per cent in 2010-11 and 6.75 per cent in 2009-10. 
Components of Net Value Addition
            In terms of ‘net value addition’ (excluding depreciation) generated by CPSEs in  2010-11, the share of profit (PBTEP) was the highest at 31.75 per cent followed by indirect tax and duties (30.84%),  salary & wages (23.20%) and interest payment (9.41%).  A comparison between the respective shares of each of these items during 2009-10 and 2010-11 shows a very little change during these two years. 

Contribution to the Central Exchequer

            CPSEs contribute to the Central Exchequer by way of dividend payment, interest on government loans and payment of taxes and duties.  There was, however, a significant increase in the total contribution of CPSEs to the central Exchequer during the year, which increased from Rs. 1,39,918 crore in 2009-10 to Rs. 1,56,124 crore in 2010-11.  This was, furthermore, primarily due to increase in contribution towards ‘customs duty’ and ‘excise duty’ which increased from Rs. 6,896 crore and Rs. 52,627 crore in 2009-10 to Rs. 14,151 crore and Rs. 62,713 crore respectively in 2010-11.  There was a significant increase in contribution from corporate taxes as well, which went up from Rs. 38,134 crore in 2009-10 to Rs. 43,369 crore in 2010-11.  There was, however, a decline in ‘other duties & taxes’ and sales tax and dividend tax’ during the year as compared to the previous year.

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