Much hype is created about central government controlled public sector undertakings and their under-performance. This is primarily due to two reasons- the first being the fact that the so-called national media is based in Delhi and everything related to central government gets extensive coverage and the second being the huge turnover of the central public sector enterprises (CPSE) in comparison to the state public sector undertakings’ (SPSUs). The SPSUs are neither scrutinized by media nor the vigilance authorities; the only organization which keeps an eye on financial statements of these companies is Comptroller and Auditor General of India (CAG). As per the CAG report, the SPSUs in almost every state except Gujarat, Odisha, and Assam are running under huge losses.
The states run by Communist governments for a long time period like Kerala and West Bengal have a large number of SPSUs. The 16 large states of the country have a total of 1,173 SPSUs and about a quarter of them are not working. Almost a half of SPSUs in Bihar and two third in Telangana are ‘non-working’.
Majority of the states have a negative return of capital (ROI), SPSUs in only a few states like Odisha register returns above 10 percent. The power distribution companies are a major source of loss for the states. The Ujwal DISCOM Assurance Yojana (UDAY) brought by the Modi government may help these companies to shed their losses.
The losses of 1,173 PSUs in 16 large states of the country amounted to Rs 62,931 crore which is almost equal to the GDP of Goa. The PSUs in UP amounted to a loss of Rs 17,790 crore which is 5 percent of state’s expenditure.
The SPSU’ turnover to state GDP ratio is highest for the state of Madhya Pradesh. Another finding is that the importance of PSUs in state economy is lesser in communists states like Kerala and West Bengal in comparison to states like Gujarat and Tamil Nadu. This proves that states like Kerala and West Bengal and their governments are Marxist only in theory, in practice; they are more capitalist than Gujarat or Maharashtra.
The number of people employed in SPSUs in highest in Tamil Nadu. As the state has a monopoly over liquor wholesaling and retailing, the turnover was higher (Rs 30,542 crores for FY 2015-16). The state still makes a loss of 125 crores on SPSUs. The left-dominated states like West Bengal and Kerala employee lesser number of people in PSUs in comparison to capitalist states like Gujarat and Maharashtra.
There are two main findings in the analysis of CAG report on PSUs. The first is that SPSUs are a burden to public finance and costs on taxpayers becomes huge. On the other hand, the public sector companies in business-friendly capitalist states outperform those in communist-dominated states like Kerala and West Bengal. The communist governments employ a lesser number of people in PSUs, invest less in PSUs and run them inefficiently with huge losses.
