The document discusses the role and performance of public sector enterprises (PSEs) in India. It notes that PSEs have played a strategic role in India's rapid industrialization by undertaking large capital-intensive projects and promoting equitable distribution of wealth. However, over time PSEs have faced issues like unprofitable pricing, overstaffing, and underutilized capacity. The document outlines various remedial measures to improve PSE performance, such as allowing more managerial autonomy, introducing competition, and public sector reforms like disinvestment and privatization.

1. Unit Vb (ii)
Public Sector its Role, Performance and Reforms
Prof. Mahendra Kumar Ghadoliya

2. Public sector
• Public Sector Enterprises (PSEs) or State owned and managed
units have played a strategic role in the Indian economy. The key
factors contributing to stronghold of these enterprises are the
need of rapid industrialization with equitable distribution of
economic wealth and inadequacies of free market.
• Public sector consists of all the industrial and commercial
enterprises which are owned by the government and managed
either by government or any other authorised body on behalf of
the government.
• Government funded universities, colleges, hospitals, schools are
part of public sector but are not PSEs because these organizations
lack commercial orientation.

3. Role of Public sector Enterprises (PSEs)
• Rapid Economic Development- The prerequisite of faster economic
development is the creation of infrastructure and the growth of basic
industries like power, steel transportation; communication, banking etc.
These industries require huge capital investment and involve long-
gestation period and so private sector may not be interested to
undertake the development of such industries.
• Reduction of Concentration of Economic Powers- to promote equality
of income and wealth
• Employment Generation
• Balanced Regional Growth- development of backward areas
• Import-Substitution and Export-Promotion-
• to mobilise savings and earning foreign exchange
• Resource Mobilization

4. Objectives of Public Sector
• To attain commanding heights of the economy
• It creates the necessary infrastructure for economic development
• To earn return on investment and generate resources for
development
• To promote redistribution of income and wealth
• To generate employment opportunities
• To promote balanced regional development
• To assist the development of small-scale industries
• To earn foreign exchange for the economy

5. Growth and performance of Public Sector
Plan Number of PSU
First Plan 5
Second Plan 21
Third Plan 48
Fourth Plan 85
Fifth Plan 122
Sixth Plan 186
Seventh Plan 221
Eighth Plan 237
Ninth Plan 238
Tenth Plan 240
Eleventh Plan 242

6. Growth of Investment in CPSE's
As on March 31 No. of Units Total (in Crores)
Investment
1951 5 29
1961 47 950
1980 179 18,150
1990 244 99330
2001 242 274198
2007 247 421089
2008 214 763815
2009 213 793096
2010 217 908842
2014-15 298(in operation 235) 1096057
-
Source: Public Enterprises Survey 2014-15

7.  Contribution to the Government Resources- Total income of all CPSEs
during 2014-15 stood at Rs. 19, 65,254 crore compared to Rs. 20,
56,336 crore in 2013-14, showing a reduction in income of 4.43%.
 Total investment (equity plus long term loans) in all CPSEs stood at
Rs. 10,96,057 crore as on 31.3.2015 compared to Rs. 9,92,096 crore as
on 31.3.2014, recording a growth of 10.48%.
 Capital Employed (Paid up capital plus reserve & surplus and long
term loans) in all CPSEs stood at Rs. 18,67,730 crore on 31.3.2015
compared to Rs. 17, 39,090 crore as on 31.3.2014 showing a growth of
7.40 %.
 Total turnover/gross revenue from operation of all CPSEs during
2014-15 stood at Rs 19, 95,902 crore compared to Rs. 20, 66,057 crore
in the previous year showing a reduction in turnover of 3.40 %.

8. Contribution Towards Foreign Exchange Earnings- Foreign exchange
earnings through exports of goods and services decreased
from Rs 1,45,196 crore in 2013-14 to Rs 1,03,071 crore in 2014-
15, showing a reduction of 29.01%.
Profit of profit making CPSEs stood at Rs. 1, 30,363 crore during 2014-15
compared to Rs 1,49,636 crore in 2013-14 showing a decline in profit of
12.88%.
Loss of loss incurring CPSEs stood at Rs.27, 360 crore in 2014-15
compared to Rs 21, 341 crore in 2013-14 showing a increase in loss by
28.20 %
Overall net profit of all 235 CPSEs during 2014-15 stood at Rs 1,03,003
crore compared to Rs 1,28,295 crore during 2013-14 showing a decrease in
overall profit of 19.71%.
Source-The Public Enterprises Survey (2014-15) placed in parliament on 26 Feb., 2016

9. Problems of Public Sector
1. Unprofitable pricing
2. Over Staffing
3. Management gaps
4. Under Utilised Capacity
5. Inadequate Autonomy
6. High Losses
7. Burden of Sick Units
8. Poor project Planning and Control
9. Bureaucratic Delays
10.Pessimistic Atmosphere

10. Causes of Poor performance of Public Sector
1. Heavy Social Cost
2. Low Priced Products
3. Large Proportion of loans
4. Slow decision Making
5. Oversized Plants
6. Unutilised Capacity
7. Inefficient inventory control
8. Over Regulation and Political intervention
9. Traditional Audit
10.Old technology
11.Unfavourable Government Policies

11. Remedial Measures for Improving the performance of the public Sector:
 Allowing Managerial Autonomy
 Performance-based Accountability through Memorandum of understanding
(MOU) System
 Manpower Rationalization
 Professionalism in Management
 Introduction of competition
 Transparency in Operations of PSEs
 Revival and Restructuring of Sick PSEs
 Allowing PSEs to Enter Capital Market
 Modernization
 Disinvestment and Privatization
 Public Sector Reforms-Liberalization, areas reserved for public sector reduced,
structural reforms, Disinvestment, sick units policy, autonomy and
accountability.