Public Sector Enterprises in India

Liberalization and globalization have caused competition and have lowered profit margins. At the same time, government has reduced subsidies and budgetary support for public sector enterprises (PSEs) to curtail its own fiscal deficit. These factors have forced government to introduce strategic and economic reforms in the Indian PSEs to make their operations commercially profitable so that they are not dependent on Government to meet their financial requirements on the one hand and have their own earnings to finance their expansion/ modernization requirements as well as their social obligations, on the other. To what extent, the PSEs have succeeded in this objective constitutes one major aspect of the present research work. The two equally important aspects examined are financial performance of PSEs which have opted for disinvestment and have signed memorandum of understanding (MoU)/ self obligations. The study intends to cover virtually the entire universe of non-financial central PSEs in India. The financial analysis is based on all the key financial ratios, namely, profitability, efficiency, liquidity, leverage and productivity for the long time span of more than two decades (w.e.f. 1986-87 to 2010-11). The Government has desired the central PSEs to be profitable in their operations in post-liberation era of 1990s. For the purpose, the Government had introduced two major instruments, namely, disinvestment and MoU/charter of self obligations. Therefore, this study has examined (in detail) financial performance of PSEs which had opted for disinvestment and have signed MoU/charter of self obligations. Based on analysis/ findings and literature on the subject, some concrete suggestions have been made for the consideration of Government, to further improve their financial performance.