Study on performance of public enterprises in a phase of economic liberalization - A holistic perspective

Considering the post independent economic situation, and to speed up the country's economic growth, Government of India has adopted three policies viz., The Constitution of India, The Industrial Policy Resolutions (IPR) of 1948 and 1956, and the Five Year Plans, all of which have influenced the establishment of Public Enterprises (PEs). Central Public Enterprises (CPEs) and State Level Public Enterprises (SLPEs) are the two types of PEs which exist in Indian economy. The present article is considering the performance of CPEs. The composite term “Public Enterprise” reflects the diverse objectives. While the “Public” dimension emphasizes Social Responsibility and includes, among others, compliance with reservation policies and removal of regional imbalances, the “Enterprise” dimension includes physical and financial performance with an emphasis on “Return on Investment”. These two objectives together to be achieved is no doubt a daunting task. In view of the above, a study on “Performance of public enterprises in a phase of economic liberalization – a holistic perspective” is taken up to examine to what extent the PEs have excelled in meeting enterprise dimension and public dimensions simultaneously. It is essentially a comparative study between pre and post liberalization periods of various parameters. The findings of the study indicate that the CPEs have excelled in financial performance in terms of increased Gross Profit, increased Net Profit, and increase in Internal Resource generation. In respect of Aggregate Turn Over, there is not much of difference in performance of CPEs between the two periods. In terms of Net worth, Current Ratio, CPEs have shown significant downward trend during post liberalization. Contribution to Central Exchequer from CPEs is found to be satisfactory during post liberalization. While the profit from profit making CPEs is increasing substantially, the losses from loss incurring CPEs has also been increasing during post liberalization period. With respect to Physical performance, CPEs have excelled in terms of inventory management. The inventory in no. of days of Cost of Production has been reduced from a level of 91 no. of days of Cost of Production during pre liberalization to 44 no. of days of Cost of Production during post liberalization. With regard to Capacity Utilization, Value Added, Export Earnings and investment on Research and Development, the performance of CPEs during post liberalization was found to be on par with that during pre liberalization. In terms of fulfilling Social Responsibility, while the performance of CPEs in respect of Employee Earnings during post liberalization is on par with that of pre liberalization, Socio Economic Welfare Costs, the performance is superior during post liberalization than that during pre liberalization. CPEs have reduced the regional imbalances substantially and continue to ensure the compliance with reservation policies in regard to employment for Scheduled Castes and Schedule Tribes on the same lines as applicable to Central Government Departments.