INTRODUCTION :

The Industrial Policy Resolution dated April 6, 1948 envisaged an important role for the
public sector. It laid down that besides arms and ammunition, atomic energy and railway
transport which would be the monopoly of Central Government, the State would be
exclusively responsible for the development of six basic industries namely, iron & steel, coal,
aircraft manufacture, ship building, mineral oils, manufacture of telephone, telegraph and
wireless apparatus - except where, in the national interest, the State itself found it necessary to
secure the cooperation of the private sector. All the other areas in industry were left open to
private enterprises.

The Industrial Policy Resolution in 1956 gave the public sector enterprises a strategic role in
Indian Economy and the public sector was thought of as the engine for self-reliant economic
growth to develop a sound agricultural and industrial base, diversify the economy and
overcome economic and social backwardness. In this paper, I want to address the trade-offs
between the social and economic objectives of public sector enterprises with a focus on
performance under economic reforms , and future synergies.

Public Sector companies are owned by the union government of India or one of the many
state or territorial governments or both. The company stock needs to be majority-owned by
the government to be a PSU. PSUs strictly may be classified as central public sector
enterprises (CPSEs) or state level public enterprises (SLPEs).

The CPSEs are key and strategic actors in the nation’s economy providing essential goods and
services and holding a dominant market position in critical sectors such as Petroleum, Power,
Steel, Mining, and Transportation. The CPSEs are also operating in competitive markets such
as Telecommunication and Information Technology, Hospitality etc. The CPSEs are
increasingly under pressure by both the government and business environment competition to
achieve their goals more effectively and efficiently.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, British India Corporation Ltd, Andrew Yule &
Company Ltd, 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
Aluminum Company and Maruti Udyog Ltd, 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, Post & Telegraph in Telecom sector and
Indian Railways in Transportation, the CPSEs are leading companies of India with significant

1
market-shares in sectors such as petroleum, (e.g. IOCL, ONGC, GAIL, HPCL, and BPCL),
Mining (e.g. Coal India Ltd. and NMDC), Power Generation (e.g. NTPC and NHPC), Power
Transmission (e.g. Power Grid Corporation of India Ltd.), Nuclear Energy (e.g. Nuclear
Power Corporation of India Ltd.), Heavy Engineering (e.g. BHEL), Aviation (e.g. Hindustan
Aeronautics Ltd. and Air India Ltd.), Storage and Public Distribution (e.g. Food Corporation
of India and Central Warehousing Corporation), Shipping and Trading (e.g. Shipping
Corporation of India Ltd, and State Trading Corporation of India Ltd.), Steel (e.g. Steel
Authority of India Ltd and Rashtriya Ispat Nigam Ltd) and Telecommunication (e.g. BSNL
and MTNL).
Cognate group-wise status of CPSEs A Committee was constituted on 4th July 2017 to
examine the issues relating to change of cognate groups of the CPSEs as per their core line of
activities. Based on the recommendations of the committee Electricity Sector was removed
along with shifting of ‘Power Generation’ to Manufacturing Sector and Telecommunication
(e.g. BSNL and MTNL).

Viewing this , the Public Sector enterprises were entrusted with the following responsibilities :

1. To promote rapid economic growth and industrialization of the country and create the
necessary infrastructure for economic development.
2. To earn a return on investment and thus generate resources for development
3. To create employment opportunities
4. To promote balanced growth.
5. To assist the development of small scale and ancillary industries .
6. To promote redistribution of income and wealth.(2)

Economic Reforms : In 1951, India formally launched its economic plan of development with
the first 5-year plan. The newly independent Indian government had inherited an economy
that was all but stagnant, having grown at an estimated one per cent annually over the first
half of the twentieth century, implying stagnant or declining per capita incomes (Kohli, 2004).
Factories accounted for only seven per cent of the economy, while agriculture contributed over 50
per cent. The industrial base was extremely low even by the standards of other recently independent
nations (Kohli, 2004). 12 The Indian leadership (specifically Jawaharlal Nehru) established a
strongly interventionist role for the government in the economy in an effort to achieve rapid
industrialisation.13 According to Panagariya (2011), the U.S. government and the scholarly
community had high hopes for India's economic success, and predicted India would quickly
outpace other recently independent East Asian nations such as Korea and Taiwan. For the first

2 | Page
decade or so after independence, India's development model was largely successful by most
accounts (Bhagawati and Desai,1970; Panagariya, 2011) as the country experienced industrial
growth of 7.4 per cent between 1950 and 1964 (Kohli, 1989). However, beginning in the early
1960's the country stumbled from economic crisis and GDP growth was approximately 3.5 per cent,
which was well below the growth of the population. A key component of India's state-led
development model was the establishment of state-owned enterprises across nearly all sectors of the
economy. Nehru often stated that SoEs would occupy the “commanding heights" of the economy
(Nayar, 2000), and frequently referred to SoEs as temples of modern India (Majumdar, 2008). The
initial wave of labour creation consisted mostly of large manufacturing units such as ITI, BEL,
BHEL, HMT, BEML and Hindustan Aeronautics.

The focus for SoE investment was in industries where private investment was not forthcoming
due to lack of investment capital or lack of markets (Majumdar, 2008), and specifically in the
heavy industrial manufacturing sector (Nayar, 2010). The next major wave of SoE creation
occurred between 1975 and 1980 under Indira Gandhi and included the nationalisation of the
coal and gas sectors as well as a number of individual private firms. Along with these
nationalisations there was a general emphasis on reducing the role of private investment in
the economy. However, by 1981 the government was shifting back towards encouraging
private investment in the economy (Kohli, 2006; Rajakumar, 2011).

This shift was much more pronounced when Rajiv Gandhi became Prime Minister in 1984.
Rajiv Gandhi attempted to increase the scope of reforms and clearly stated his intention to
reform the Indian economy.( Jagdish Bhagwati 2015} However, within 6 months of his 1985-86
pro-reform budget the government rolled back reform plans due to strong opposition within the
Congress Party and outside (Kohli, 2006). By 1985, a government spokesperson was assuring the
public that SoEs would be protected (Kohli, 2006). In 1986 the government again made clear that
privatisation was not on the table. By 1989 labours were actually larger in terms of total
employment and in terms of contribution to total GDP than in 1981.14 Profitability of SoEs in India
is notoriously difficult to measure due to the huge levels of state investment that is not repaid,
however, the general trend of profitability is that it saw steady increases until the 1980's when
profitability began to decline rapidly due to competition and loss of monopoly status (Baijal,
2002).15 Economic Crisis and Privatisation in 1991 From 1988 to 1991 India recorded GDP growth
of 7.6 per cent annually, the highest three years of growth India had experienced (Panagariya,
2011).

However, by 1991 the Indian economy was facing a balance of payments crisis caused in large
part by excessive foreign borrowing to fund domestic fiscal expansion (Joshi and Little, 1994;
Chhibber and Eldersveld, 2000). Leading up to the 1991 parliamentary elections, the Congress
party billed itself as the centrist party between the right-wing BJP and the left-wing United Front
coalition, and the only party that could solve the numerous state succession struggles as well as the
failing economy (Varshney, 1998). Congress won the most seats in the 1991 elections and Prime
Minister P. Narasimha Rao formed a coalition government.

3 | Page
 By the time of the election, the Indian economy was entering the balance of payments crisis
and the newly elected Prime Minister Rao used the crisis to undertake reforms that followed
the same general scope as earlier reforms but did so to a much larger degree and with a big
bang' (Ghate, 2012). The New Economic Policy (NEP) was instituted within months of the
election and IMF loans were secured to cover the balance of payments crisis. The NEP called
for dramatic economic reforms including limited privatisation. It should be noted that some
authors (Panagariya, 2011; Varshney, 1998) do not believe that the reforms of this period were a
result of the crisis and need for IMF funds as much as the crisis was used by the government to
force through reforms. Regardless of the importance of the IMF and World Bank in pushing
through broad reforms, there was little pressure on privatisation specifically (Sapat, 1999). The
liberalising reforms of the early 1990s directly affected Indian SoEs in a way that the reforms of the
1980s never approached, and not just though privatisations. Gradually, nearly all of the sectors that
had been reserved for the public sector were opened up to private enterprise (Gouri, 1996). 17 The
increased competition coupled with an enormous fiscal deficit in the national budget meant that
public firms had their profits collapse at a time when the government was completely unable to
provide the endless cushion that it had provided in the past. The actual privatisations in this period
were minor relative to the size of the public sector as a whole. There were no SoEs that were
strategically privatised by the Congress government from 1991-96. Furthermore, the government
did not even use the word privatisation and instead opted for disinvestment (Dinc and Gupta, 2011;
Kapur and Ramamurti, 2002). In total, an average of 19.2 percent of 40 SoEs was sold (out of the
over 200 labours) (Makhija, 2006).

Following the INC-led government, privatisation halted between 1996 and 1998 as a coalition
of Left-leaning parties held government. However, it should be noted that this government did
not attempt to roll back the previous government's privatisation policy or its economic
liberalisation programme in general. The BJP came to power in 1998 at the head of the National
Democratic Alliance, and in 1999 the government resumed the privatisation programme. A
Department of Disinvestment was established which declared that majority shares of labours would
be sold. Between 1999 and 2004 the BJP sold majority shares in the case of 17 SoEs (Dinc and
Gupta, 2011). The Disinvestment Minister during this period, Arun Shourie, was a
particularly strong advocate of strategic sales, i.e. ensuring that the management of SoEs
actually passed into private hands (dberg, 2001). However, the BJP only sold shares in 10
SoEs that had not had some equity sold under the Congress led government from 1991-96
(Dinc and Gupta, 2011).19 Along with these strategic sales of SoEs, minority shares were sold
in five other companies, all of which had already had minority sales under the Congress-led
government. The method of sale under the BJP was generally not by individual bids for
shares.

Instead the government announced how much equity they would sell, and then took bids on the
entire equity being offered (Uba, 2008). Foreign buyers were also allowed to purchase controlling
shares in SoEs, whereas in previous privatisations they had only been able to participate as minority
investors and only as financial institutions (Kapur and Ramamurti, 2002).

4 | Page
REVIEW OF LITERATURE
Working capital Analysis
Working capital is one of the important measures of a firm’s efficiency and represents the total
liquid assets available with a firm. It reflects a firms’ ability to meet day-to-day operating expenses
and also acts as an indicator of a firm’s short-term financial health. So a firm has to plan the
effective utilisation of its working capital in order to maintain equilibrium between liquidity and
profitability of the business. Therefore, the this article tries to examine the impact of working
capital management on profitability of the firms of (2014)Indian steel industry. The study has taken
into consideration four independent variables, that is, Current ratio, Quick ratio, Debtors turnover
ratio and Finished goods turnover ratio which act as indicators of working capital use in the
industry. Return on total assets represents the profitability of the industry and acts as a dependent
variable to develop an empirical model in order to establish relationship between working capital
management and profitability of the steel industry in India by using panel data regression. The
period of study is 17 years, that is, 2000–2016. The result of the study indicates that the impact of
working capital management on profitability of the firms of Indian steel industry has been
significant This was the work under :Analysis of the Effect of Working Capital Management on
Profitability of the Firm: Evidence from Indian Steel Industry.Pinku Paul, Paroma Mitra
(2014).
(2013) Arunkumar O.N & T. Radha Ramanan Department of Mechanical Engineering, National
Institute of Technology Calicut, -: The correlation analysis shows that the firms’ profitability is
highly influenced by the variables relating to assets. We find a positive relationship between
profitability and debtors’ days and inventory days. Creditor’s days shows a significant positive
relationship. They conduct conduct sensitivity analysis to find out the range of return on assets to
the given level of independent variables.Sharma, A., Kumar, S. (2011). Effect of working capital
management on firm profitability, empirical evidence from India.The findings of our study
significantly depart from the various international studies conducted in different markets. The
results reveal that working capital management and profitability is positively correlated in Indian
companies. The study further reveals that inventory of number of days and number of days accounts
payable are negatively correlated with a firm’s profitability, whereas number of days accounts
receivables and cash conversion period exhibit a positive relationship with corporate profitability.
The present study contributes to the existing literature by examining the effect of working capital
management on profitability in the context of an emerging capital market such as India.

Profitability analysis
Profit is a life and blood for business. Profitability is the profit earning capacity which is a crucial
factor contributing to the survival of the firms. The profitability level should maintain at increasing
level in order to overcome this problem. The data is purely based on secondary Profitability

5 | Page
position is major determined by the direct and indirect expenses and two way ANOVAs of ROI of
selected steel company was, there is a significant different on the selected steel company viz, they
are maintaining different levels of returns on their investment and correlation of SAIL TO TATA of
Net Profit and BHUSAN to JSW of OP was positive it tells, they are maintaining a similar level in
the Net Profit of SAIL TO TATA ..
There some relationship between Social Responsibility and Profit Maximisation?(2016)
Corporate social responsibility does not generally increase profitability.(2016) And when
corporate executives only implement acts of corporate responsibility that promote profits, and only
as much of these activities as promotes profits, they are just being profit-minded, not responsible.
This is in fact profitability in the guise of CSR. The correct way of approaching the issue of
corporate social responsibility, is to first ask what a company is responsible for, and then implement
these responsibilities, whether they increase profits or not. And in some cases they will certainly cut
into the bottom line. There is thus a very real possibility that corporations should in certain cases
deviate from profit maximization, from maximizing returns to owners, to pursue ends that are more
important from a social point of view.

CPES UNDER HEAVY INDUSTRIES Have show , high profits return and balance with social
responsibility of CPES : THESE INCLUDE :(2017-18) annual Report -Andrew Yule & Co Ltd.
(AYCL) :
Hooghly Printing Company Ltd. :.Bharat Heavy Electricals Ltd. (BHEL) :4 BHEL- Electrical
Machines Limited : Bharat Pumps & Compressors Ltd. Bridge & Roof Company (India) Ltd.
: Richardson & Cruddas (1972) Ltd.:HMT Limited (HTML). And many others

Despite scads research on the relationship between corporate social responsibility and
financial performance, literature is still inconclusive.(2018) This study attempts to examine the
relationship between corporate social responsibility and financial performance in the Indian context.
Secondary data has been collected for 28 Indian commercial banks listed in Bombay stock
exchange (BSE), for a period of 10 years (2007–16). The results indicate that CSR exerts positive
impact on financial performance of the Indian banks. The findings of this study provides great
insights for management, to integrate the CSR with strategic intent of the business, and renovate
their business traditional profit-oriented to socially responsible approach.{Corporate social
responsibility and financial performance: An empirical analysis of Indian banks
ShafatMaqbool M. Nasir) .

Balancing Opposition and Economic Benefits in Privatisation Policy{ 2015 ) :An Analysis of
Brazil, South Africa and India { 2015 } According to Panagariya (2011), the U.S. government
and the scholarly community had high hopes for India's economic success, and predicted India
would quickly outpace other recently independent East Asian nations such as Korea and Taiwan.
For the first decade or so after independence, India's development model was largely successful by

6 | Page
most accounts (Bhagawati and Desai,1970; Panagariya, 2011) as the country experienced
industrial growth of 7.4 per cent between 1950 and 1964 (Kohli, 1989). However, beginning in the
early 1960's the country stumbled from economic crisis and GDP growth was approximately 3.5 per
cent, which was well below the growth of the population.

A key component of India's state-led development model was the establishment of state-owned
enterprises across nearly all sectors of the economy. Nehru often stated that SoEs would occupy
the “commanding heights" of the economy (Nayar, 2000), and frequently referred to SoEs as
temples of modern India (Majumdar, 2008). The initial wave of labour creation consisted
mostly of large manufacturing units such as ITI, BEL, BHEL, HMT, BEML and Hindustan
Aeronautics. The focus for SoE investment was in industries where private investment was
not forthcoming due to lack of investment capital or lack of markets (Majumdar, 2008), and
specifically in the heavy industrial manufacturing sector (Nayar, 2010). The next major wave of
SoE creation occurred between 1975 and 1980 under Indira Gandhi and included the nationalisation
of the coal and gas sectors as well as a number of individual private firms. Along with these
nationalisations there was a general emphasis on reducing the role of private investment in the
economy.

However, by 1981 the government was shifting back towards encouraging private investment
in the economy (Kohli, 2006; Rajakumar, 2011). This shift was much more pronounced when
Rajiv Gandhi became Prime Minister in 1984. Rajiv Gandhi attempted to increase the scope of
reforms and clearly stated his intention to reform the Indian economy. However, within 6 months of
his 1985-86 pro-reform budget the government rolled back reform plans due to strong opposition
within the Congress Party and outside (Kohli, 2006). By 1985, a government spokesperson was
assuring the public that SoEs would be protected (Kohli, 2006). In 1986 the government again
made clear that privatisation was not on the table.

By 1989 labours were actually larger in terms of total employment and in terms of
contribution to total GDP than in 1981. Profitability of SoEs in India is notoriously difficult to
measure due to the huge levels of state investment that is not repaid, however, the general trend of
profitability is that it saw steady increases until the 1980's when profitability began to decline
rapidly due to competition and loss of monopoly status (Baijal, 2002).15 Economic Crisis and
Privatisation in 1991 From 1988 to 1991 India recorded GDP growth of 7.6 per cent annually,
the highest three years of growth India had experienced (Panagariya, 2011). However, by 1991
the Indian economy was facing a balance of payments crisis caused in large part by excessive
foreign borrowing to fund domestic fiscal expansion (Joshi and Little, 1994; Chhibber and
Eldersveld, 2000).

Leading up to the 1991 parliamentary elections, the Congress party billed itself as the centrist party
between the right-wing BJP and the left-wing United Front coalition, and the only party that could
solve the numerous state succession struggles as well as the failing economy (Varshney, 1998).
Congress won the most seats in the 1991 elections and Prime Minister P. Narisimha Rao formed a
coalition government.16 By the time of the election, the Indian economy was entering the balance

7 | Page
of payments crisis and the newly elected Prime Minister Rao used the crisis to undertake
reforms that followed the same general scope as earlier reforms but did so to a much larger
degree and with a big bang' (Ghate, 2012).

The New Economic Policy (NEP) was instituted within months of the election and IMF loans
were secured to cover the balance of payments crisis. The NEP called for dramatic economic
reforms including limited privatisation. It should be noted that some authors (Panagariya, 2011;
Varshney, 1998) do not believe that the reforms of this period were a result of the crisis and need for
IMF funds as much as the crisis was used by the government to force through reforms.Regardless
of the importance of the IMF and World Bank in pushing through broad reforms, there was little
pressure on privatisation specifically (Sapat, 1999). The liberalising reforms of the early 1990s
directly affected Indian SoEs in a way that the reforms of the 1980s never approached, and not just
though privatisations. Gradually, nearly all of the sectors that had been reserved for the public
sector were opened up to private enterprise (Gouri, 1996).

The increased competition coupled with an enormous fiscal deficit in the national budget meant that
public firms had their profits collapse at a time when the government was completely unable to
provide the endless cushion that it had provided in the past. The actual privatisations in this
period were minor relative to the size of the public sector as a whole. There were no SoEs that
were strategically privatised by the Congress government from 1991-96. Furthermore, the
government did not even use the word privatisation and instead opted for disinvestment (Dinc
and Gupta, 2011; Kapur and Ramamurti, 2002). In total, an average of 19.2 percent of 40 SoEs
was sold (out of the over 200 labours) (Makhija, 2006).18 Following the INC-led government,
privatisation halted between 1996 and 1998 as a coalition of Left-leaning parties held
government.

However, it should be noted that this government did not attempt to roll back the previous
government's privatisation policy or its economic liberalisation programme in general. The
BJP came to power in 1998 at the head of the National Democratic Alliance, and in 1999 the
government resumed the privatisation programme. A Department of Disinvestment was
established which declared that majority shares of labours would be sold. Between 1999 and 2004
the BJP sold majority shares in the case of 17 SoEs (Dinc and Gupta, 2011). The Disinvestment
Minister during this period, Arun Shourie, was a particularly strong advocate of strategic sales, i.e.
ensuring that the management of SoEs actually passed into private hands (dberg, 2001). However,
the BJP only sold shares in 10 SoEs that had not had some equity sold under the Congress led
government from 1991-96 (Dinc and Gupta, 2011).19 Along with these strategic sales of SoEs,
minority shares were sold in five other companies, all of which had already had minority sales
under the Congress-led government. The method of sale under the BJP was generally not by
individual bids for shares. Instead the government announced how much equity they would sell, and
then took bids on the entire equity being offered (Uba, 2008). Foreign buyers were also allowed to
purchase controlling shares in SoEs, whereas in previous privatisations they had only been able to
participate as minority investors and only as financial institutions (Kapur and Ramamurti,
2002).Following the 2004 elections, the Congress led United Progressive Alliance coalition

8 | Page
took control of the government. From 2004 to 2008, the government sold minority shares in 11
companies, and in only one company that had not already experienced some privatisation under a
prior government. From 2009 to 2013 the same UPA government sold minority shares in 19
companies. However, only 7 of these had not had shares privatised by previous governments and in
no case was a majority share sold. Ultimately, despite a privatisation programme that was initiated
almost 25 years ago, large publicly owned firms still play an enormous role in the Indian economy.
In fact, 14 of the 20 largest Indian firms in terms of annual gross income are labours
(moneycontrol.com, 2013) and labour (including banks) account for 6.30 per cent of total
GDP as of 2009 (GoI, 2010).

Why Has Privatisation in India Failed to Accelerate? The Disinvestment Minister under the
BJP from 1999 to 2004 (Arun Shourie) stated that those in favour of privatisation had won
the intellectual debate and that “Now it's just the question of the pace" (Solomon and Slater,
2004). While it is true that there are fewer and fewer ideological arguments against
privatisation, those who oppose privatisation for non-ideological reasons have been able to
dominate the discussion of pace and forced the process to move at a very slowly. Two clear
trends in the politics of privatisation in India are that: 1) All political parties have slowly
moved away from opposing privatisation (Ganguly et al, 2007; Suri, 2004), and 2) since 1991,
when a party is in power they are in favour of privatisation of labour, and when they are in
opposition they are against privatisations. Despite the fact that all governments in power at
the national level (or state-level) enact some degree of privatisation, no Central Government
has substantially accelerated the privatisation programme since its initiation in 1991 As stated
above, all parties attack privatisation when they are in the opposition; whether for
corruption, ideology, or inefficiency.

However, privatisation is not an important voting issue in with the general electorate in India.
According to Kumar (2004) there is no aspect of the economic reforms that was a big enough
issue among the mass electorate to have accounted for the major shift against the Congress
party in the 1996, 1998 or 1999 elections because the electorate was simply not aware of
reforms. Similarly, Panagariya (2011) argues that economic reforms did not play any role in
the defeat of the BJP in 2004 based on urban and rural voting patterns. 20 While all parties
privatise while in power, no major party has been willing to advocate privatisation as a
desirable and necessary policy. In fact, Prime Minister Rao who was responsible for the NEP
reforms, expressed opposition to privatisation despite his leading role in initiating economic
reforms by saying “You don't strangulate a child to whom you have given birth (Majumdar,
2006)." This comes back to the fact that the Congress Party established and pursued state-led
development since 1950, and breaking from this path was ideologically difficult for at least
some portion of the Party leadership.

9 | Page
Despite the BJP being widely considered more in favour of privatisation, the Party still attacks
privatisations when they are in the opposition. They opposed privatisation of water service in Delhi
against a local Congress government that was in favour of privatisation. In this case, the BJP used
the fact that the private company that would take over is Israeli as part of their argument against the
privatisation. The BJP is also actively opposing private dams being built in Assam, again on the
grounds that the dams would be built by non-Indian companies (Baruah, 2012). When opposing the
privatisation of a hospital in Goa, the BJP simply focused on corruption in the privatisation process
(The Times of India, 2010). At the state-level there have been some cases where individual leaders
or parties have more openly embraced privatisation. Furthermore, there are also cases of state-level
privatisation where the policy may have even been popular. In the case of water privatisation in
Delhi, there were protests in favour of the policy and some evidence that the public, at least the
wealthy and more educated, supported the policy (Kale, 2007).

Similarly, some state-level politicians were able to win public support for privatisation simply due
to their own charisma and popularity. For example, in his effort to privatise state electricity
distribution, Chief Minister of Orissa Biju Patnaik emphasised to the public and to legislators that
electricity costs money and those who want it need to pay. This is a position that a less popular
Chief Minister is unlikely to have taken. However, it is also the case that Orissa does not have a
strong farm lobby (generally the largest opposition to privatisation of electricity) relative to other
Indian states and so the case may be somewhat unique in that there were few effected and organised
vested interests opposed to privatisation (Ramanathan and Hassan, 2003). Opposition from
labour unions was also a major obstacle to privatisation in India. The government gave up on
privatisations in the case of 13 different labours due to opposition from various interests (Makhija,
2006), and fought hardened opposition in the case of every sale, particularly from labour at
labours. The government attempted to use Voluntary Retirement Schemes (VRS) to overcome
opposition to privatisation among labour while also reducing the labour force across labours.

The goal of Voluntary Retirement Schemes (VRS) in Indian labours is to reduce the number
of workers while also: i) Getting around India's strict regulations on labour retrenchment;
and ii) Gaining labour’s support for labour reform. In India, VRS amounts are determined by a
government generated formula based on years worked, years to retirement and current salary. The
payments are generally lump sum payments that occur at retirement. The lump sum is well below
what the government would pay the worker if they remained with the firm until retirement, thus the
government saves money on a long-term basis. VRS was never directly linked to privatisation, and
instead was presented to workers as a means of reducing the labour force. In fact, VRS was first
offered as early as the mid-1980's in some firms (Roychowdhury, 2003; Guha, 1996), well
before privatisation was ever on the table. The VRS offered at this stage was generally 30 days
salary for every completed year of work with other retirement benefits (Roychowdhury, 2003). The
average cost per worker of VRS was around 17,000 dollars (Haltiwanger and Singh, 1999).

10 | Page
Again, the actual number of VRS packages offered at this stage was very low because the firms did
12 After the initiation of the

New Economic Plan in 1991, the government viewed VRS as a primary means of appeasing
labour unions. In October of 1992 the government created the National Renewal Fund with
the objective: (1) To provide funds for compensation of employees affected by restructuring and
closure of industrial units, both in the private and public sectors; (2) To provide assistance to cover
the costs of retraining and redeployment of employees, necessitated due to modernisation,
technological upgradation and industrial restructuring; (3) To provide funds for
employment-generation schemes both in the organised and the unorganised sectors.22 Despite
increased funds for VRS, total VRS acceptance was still limited by the amount of funds that
labours could access from the government (Guha, 1996; Srinivasan, 1999a), i.e. there was
more demand for VRS than supply at many firms. In particular the more successful labours had
difficulty accessing funds from the government because the government prioritised reducing
employment at failing firms.

For example, Coal India had many times the applications for VRS from employees than
they had funds to pay out and so they limited VRS to the oldest applicants (Guha, 1996).
Even struggling firms such as SAIL were not able to secure guaranteed funding for VRS
from the National Renewal Fund until the mid-1990s. Despite this, between 1990 and
1994, 78,582 employees in approximately 100 labours accepted VRS packages (Guha,
1996). While a substantial number, it was far short of the government’s stated goal of
separating 4.5 lakh employees (Khasnabis and Banerjea, 1996). It is widely accepted that
the criteria for selecting firms for privatisation is a function of size and value, i.e. larger and
more valuable firms have been privatised first (Arun and Nixson, 2000; Rastogi, 2004;
Mani and Bhaskar, 1998). The reason for this is that the primary impetus for
privatisation in India has been to raise funds to cover the deficit and for other more
popular subsidies (Sapat, 1999; Gouri, 1996; Panagariya, 2011; Varshney, 1998;
Rastogi, 2004; Mani and Bhaskar, 1998).

Business Standard , July 4 2019 :The wage bill for around 70,000 Bharat Sanchar Nigam
(BSNL) employees, who are over 55 years old, will be equally split between the
Department of Telecommunications and the Centre, according to a proposal in the
works. After this, all recruitments would be on a contractual basis to keep the wage bill
low. VRS was first offered as early as the mid-1980's in some firms (Roychowdhury, 2003;
Guha, 1996), well before privatisation was ever on It is widely accepted that the criteria for
selecting firms for privatisation is a function of size and value, i.e. larger and more valuable
firms have been privatised first (Arun and Nixson, 2000; Rastogi, 2004; Mani and Bhaskar,
1998). The reason for this is that the primary impetus for privatisation in India has been to raise
funds to cover the deficit and for other more popular subsidies (Sapat, 1999; Gouri, 1996;
Panagariya, 2011; Varshney, 1998; Rastogi, 2004; Mani and Bhaskar, 1998). Thus, privatisation
is a fiscal necessity to cover excessive spending as opposed to a policy that the government
implements so as to improve economic performance.

11 | Page
This proposal, which rules out the need to roll out a voluntary retirement scheme (VRS)
immediately, would be taken up for consideration on Thursday at a meeting headed by the
Cabinet secretary. Possible merger of BSNL and Mahanagar Telecom Nigam (MTNL) is to be

The actual privatisations in this period were minor relative to the size of the public sector as a
whole. There were no SoEs that were strategically privatised by the Congress government from
1991-96. Furthermore, the government did not even use the word privatisation and instead
opted for disinvestment (Dinc and Gupta, 2011; Kapur and Ramamurti, 2002). In total, an
average of 19.2 percent of 40 SoEs was sold (out of the over 200 labours) (Makhija, 2006).18
Following the INC-led government, privatisation halted between 1996 and 1998 as a coalition of
Left-leaning parties held government. However, it should be noted that this government did not
attempt to roll back the previous government's privatisation policy or its economic liberalisation
programme in general. The BJP came to power in 1998 at the head of the National Democratic
Alliance, and in 1999 the government resumed the privatisation programme. A Department of
Disinvestment was established which declared that majority shares of labours would be
sold. Between 1999 and 2004 the BJP sold majority shares in the case of 17 SoEs (Dinc and
Gupta, 2011). The Disinvestment Minister during this period, Arun Shourie, was a particularly
strong advocate of strategic sales, i.e. ensuring that the management of SoEs actually passed into
private hands (dberg, 2001). However, the BJP only sold shares in 10 SoEs that had not had some
equity sold under the Congress led government from 1991-96 (Dinc and Gupta, 2011).19 Along
with these strategic sales of SoEs, minority shares were sold in five other companies, all of which
had already had minority sales under the Congress-led government. The method of sale under the
BJP was generally not by individual bids for shares. Instead the government announced how much
equity they would sell, and then took bids on the entire equity being offered (Uba, 2008). Foreign
buyers were also allowed to purchase controlling shares in SoEs, whereas in previous
privatisations they had only been able to participate as minority investors and only as
financial institutions (Kapur and Ramamurti, 2002).
Opposition from labour unions was also a major obstacle to privatisation in India. The
government gave up on privatisations in the case of 13 different labours due to opposition
from various interests (Makhija, 2006), and fought hardened opposition in the case of every
sale, particularly from labour at labours.

Then there has been a big shift in the disinvestment policy under NDA , under Modi
Government .arat Earth Movers Limited (BEML), one of the nine defence public sector units
engaged in defence production, Salem, Durgapur and Bhadravati plants of Steel Authority
of India Limited (SAIL), Bridge and Roof Company, a premier mini ratna PSU, Dredging
Corporation of India, Hindustan Fluorocarbons etc are among those identified for strategic sale.
The Defence Ministry has also ordered to immediately list other Defence PSUs viz., BDL and
MIDHANI in the stock market to facilitate disinvestment of at least 25% shares. 25% shares in all
the five public sector general insurance companies will be sold to private companies, both Indian
and foreign.
Public sector makes huge contribution to the national exchequer. It not only scrupulously pays its
taxes but also dividends, special dividends etc in addition to keeping the national economy afloat

12 | Page
with regular capital investments of not less than Rs 1.5 lakh crore every year. In 2014-15 the PSUs
contributed more than Rs 2 lakh crore to the public exchequer.The government raised Rs 46,247
crore through divestment in 2016-17, exceeding the downward revised target for the financial year.
This is the highest amount raised through disinvestment in a fiscal. The government had revised
the disinvestment target from Rs 56,500 crore to Rs 45,500 crore in the budget presented on
February 1 this year.

The centre has exceeded its disinvestment target for the fiscal year 2018-19, finance minister
Arun Jaitley said on Friday.“As against a target of INR 80,000 crore for disinvestment for the
current year, the divestment receipts have touched IMR 85,000 crore today," Jaitley said in a
tweet.As of 28 February, the government had garnered INR 56,473 crore as disinvestment
proceeds.State-owned Power Finance Corp. Ltd also finalized a deal to acquire a 52.63% stake in
another state-owned entity, REC Ltd, for INR 14,500 crore, taking the disinvestment collection
close to₹71,000 crore.In addition, the centre on Friday garnered inr 10,000 crore through the fourth
tranche of CPSE exchange traded fund (ETF). ETFs—index funds that are listed and traded on
domestic bourses just like stocks—were introduced in 2017-18 as vehicles for disinvestment of
shares.“CPSE ETF FFO 4 (further fund offer) oversubscribed by about eight times so far against
the base issue size of INR 3,500 crore. Government has decided to retain INR 10,000 crore,"
department of investment and private asset management (DIPAM) secretary Atanu Chakraborty
said in a tweet.

Dr. Himanshu Joshi (2001) in his paper titled Does Disinvestment Improve Financial
Performance? A Case of Bharat Heavy Electricals Ltd. (BHEL) advocated that a change in
ownership would result in a change in the performance of the companies, as the main
conflicting objectives between the public and private sector is that of service and profits
respectively. He studied the impact of disinvestment on BHEL and found that the company saw a
major improvement in its profitability measured by the return on sales, a fall in its leverage
measured by debt - equity ratio, an improvement in its liquidity and a fall in the dividend payout
ratio, primarily due to increased retained earnings maintained by the company.Garg Rakesh (July
2011) in his article titled ‘Impact of Disinvestment on Corporate Performance’ states that
economic reforms that commenced in 1990 met with strong opposition from other political parties
slowing down the process and infusing inefficiency and lethargy into the entire process. He studies
how disinvestment has improved the performance of public sector units, if correct and timely
implementation is carried out. M. Kanchan, R.G. Herlekar (December 2013) in their article
‘Ailing Public Sector Undertakings: Revival or Euthanasia' opine that the loss making public
sector units are ridden with inefficiency and complacency, especially units like HMT and
Hindustan Cables Limited. The government financially supporting the restructuring of these firms
has been censured by the authors, as restructuring has not improved the operating efficiency or
liquidity position. Infact, the test on bankruptcy conducted reveals that there has been hardly any
improvement with restructuring. They stated that as there was no change in management or
production, the process of financial restructuring would benefit only for a short period, while
disinvestment would bring in long term positive changes.

In the wake of public sector reform programme , performance of public sector units in terms of
profitability has become a highly debated issue in India , where major arguments for inefficiency of
public enterprises are over employment and lack of managerial autonomy. However there is not

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much academic work which formally establishes assertions . The paper by Meenakshi Rajeev
and B P Rani {2004 }considered 59 state level public sector firms in Karnataka and uses
Random effect model to examine the possible contributing either positively or negatively to
performance of public enterprises.

Labour Management Relations .the Indian government liberalize the Indian economy
through a series of policy measures starting from 1991. During the past 24 years,
Indian industry, the Indian labour market and the Indian industrial relations scenario
have all witnessed many changes. The information technology (IT) revolution, which
led to increased global demand for IT-enabled services, coupled with the availability
of relatively cheaper educated manpower in India, made India the backroom for the
Western world. The sluggish manufacturing sector was quickly overtaken by the IT
and the services sector.
Perhaps learning from the success stories of East Asian economies including
China, India has been trying to revive the manufacturing sector in recent years.
The past several governments have attempted to usher in various labour
reforms to that effect. Meaningful labour reforms have to take cognizance of the
unequal structure of the Indian labour market, with an increasing proportion of
the labour force joining the informal sector. The informal sector remains
unprotected and unorganized as it has not attracted much attention of the trade
unions. An important question that may be asked here is: ‘will the
“Make-in-India” campaign and the ensuing labour reforms, while achieving
labour market flexibility and industrial/economic development, also reduce the
growing inequality in the labour market and ameliorate the vulnerability of the
large segment of the Indian labour force?’
Changing Times and the Make in India
During the initial two to three decades after Independence, Indian industry
concentrated largely on the manufacturing sector. The manufacturing sector
was dominated by the state, namely, the public sector which created textile
mills, steel plants, bicycle and railway coach factories, automotive plants,
pharmaceutical firms, chemical factories, aviation manufacturing, consumer
electronics, etc. While the private players were not inclined or encouraged to
invest in important sectors of the economy, the public sector did not pay
serious attention to the efficient management of enterprises, leave alone the
technological upgradation and modernization of industrial plants and
machinery. As a result, the manufacturing sector became inefficient and was
unable to generate the desired employment. In the meantime, the private sector
took advantage of the newly announced 1991 economic policies of the
liberalized India to serve the globalized economy. With the help of new
technologies and IT-enabled services, along with the availability of a relatively
cheap educated labour force, India became the destination of outsourced work

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for the global economy and sooner than later the services industry came to
occupy a dominant position in the economy.
Lack of modernization and the delay in introducing technological changes made
the Indian manufacturing processes and products obsolete, making the
manufacturing sector extremely non-competitive. Manufacturing was no longer
the preferred choice of Indian entrepreneurs and businessmen. Industrial
re-engineering and organizational restructuring, required by the pressures of
the globally competitive environment, resulted in massive downsizing, closure
of many manufacturing enterprises and many job losses. The result was
declining job opportunities for the large majority of the labour force which
remained unskilled or at best semi-skilled.
Taking note of the situation, the previous United Progressive Alliance (UPA)
government had initiated the National Manufacturing Policy in 2011 which was
visualized to create 100 million jobs in the manufacturing sector by 2022 so as
to increase the share of the manufacturing sector to the contribution of GDP.
The National Manufacturing Policy 2011 has been refurbished as ‘Make in India’
and has been given better branding and publicity by the current National
Democratic Alliance (NDA) government. It goes without saying that the
manufacturing sector is critical for the growth of the economy as it has the
potential of a multiplier effect to create subsidiary enterprises and job
opportunities. It is also significant that today the Micro, Small and Medium
Enterprises (MSMEs) contribute 8 percent of GDP, 45 percent of manufacturing
output, and about 40 per cent of exports. In recent years, we have witnessed
many more innovative entrepreneurial initiatives in the space of MSMEs.
While many argue that factors such as inadequate infrastructure, utilities,
restrictive labour laws and practices create serious barriers to the growth of
manufacturing, some others argue that manufacturing policy needs substantive
transformation to take advantage of existing resources. Pankaj Chandra (2015)
addresses three debates in Indian manufacturing, namely, volume versus
variety, manual versus capital intensive and low-tech versus hi-tech production,
which have created a misalignment between capabilities and strategies. He
presents a framework for transforming the manufacturing policy by focusing on
a new set of enabling factors that will align strategies and help build long-term
dynamic capabilities which are essential for the growth of manufacturing in
India. Chandra argues that
if we see India as farmers of science & technology, then we can see a pathway
leading to small and large firms linked together in developing new products and
processes that solve mankind’s problems in areas of health care, housing,
transport and even in electronics, space and defence. It is only then that we will
remove the constraints and not optimize around them. (Chandra, 2015)

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Mergers And Acquisitions

NEED AND SCOPE OF STUDY

With new issues of interest highlighted above , obviously the right approach is to understand the
performance in light of post economic reform process.This succinctly defines the scope of study.
I begin with performance indicators .After a long history of low growth of 3‑3.5% per annum the
Indian economy ascended to a higher growth path during the 1980s. A sustained annual growth
rate in GDP of 5.6% was recorded during the Seventh Five Year Plan period (1985‑90) During this
period the annual industrial growth was about 8.5%, with the manufacturing sector growing at an
annual rate of 8.8%. This growth was achieved by a sustained level of investment of about 22.7%
of GDP, on average, during the period. Although there was some improvement in the savings rate
from about 19.6% of GDP during the Sixth
The serious budgeting and fiscal deficits of the government and severe pressure on the country’s
balance of payments created the ‘necessity.’ This led to the opening of the window of Foreign
Direct Investment (FDI) and liberalization of trading practices and procedures. The government
realized that there was an opportunity to unlock the huge investments chained in the DOEs – the
PSUs — which had become lethargic and inefficient. They suffered due to inertia, spread, and
absence of pressure of stakeholders (the President of India was the invisible owner), compulsions
of political management, perceptions of the public and trade union, poor work culture of the
employees, and lack of accountability on the part of the decision-makers.
Plan period (1980‑85) to an average of 20.3% during the 7th plan period, this still left a substantial
invest­ment savings gap of about 2.4% of GDP over this five year period. The savings rate of the
household and private corporate sector did increase from about 15.9% of GDP during 1980‑85 to
18.0% in 1985‑90. However, savings of the Government sector turned from a positive 1.2% of
GDP during 1980‑85 to register negative savings of 1.6% of GDP during 1985‑90. The
performance of the public corporate sector improved significantly between .This shall be the main
intention of the of my explorative analysis.. While the rate of gross domestic savings (at current
prices) has fallen from 34.6% of gross domestic product (GDP) in 2011-12 to 32.2% in 2015-16, it
is an investment which poses a greater problem. Given the latter’s current state, the government
may well be unable to make much headway in its ambitious growth plans. So other than
disinvestment proceeds what measures to increase the profitability are required . With huge
investment in CPESs.

Industrial policy Massive deregulation of the industrial sector, in fact, constituted the first major
package of reforms in July 1991. The obsolete system of capacity licensing of industries was
discontinued; the existing legislative restrictions on the expansion of large companies were
removed; phased manufacturing programmes were terminated; and the reservation of many basic
industries for investment only by the public sector was removed.
In 1991 as many as 836 industries were reserved for investment by only small firms, defined by the
level of investment. The number of these industries has now come down to 326. Infrastructure A
number of measures have been initiated in the development of infrastructure since 1996. Many of
these reforms emanated from the recommendations of the India Infrastructure Report of the mid

16 | Page
1990s. We recognized that infrastructure investment had to be raised and suggested introduction of
the private sector in infrastructure which had been restricted earlier. This was part of a world wide
move during the 1990s. This has also necessitated other wide ranging reforms including new
legislations and formation of regulatory authorities.

With deregulation, the introduction of the private sector and formation of the Telecom Regulatory
Authority of India (TRAI), telecom is indeed a success story. The major reforms in roadways were:
imposition of a fuel cess to finance highway construction; the commissioning of the National
Highway Development Project and PMGSY (Prime Minister's Gram Sadak Yojana or the Rural
Roads Programme). In case of ports private operators have been introduced and then the Tariff
Authority of Major Ports (TAMP) formed; in civil aviation new private airlines, new private
airports and the beginning of an open skies policy are in evidence. In all these cases the response
has been positive. In other infrastructure sectors, the reform process experience has been mixed. In
the power sector, where some of the early efforts for reform were made in the early 1990s,
problems continue to constrain its expansion.

Thus, power reforms have some way to go, although the legislative and institutional prerequisites
are now in place. Urban infrastructure is another area where reform has been inadequate and
thinking has just begun. In transportation, considerable reforms have taken place in air and road
transportation but railways have some way to go. Although there has been noted improvement in
financial performance of railways in the last couple of years, there is a need for much greater
structural reforms for this vital transportation system to be put in a sound sustained growth path.
The new economic policy initiated in July 1991 clearly indicated that PSUs had shown a very
negative rate of return on capital employed. Inefficient PSUs had become and were continuing to be
a drag on the Government’s resources turning to be more of liabilities to the Government than being
assets. Many undertakings traditionally established as pillars of growth had become a burden on the
economy. The national gross domestic product and gross national savings were also getting
adversely affected by low returns from PSUs. About 10 to 15 % of the total gross domestic savings
were getting reduced on account of low savings from PSUs. In relation to the capital employed, the
levels of profits were too low. Of the various factors responsible for low profits in the PSUs, the
following were identified as particularly important:

● Price policy of public sector undertakings

● Under–utilisation of capacity
● Problems related to planning and construction of projects
● Problems of labour, personnel and management
● Lack of autonomy
Hence, the need for the Government to get rid of these units and to concentrate on core activities
was identified. The Government also took the view that it should move out of non-core businesses,
especially the ones where the private sector had now entered in a significant way. Finally,
disinvestment was also seen by the Government to raise funds for meeting general/specific needs.

17 | Page
In this direction, the Government adopted the 'Disinvestment Policy'. This was identified as an
active tool to reduce the burden of financing the PSUs. The following main objectives of
disinvestment were outlined:

● To reduce the financial burden on the Government

● To improve public finances
● To introduce, competition and market discipline
● To fund growth
● To encourage wider share of ownership
● To depoliticise non-essential services
Importance of Disinvestment
Presently, the Government has about Rs. 2 lakh crore locked up in PSUs. Disinvestment of the
Government stake is, thus, far too significant. The importance of disinvestment lies in utilisation of
funds for:

● Financing the increasing fiscal deficit

● Financing large-scale infrastructure development
● For investing in the economy to encourage spending
● For retiring Government debt- Almost 40-45% of the Centre’s revenue receipts go
towards repaying public
debt/interest
● For social programs like health and education

Disinvestment also assumes significance due to the prevalence of an increasingly competitive

environment, which makes it difficult for many PSUs to operate profitably. This leads to a rapid
erosion of the value of the public assets making it critical to disinvest early to realize a high value.
From 1991-92 Rupee 3037.44 crore ; 2009-10 Rupee 23,956.81 crore ; 2014-15 Rupee
24,277.117crore ; 2016-17 Rupee 34,938.68 crore

Employment in CPSEs grew massively in the 1970s – from 0.7 million in 1971-72 to 1.94 million in
1981-82 – driven by nationalisations and political patronage. It further increased in the 1980s,
peaking at 2.24 million in 1989-90. Since then it has halved to 1.13 million in 2016-17 (see figure
below). Much of this came through voluntary retirement schemes in bloated employers like Coal
India, which saw its numbers decline from about 0.65 million in the mid-1980s to just above 0.3
million end-2017. Another large employer, the National Textile Corporation, the repository of scores
of erstwhile private textile mills that had gone “sick”, closed nearly 80 millsover the past two
decades and employment declined by 90 per cent in this period. Furthermore, many jobs that were
not considered core to the CPSEs objectives – drivers, janitorial staff, and security personnel –
were gradually subcontracted to private companies, a trend observable in large private enterprises
as well. However, even as employment declined within CPSEs (and contract labour grew pari
passu), relative emoluments of CPSE personnel has doubled (as a multiple of per capita incomes)
over the last four decades. .

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19 | Page
As highlighted in the introduction the disinvestment process shall be a crucial aspect of the
study.*If GOI earns 10% on the sale price of Rs.152 crore, it would get an interest of Rs.15.2 crore
annually, as against an average dividend of Rs. 1.42 crore over the previous four years.

The shares allotted under the would be locked in for a period of one year from the date of
allotmentShares would be offered at one-third of the “listed market value” (average of the closing
price on BSE/NSE for the last 30 days prior to the formal offer date) or one-third of the strategic
sale price per share, whichever is lower. The Price earnings ratio (PE ratio) of some of the
companies in the BSE IT Index for the last three years: During the Current Financial Year 2019-20
so far Rs.2350.25 crore has been obtained through disinvestment transactionsAs on 31st March,
2019, the Government has realised Rs. 84,972.16 crore as disinvestment proceeds against the BE
of Rs. 80,000 crore during the financial year 2018-19The FFO 3 of CPSE-ETF in November 2018
is the biggest disinvestment transaction through ETF raising Rs. 17,000 crore.Total disinvestment
proceeds during 2017-18 was Rs. 1,00,056.91 crore vis-a-vis the revised target of Rs. 1,00,000
crore. Details are available in 'Recent Disinvestment' under the link - Disinvestment.CPSEs
constitute 8.88% and 8.98% of the total market capitalisation of companies listed at BSE and NSE
respectively (as on 24th May, VSNL was the first CPSE to be divested by way of a Public Offer in
1999-200 .ONGC PubliOffer in 2003-04 has been the largest CPSE FPO, raising Rs. 10,542
crorCoal India Public Offer in 2014-15 has been the largest CPSE OFS, raising Rs. 22,557.63
croreTotal disinvestments proceeds during the Financial Year 2016-17 was Rs. 46,246.58
crore.The Prime Minister's Office (PMO) Tuesday held a meeting to work out steps to expedite the
strategic sale of PSUs identified by government think-tank Niti Aayog, a senior official said.Niti
Aayog has identified 35 PSUs, including Air India, Air India's subsidiary AIATSL, Dredging
Corporation, BEML and Scooters India for strategic sale."There is not much headway in strategic
sale of CPSEs because of opposition by certain organisations. The PMO tried to identify these
bottlenecks and come up with a roadmap to expedite the whole process," the official, who did not
wish to be identified, told PTI.The government has set a target of ₹90,000 crore to be mopped up
from share sale of central public sector enterprises (CPSEs) in financial year 2019-20, higher than
the ₹80,000 crore target this fiscal.Niti Aayog recently submitted to the Department of Investment
and Public Asset Management (DIPAM) the fifth list of CPSEs, profitable as well as non-profitable,
which can go for a strategic sale. This takes the total number of PSUs identified for strategic
disinvestment to 35.
The companies which have been shortlisted for strategic sale include Air India, Air India's
subsidiary AIATSL, Dredging Corporation, BEML, Scooters India, Bharat Pumps Compressors,
and Bhadrawati, Salem and Durgapur units of steel major SAIL.The other CPSEs for which
approvals are in place for outright sale include Hindustan Fluorocarbon, Hindustan Newsprint, HLL
Life Care, Central Electronics, Bridge & Roof India, Nagarnar Steel plant of NMDC and units of
Cement Corporation of India and ITDC.
The study would be incomplete without a discussion of the social responsibility of CPESs. The
Companies including Public Sector Undertakings and Enterprises have been taking initiatives
since long to fulfill their Social Responsibilities so as to promote socio-economic and
environmental changes in the lives of the poor people in the country. The Committee are

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concerned to note that the Ministry of Corporate Affairs(MCA) and the Department of Public
Enterprises (DPE) have not bothered to maintain data with regard to amount spent so far on CSR
by CPSUs as well as private Companies. DPE has, however, furnished the estimated amount likely
to be spent on CSR during the year 2013-14. It has been stated that as per the data furnished in
the Public Enterprises Survey 2013-14, two per cent of average net profit in the three immediately
preceding years, in respect of 131 CPSEs which exceeds the threshold limit for undertaking CSR,
comes to Rs.3683.73 crore. With regard to private Companies, the information given at official site
of MCA indicates that as on the 28th February, 2015, the 60 total number of private Companies is
952892 with authorized capital of Rs.1,476,339.28 crore. There are 21,429 Companies having net
profit of above Rs.5 crore i.e. they cross the threshold limit for spending the requisite amount on
CSR. Thus, it can very well be presumed that a huge amount of money under CSR would be
available which in the opinion of the Committee, if utilized properly, can contribute in bringing a
visible change in the lives of the poor people in the country. The Committee also feel that a huge
amount would have been spent on CSR by Companies during the first year of implementation i.e.
2014-15, as per the statutory provisions. Now when Companies would be making a report about
the policy developed and implemented on Corporate Social Responsibility initiatives taken for the
year 2014-15 as per Section 134(3)(o) read with Section 135 of the Companies Act, 2013, the
Committee would like to be apprised about the total allocations made under CSR by CPSUs as
well private Companies, as and when the data is compiled by MCA.

SOURCES OF DATA COLLECTION

The analysis carried out in the present study would be entirely based on the data/information
compiled from secondary sources only. The important among these sources consist of mainly
Annual Reports of Public Sector Enterprises , Various Issues of Public Enterprises Survey , Five
year Plans of Government of India , Annual Report of the Department of Public Enterprises.

RESEARCH METHODOLOGY :
Research design is the plan , structure and strategy in investigation conceived so as to obtain
answers to research questions and to control variance .The present study is related with “Central
Public Sector Enterprises” :Performance and Challenges “ The study is primarily based on the
availability of secondary data and literature .Data have already been collected and made available
Public Reports , Private Records and other sources are called secondary data.

RESEARCH DESIGN AND TOOLS;

1.Concept of productivity :it refers to a comparison between the quantity of goods or services
produced and quantity of resources employed in the process ...In 1950 the Organization of
European Cooperation gave the definition of productivity : “ Productivity is the quotient obtained by
dividing outputs by one of the factors of production ...In this way , it is possible it is possible to
speak of productivity of capital , investmentor raw materials according to whether the output being
considered is in relation to capital , investment or raw material.Productivity is the combination of
effectiveness and efficiency

“Therefore , Productivity Index =Effectiveness /Efficiency

Efficiency is the relationship of quantity and \content of outputs to inputs .It is referred to as “doing
the same thing “, whereas effectiveness is the relationship of inputs to goals and objectives of the

21 | Page
organization's ...It is referred to as “doing the right thing '''.According to Paul Mali “Productivity is a
measure of how well resources are brought together in organization and utilized for
accomplishments set of result Productivity =Output Obtained / Input Expended.
Daily And Neugarten while defining productivity means to get more bang for buck “ To be more
erudite , to improve productivity means to increase the ratio of the quality and quantity of services
provided to resources consumed .Productivity at organization level , may be considered a measure
of how the company satisfies the customers utility . Therefore , productivity measures how well the
company is performing (Rittenhouse, 1992).

PROFITABILITY :In business , profit is the excess of income over expenditure and it is an absolute
measure of any firm’s or an enterprise performance Profitability is the most commonly ascertained
as the ratio of profit earned (net income after taxes) to the capital invested .In other words
profitability is the measure as the return on capital. Invested. The ratio of gross margin , gross
profit and net profit and net profit to capital employed has been worked out to assess the overall
profitability of the enterprises over the years .It also indicates the operational efficiency of an
enterprise .

Following main ratios can be employed , that is profits generated out of :

(a) Return on assets.
(b) Return on capital employed .
(c) Return on capital.

Comparing the information on average the units may be arranged ONGC , BPCL , SAIL MMTC
and NTPC.For ONGC the ratio has shown a fluctuating trend through from 9.88 percent to 54.98
percent in 2002-03 .For BPCL the ratio fluctuates from 4.62 percent 1991-92 to 46.41 percent.The
case of SAIL ratio varies from -0.96 percent in 1991-92 to 60.87 percent . To MMTC also , the ratio
varies from 5.14 percent in 1991-92 to 86.91 percent .NTPC has also shown a fluctuating tre
To capture the factors affecting disinvestment decision more accurately I propose to consider
sophisticated econometric tools.

We use three separate regression frameworks by using three dependent variables which capture
different dimensions of disinvestment- selection, occurrence and extent of disinvestment. Selection
of firms for disinvestment would help in exploring how the government chooses firms for
disinvestment for the first time whereas occurrence of disinvestment captures the factors affecting
firms being disinvested in a particular year. Although the latter question seems to be closely related
to the former one, the two are essentially dissimilar in nature. The first question targets the types of
firm being selected for disinvestment where as the second one focuses on the disinvestment
pattern in a particular year.

Yt = B0 + B1X2t + B3tX3t + B4X4t +B5X5t + B6X6t + B7D8t +B8D9t.D8t + B9t + ut

One such regression equation :

Yt - profitability index
X2t - investment level .
X3t - Debt Equity Ratio .

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X4t - WCT Ratio Working Capital Turnover Ratio .
X5t - Net Sales / Average Capital Employed .
X6t - Debt -Equity Ratio .
D8t - represents the Dummy variable , that is qualitative variable .
say for the period ‘0’ to 1980 to 1990 ; amd then DT= 1 FOR THE PERIOD 1990 to 2010.
we can also use interactive dummy .

D9 as period of Mergers And Acquisitions . As introduced as a policy measure .

the coefficient of multiplicative Dummy will let us know whether ; disinvestment and mergers and
Acquisitions are able to have greater positive effect .
Number of other such regressions can be proposed .

As it is a time series analysis we need to test for stationarity of the time series .Several popular
tests are present ; 1. Dicky Fuller Test : 2. ADF- Augmented Dicky Fuller test 3. Q plot and others
4.We also have structural break Dicky Fuller test.

In case we have the unit root then we - An important econometric task is determining the
most appropriate form of the trend in the data. Many economic and financial time series
exhibit trending behavior or non-stationarity in the mean. ... So testing for stationarity is
very important because the whole results of the regression might be fabricated or
spurious Enders

PANEL DATA ANALYSIS :

Yit = b0 + b1X1jt + b2 X2it + b3X3it + b4X4it + b5 D1it +b6D2it + b7D3It +uit

YIt - net profit of enterprise / firm i in period t .

X1t : age of firm I

X2it : total employment of firm i.

X3it :Gross fixed asset value of firm i in period t .

X4it Average annual emolument per worker in period t.

D1it : =1 If firm 1 belongs to “Development commercial “ or commercial or 0 otherwise .

D2it : =1 If firm belongs to manufacturing category of enterprises “0’ otherwise .

D3it : =1 if firm belongs to ‘ marketing or financial services ‘ or ‘0’ otherwise .

As per Greene , Random effect is suggested .

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we shall like to explain whether the government should prefer to restructure loss making
units ; at least the profit making enterprises should not be disinvested .

The two questions may help us in exploring patterns about disinvestment decisions made by the
governments. More specifically, it is a dual analysis that explains if the government selects the
same firm for disinvestment repeatedly or continues to pick up new firms for disinvestment. As a
final part of the question, we explore the factors affecting the extent of disinvestment (percentage
disinvested) overtime. The first two analyses (selection and occurrence)use a similar econometric
methodology. A dichotomous dependent variable is regressed on a set of exogenous factors to get
the estimated probabilities of disinvestment.

This dichotomous variable takes the value 0 and 1 according to the disinvestment decision. For
first time selection, we focus on whether a firm is being selected for disinvestment for the first time
or not. A firm takes the value 1 as soon as it is selected for disinvestment for the first time. Also, to
avoid capturing the effect of disinvestment in the following years, the firm is removed from the
sample as soon as it takes the value 1. For occurrence, the prime focus is to find the determining
factors of disinvestment occurrence. So, here the dependent variable takes the value 1 whenever
a firm is selected for disinvestment. We also treat first time and repeated disinvestment to be of
equal importance and assign the same value 1 to both cases. In both the frameworks the dataset
is an unbalanced panel to avoid attrition bias. Also, the economic factors are taken at lagged
values where as the stock market and political variables are used as the current period value. We
employ random effects with probit model for our estimation 17

WORKING CAPITAL ANALYSIS :

1. Monitoring Operating Cycles

2. Monitoring Working Capital Ratios :

a.Current Ratio

b.Liquid Ratio

c. Current Assets To Total Assets Ratio

d.Current Assets to total sales ratio

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FINANCIAL ANALYSIS :This involves the Long term Investment Decisions :Capital
Budgeting :

There are various techniques of :

a.Cost of Capital .

b.Leverage Analysis

c. EBIT EPS Analysis.

d.Leverage Cost of capital and value of the firm.

e.Capital Structure Planning And Decisioning.

LABOUR MANAGEMENT RELATIONS

OBJECTIVES OF THE STUDY:

1. To make the study of history of Public Sector Reforms applicable to Central Public
Sector

Reforms applicable to Central Public Sector Enterprises Since 1991.

2.To study the role and growth of Central Public Enterprises in India .

3. To analyse the disinvestment and privatisation process in Central Public Sector

Enterprises

4. To study the labour management relations in Central Public Sector Enterprises in

changing scenario.

5. Texamine the profitability and performance of Central Public Sector Enterprises

during the period of reference.

6.To study and analyse the problems and constraints in Central Public Sector
Enterprises.

7. To suggest effective measures and policy initiatives to reinforce Central Public Sector
Enterprise .

8. To study the performance of public enterprises under disinvestment process , and

future scenario.

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 9. To have useful study of mergers and acquisitions of CPSEs

HYPOTHESIS OF THE STUDY.

1.Public Sector Reforms will be helpful in increasing the rate of return on capital employed.

2. Public Reforms will provide managerial , functional and financial autonomy .

3. Public Sector reforms have an adverse impact on labour management relation s.

4. Public Sector reforms will result in a shift from labour to capital technology.

5. Public sector reforms will be helpful in improving the overall performance of Central
Public Sector Enterprises

6. Disinvestment remains an important solution to loss making units.

CHAPTERIZATION :
In advance this comes out a daunting task a logical sequence I shall prefer , however close to
convention , is listed below:
1.INTRODUCTION .

2.Category Of Public Sector Enterprises ; Including CPESs ; Navratnas ; Mahaavratnas and

others.

3.Various Economic Reforms .

4. Literature Review.

5.Scope And Method of Study.

6.Research Design And Tools.

7.Refrences

8.Bibilography

26 | Page
Books :
1. Introduction to Econometrics by PearsonPaperback – 21 Oct 2017
by H Stock James (Author), W. Watson Mark (Author),
2. Econometric Analysis. William H. Greene International ed of 7th revised ed
Edition (English, Paperback, William H. Greene).
3.Econometric Analysis of Panel Data, 5th Edition Badi H. Baltagi
4. Basic Econometrics (English, Paperback, Gujarati Damodar).
5. Financial Management: Theory and Practice (Old Edition) Paperback – 4 May 2011

by Prasanna (Author)
6. Applied Econometric Time Series, 3edPaperback – 2013

RESEARCH PAPERS
1.A Study on Working Capital management in Public Enterprises Mr.Pushpakumar.B & Mr.Prabhat
Kumar Yadav camstvm.org/images/CAMS_Journal.pdf: [ 2018 ]

2. :Analysis of the Effect of Working Capital Management on Profitability of the Firm:

Evidence from Indian Steel Industry.Pinku Paul, Paroma Mitra (2014).
3 .Analysis of the Effect of Working Capital Management on Profitability of the Firm: 4.
Evidence from Indian Steel Industry
:https://www.researchgate.net/.../329781343_Analysis_of_the_Effect_of_Working capital.
4.Balancing Opposition and Economic Benefits in Privatisation Policy An Analysis of
Brazil, South Africa and India.CUTS [2015 ] .

6.. Meenakshi Rajeev and B P Rani {2004 }considered 59 state level public sector firms in

Karnataka andusesRandomeffect
:www.isec.ac.in/CV%20of%20meenakshi%20rajeev.pdf

Newspaper and Magazine Articles Articles :

1The Times of India,20 TH July 2010 .

2 Economic Times June 11 2019 ` `.Big shift in disinvestment policy: Plan to privatise
profitable CPSEs in works.”

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3.“Niti Aayog may be told to draw up a list of non-strategic blue chip companies for
sale.”
4. “ Modi government exploring opportunities for more mergers in energy “Diapm secy
July 7, 2017.

4.5

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