Kamal Ghorui
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Inactive public sector enterprises (PSEs) should be considered for immediate closure to reduce fiscal strain on central and state governments, the 16th Finance Commission has recommended in its report while calling for deep reforms in the sector.The panel also said that land and buildings owned by inactive PSEs are valuable and could be deployed to alternative uses. “Our detailed review of central and state PSEs reveals considerable scope for reforming them to enhance their contribution to economic growth,” the report read.
It said the New Public Sector Enterprise Policy, adopted in Feb 2021, commits to closing or privatising central PSEs (CPSEs) in nonstrategic sectors. “While the closure of loss-making enterprises has gathered speed recently, action on privatisation has not. Based on the experience of CPSEs privatised from 1999 to 2004, significant efficiency gains can be reaped through the privatisation of CPSEs and SPSEs in non-strategic sectors,” the report added.Citing the Public Enterprise Survey 2023-24, the panel headed by economist Arvind Panagariya said there are 17 CPSEs under liquidation, 24 approved for closure by govt, and 31 nonoperational as on Mar 31, 2024. “Altogether, assets of 72 CPSEs have been unproductive,” said the commission. It highlighted a similar problem in states, saying that 308 of a total of 1,635 state PSEs (SPSEs) have ceased operations.The report said almost one third of CAG-audited CPSEs incurred losses ranging from Rs 36,213 crore to Rs 51,419 in each of the last four years. In states, 489 of 1,055 SPSEs, incurred losses totalling Rs 1.14 lakh crore in 2022 23. “One rule of thumb worth considering is for the department to mandatorily take to the Cabinet any enterprise incurring losses in three out of four consecutive years for consideration for closure, privatisation or continuation,” said the report.
