HYDERABAD: Chief Economic Adviser K V Subramanian on Friday suggested aggressive disinvestment of Central Public Sector Enterprises (CPSEs) as the move ensures profitability and efficiency.
Data presented in the Economic Survey 2019-20 showed that State-run entities where government offloaded stake were found to have performed much better than those under government control.
For instance, the 11 CPSEs that have undergone strategic disinvestment between 1999-2000 and 2003-04 have realised efficiency gains.
These CPSEs, on an average, performed better after privatisation than peers in terms of their net worth, net profit, return on assets (ROA), return on equity, gross revenue, net profit margin, sales growth and gross profit per employee.
“Key financial indicators such as net worth, net profit and return on assets of the privatised CPSEs, on an average, have increased significantly in the post-privatisation period compared to peers. This performance holds true for each CPSE taken individually as well,” the Survey noted.
According to Subramanian, the ROA and net profit margin turned around from negative to positive surpassing that of peer firms, which indicates that privatised CPSEs have been able to generate more wealth from the same resources.
“The analysis clearly affirms that privatisation unlocks the potential of CPSEs to create wealth,” he stressed.
The Survey noted the recent approval of strategic disinvestment in Bharat Petroleum Corporation Ltd (BPCL) led to an increase in the value of shareholders’ equity by Rs 33,000 crore compared to its peer Hindustan Petroleum Corporation Ltd (HPCL).
“This reflects an increase in the overall value from anticipated gains from consequent improvements in the efficiency of BPCL when compared to HPCL, which will continue to be under government control,” it noted.
NDA government has been pursuing CPSEs’ privatisation for some time now, which is why it has set an ambitious disinvestment target of Rs 1.05 lakh crore in FY20.
However, some of its efforts including disposing off national carrier Air India have remained fruitless despite years of efforts.