THIRUVANANTHAPURAM: Amid the national debate over privatisation, Kerala has emerged as a stronghold of public sector enterprises. The state owns the highest number of State Public Sector Enterprises (SPSEs) in the country (149), according to the 16th Finance Commission (FC-16) report released on Sunday. The number of active enterprises was 131, up from the 118 reported in the previous FC’s report in 2020.
However, Kerala’s affinity for the public sector has a flip side. At 66, it has the most loss-making SPSEs in the country, accounting for 13% of India’s loss-making units. The state was second in profit-making SPSEs, with those 58 units posting a total profit of Rs 1,369 crore in 2022-23. The combined loss of the 66 units was Rs 1,874 crore, resulting in a net loss of Rs 505 crore.
Barring northeastern states, SPSEs in Uttar Pradesh recorded the highest loss in 2022-23 (Rs 32,430 crore), followed by Rajasthan (Rs 18,814 crore), Tamil Nadu (Rs 16,048 crore) and Telangana (Rs 11,970 crore). Kerala was positioned 12th.
The report provided insights into the economic significance of SPSEs in each state, measured by turnover-to-Gross State Domestic Product (GSDP) ratio. Kerala reported a lower ratio, 3.7, against the national average of 5.7. Toppers were Punjab (10.9), Sikkim (9.5) and Chhattisgarh (9.2). Nagaland (0.02), Arunachal Pradesh (0.03) and Mizoram (0.3) were at the bottom.
In the state-wise budgetary outgo to SPSEs, Kerala stood 8th, having spent Rs 13,704 crore in the year under review. Curiously, it was higher than the spending by the top three states in turnover-to GSDP ratio. While Punjab spent Rs 167 crore, Sikkim Rs 98 crore and Chhattisgarh Rs 9,869 crore.
Apart from budgetary expenditures, state governments also provide guarantees against loans raised by the SPSEs. The outstanding guarantees issued by the Kerala government to SPSEs till 2022-23 was Rs 26,361 crore.
The FC-16 report said there was considerable scope for undertaking PSE reforms to leverage their contribution to the economy. “In the absence of such reforms, with high losses and valuable asset lock-ins, especially land, PSEs burden the state exchequer,” it said. The report called for an evaluation of performance and closure of inactive SPSEs to reduce the fiscal strain, as many of them continue to receive budgetary support from state governments. A stricter scrutiny has been proposed for loss-making SPSEs as well.
“One rule of thumb worth considering is for the department concerned to compulsorily inform the cabinet any enterprise incurring losses in three out of four consecutive years for consideration for closure, privatisation or continuation. The cabinet may then take a call depending on the strategic importance of the enterprise,” it said.