The 16th Finance Commission's comprehensive report for 2026-2031 has unveiled a concerning financial landscape for India's State Public Sector Enterprises (SPSEs), with more than 40% of these government-owned entities operating at a loss. This revelation underscores significant challenges in the sustainability and efficiency of state-run businesses across the country.
National Picture: A Fragile Financial State
According to the detailed assessment, India had 1,635 SPSEs as of March 31, 2023. The majority of these, precisely 1,414 enterprises or 86.5%, are classified as Government Companies where state governments hold a 51% or greater stake in paid-up capital. The remaining consist of 135 Government Controlled Other Companies and 86 Statutory Corporations.
The report emphasizes that profits serve as a crucial indicator of an enterprise's financial sustainability. Alarmingly, the latest available data indicates that nearly 50% of SPSEs—541 out of 1,107 enterprises for which profit/loss information is accessible—are either operating at a loss or reporting zero net profit. This statistic highlights what the commission describes as the highly fragile financial condition of SPSEs nationwide.
Sector-Wise Breakdown of Loss-Making Enterprises
The infrastructure sector emerges as the primary contributor to these financial losses, followed closely by power and manufacturing sectors. Specifically:
- Infrastructure Sector: Encompasses construction, urban development, and related activities
- Manufacturing Sector: Includes chemicals, powerloom, paper production, and similar industries
Conversely, the highest profit-making SPSEs nationally fall within agriculture and allied sectors, followed by finance and miscellaneous categories. The miscellaneous sector incorporates diverse activities such as textbook publishing, governance institutes for backward populations, and regional development corporations, while the finance sector comprises credit institutions, investment corporations, and financial services providers.
Maharashtra's Specific Scenario
Focusing on Maharashtra, the financial commission's data reveals that out of 101 State Public Sector Enterprises in the state, 45 were loss-making during the 2022-23 fiscal year. An additional nine enterprises reported zero profit or loss, while only 47 SPSEs managed to generate profits.
The sectoral pattern in Maharashtra mirrors the national trend, with infrastructure enterprises leading the loss-making units, followed by power and manufacturing sectors. On the positive side, agriculture and allied sectors produced the highest profits among Maharashtra's SPSEs, with finance and miscellaneous categories following closely.
The Inactive Enterprise Challenge
Beyond the profitability concerns, the report identifies another critical issue plaguing SPSEs: a substantial number of non-operational or inactive enterprises. While classification methods for 'inactive' status vary slightly across state audit reports, the commission broadly defines inactive SPSEs as those that have completely ceased their operational activities.
This phenomenon of inactive enterprises represents a significant drain on resources and highlights potential management and oversight challenges within the state public sector ecosystem. The presence of such enterprises further complicates the financial assessment and reform efforts for SPSEs across different states.
The 16th Finance Commission's findings present a sobering assessment of India's state-owned enterprise landscape, calling attention to the urgent need for strategic reforms, better management practices, and enhanced operational efficiencies to ensure the financial viability of these crucial public sector entities.
