Central PSEs' Remarkable Turnaround Signals Path for State-Level Reforms
As the Union Budget approaches, the evolution of public-sector enterprises (PSEs) over the past decade demands attention. Globally, the collapse of economic planning has spurred transformation in PSEs, with countries like China and India leading the way. Reforms have been driven by the public sector's massive influence on economies, necessitating improved efficiency and service delivery.
Global and Indian Context of PSE Reforms
According to the OECD, in 2023, the public sector owned over 25 per cent of 2,037 listed companies worldwide, representing 11.6 per cent of total market capitalisation. In India, the term PSE encompasses both Central and state enterprises, but this analysis focuses on Central PSEs (CPSEs). The 2020 New PSE Policy for Atmanirbhar Bharat classifies sectors as strategic or non-strategic, minimising government presence in non-strategic areas while maintaining a bare minimum in strategic sectors like defence and energy.
Financial Resurgence of CPSEs in India
Over the last decade, CPSEs have transformed from periods of policy paralysis to becoming key drivers of financial value. Listed CPSEs have outperformed broader market indices, with significant improvements in their financial metrics:
- The number of profit-making CPSEs increased from 157 in FY15 to 227 in FY25, while loss-makers declined from 77 to 63.
- Net profit of profit-making CPSEs surged to Rs 3.09 lakh crore in FY25 from Rs 1.30 lakh crore in FY15, a 2.4-fold increase.
- Total paid-up capital rose from Rs 2.13 lakh crore in 2015 to Rs 6.87 lakh crore as of March 31, 2025.
- Net worth expanded from Rs 9.85 lakh crore to Rs 22.33 lakh crore over the same period.
- Contribution to the central exchequer jumped to Rs 4.94 lakh crore in FY25 from Rs 2.00 lakh crore in FY15.
- Market capitalisation of 66 listed CPSEs tripled to Rs 38.57 lakh crore by March 2025.
Role in Investment and Banking Sector Recovery
Gross capital formation by non-financial CPSEs grew by 11.9 per cent, supporting investment demand in core sectors. These enterprises have been a net saving sector, accounting for 10 per cent of national savings and financing capital formation internally. In the financial sector, public sector banks have seen a phenomenal turnaround post the twin balance sheet crisis, with net profits soaring from Rs 80,913 crore in FY14 to Rs 4 lakh crore in FY25.
Export Achievements and Green Transition Initiatives
CPSEs have made significant strides in exports, particularly in defence, engineering, and commodities. Defence exports reached a record high of Rs 23,622 crore in 2024-25. On the environmental front, CPSEs are contributing to India's green transition. For instance, Indian Railways, though not a PSE by definition, has electrified nearly 45,000 km of its broad-gauge network in the last decade, reducing diesel dependence and emissions. It has also integrated 553 MW of solar, 103 MW of wind, and 100 MW of hybrid capacity.
Global Expansion and Future Challenges
Following government approval for foreign asset acquisitions, Indian oil PSUs have established a global presence with 45 assets across 21 countries, involving a cumulative investment of about $40.6 billion. Looking ahead, CPSEs will face challenges from evolving technology and market dynamics. The growing use of technology underscores the need for skill upgrades to achieve agility, and R&D spending may require increased attention.
Call for State-Level Replication of Reforms
The positive reform process that transformed CPSEs should be extended to state-level PSEs in the coming years. Greater transparency in operations at the state level could catalyse regional development, addressing disparities and fostering economic growth across India. This move is essential to sustain the momentum of public sector revitalisation nationwide.
Written by: Soumya Kanti Ghosh, member of the 16th Finance Commission, PMEAC, and group chief economic advisor, State Bank of India. Views are personal.
