The 16th Finance Commission, in its comprehensive report presented to Parliament on Sunday, has drawn attention to the precarious financial condition of state public sector enterprises (SPSEs) in Telangana. The document underscores that a significant majority of these government-run entities are operating at a loss, raising serious concerns about their long-term sustainability and economic contribution.
Telangana's SPSEs: A Troubled Financial Landscape
As of March 31, 2023, Telangana had a total of 18 state public sector enterprises. Out of these, a concerning 11 enterprises were reported to be loss-making, while only six managed to register profits. This stark imbalance indicates that most state-run businesses in Telangana are not financially self-sufficient, failing to meet the objective of operating as commercially viable organizations that can sustain themselves without constant government support.
A National Pattern of Financial Struggle
The commission's analysis reveals that Telangana's situation is not an isolated case but rather reflects a broader national trend. Across various states in India, numerous SPSEs face similar financial challenges, with many either operating at a loss or barely breaking even. This widespread underperformance significantly limits their capacity to reinvest in their operations, increases their dependence on government subsidies and grants, and diminishes their potential contribution to overall economic growth and development.
Inter-State Comparison and Economic Impact
In an inter-state comparison, Telangana finds itself grouped with Goa, Karnataka, Kerala, Punjab, and West Bengal—all states that report a high proportion of loss-making state enterprises. This grouping demonstrates that the financial viability challenge extends beyond Telangana's borders, pointing to systemic issues related to governance, management, and operational efficiency of SPSEs across multiple Indian states.
The economic significance of state public sector enterprises is typically measured through the turnover-to-GSDP ratio, which indicates how much these enterprises contribute to the state's overall economic output. In Telangana, this ratio stood at 7% for the fiscal year 2022-23, representing a moderate level when compared to other states where this metric ranges from negligible to over 10%.
Key Concerns Identified in the Report
The Finance Commission report has identified several critical issues specific to Telangana's SPSEs. These include the continued operation of enterprises that consistently report losses, heavy reliance on budgetary support in the form of subsidies and grants, and the persistence of inactive or non-operational SPSEs that remain officially on the state's books despite not contributing to economic activity.
Collectively, these problems create substantial fiscal pressure on the state government, reduce operational efficiency across the public sector enterprise ecosystem, and add unnecessary administrative costs without delivering proportional public benefits or services to citizens.
The commission's findings highlight the urgent need for comprehensive reforms in how state public sector enterprises are managed, governed, and evaluated across Telangana and similar states facing comparable challenges. The report serves as a crucial document for policymakers seeking to address the structural issues affecting the financial health and operational effectiveness of these important economic entities.
