12/4/2019 Forget exit, government continues to pump good money into loss-making PSUs - cnbctv18.

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Forget exit,
government
continues to
pump good TRENDING ON CNBC-TV18
money into loss-
making PSUs
Updated : February 27, 2019 11:54 PM IST

This government has been pumping more equity

into the loss makers. Market
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almost 10 percent in 2016-17 to a mere 2.3 percent
last fiscal. Auto
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Capital employed by these CPSEs continued its year parking lot? A lesson...
on year rise in 2017-18 despite lower combined
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12/4/2019 Forget exit, government continues to pump good money into loss-making PSUs - cnbctv18.com

W
hy should government
continue to be in the business
of flying, offering telephone
SINDHU
connections or mobile telephony
BHATTACHARYA
services?

Share Several other untenable businesses also

come to mind, but aviation and telecom
take precedence in this argument purely
because the central public sector
enterprises (CPSEs) through which the
government operates in these two
sectors have been bleeding the most.
Modi government's rise to power in
2014 with a strong people’s mandate 
was seen as an enabling factor in
pushing forward with difficult decisions,
such as disinvestment of the perennially
loss making Air India or the telecom
CPSEs. LIVE TV

Five years have passed and the Modi

government’s term is about to end.
Apart from a failed attempt at selling Air
India (AI), it has precious little to show
in terms of exiting loss making public
sector enterprises. In fact, this
government has been pumping more
equity into the loss makers to prop them
up instead of getting out of these RECOMMENDED FOR YOU
companies. There have been frequent Politics

statements from the government about Chidambaram gets bail

in INX Media case after
its serious intent in selling Air India at
100 days in jail
least – it has already restarted the
process with AI’s ground handling arm – Politics

but whether any of these intentions will Citizenship Amendment

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Bill: Union
TALKcabinet
TO US clears
translate into an actual government exit
the key bill...
remains to be seen No such moves
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12/4/2019 Forget exit, government continues to pump good money into loss-making PSUs - cnbctv18.com
remains to be seen. No such moves
have been made for the telecom CPSEs, Market

though. Here's what Nippon India

Mutual Fund would look
at from the...
Why would the government do well to
exit aviation and telecom services? As
per the Public Enterprises Survey for
2017-18, BSNL was the top loss making
CPSE among 339 such companies with
government control, accounting for 25
paise for every rupee of total loss
across these companies in 2017-18. In
fact, BSNL and MTNL (the second
telecom CPSE) together accounted for
35 percent of the total losses posted by
all CPSEs together in FY18. As for
aviation, Air India accounted for another
17 percent of losses. And together,
these three CPSEs (BSNL, MTNL and Air
India) brought in 52 paise of each rupee
of loss for all CPSEs  taken together in
2017-18.

Given these startling loss figures (not to

mention the mountain of debt these
three CPSEs are drowning under), it
stands to reason that the government
would want to exit the business of flying
as well as offering telecom services.
Private players have, over the years,
achieved near complete monopoly in the
two businesses due to better
efficiencies, leaving little room for portly
CPSEs to prosper. Private airlines
account for more than 80% of the
domestic aviation market and private
telecom companies also have a lion’s
share of the mobile telephony pie in
India.

Besides being rendered marginal

players, the CPSEs are also struggling in QUICK SURVEY
TALK TO US
their respective markets because both
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12/4/2019
p
Forget exit, government continues to pump good money into loss-making PSUs - cnbctv18.com

the sectors have not been doing well. So

despite their market dominance, even
private telecom services providers and
private airlines are struggling. This
scenario compels one to ask why the
Modi government has made no serious
attempt to exit these two businesses?

Instead of making any move to exit, the

Modi government has in fact been
pouring money into these loss makers.

In the latest such move, it

may spend a whopping Rs
8500 crore to offer a
Voluntary Retirement
Scheme (VRS) to the
employees of BSNL and
MTNL.

This comes on the back of continued

financial assistance to Air India – in
four years till 2017-18, the Modi
government provided upwards of Rs
13,000 crore as equity support to the
airline. These two replies in Lok Sabha
show the equity support provided
between 2014-15 and 2017-18.

And in all, the ailing Air India has been

provided upwards of Rs 27,000 crore in
equity support since 2012 under a UPA
II mandated turnaround plan. Neither Air
India nor the telecom CPSEs have
posted a net profit in these five years
and all the three companies have
continuously sought government aid to
even pay salaries to staff!

As for MTNL and BSNL, besides mulling

over a mega VRS plan with significant QUICK SURVEY
cost implications, the government is TALK TO US

l l i t ll t 4G t t
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12/4/2019 Forget exit, government continues to pump good money into loss-making PSUs - cnbctv18.com
also planning to allocate 4G spectrum to
the two firms. Had this spectrum been
auctioned to private players, the
government could have earned upwards
of Rs 12,000 crore. So the two telecom
CPSEs are being offered free spectrum,
money to get rid of excess staff and
other carrots by a government
determined to keep funding the
inefficiencies of public sector
enterprises.

Instead of getting out of loss making

CPSEs, the country is actually adding to
their number. The total number of
CPSEs increased in 2017-18 over the
previous year, by adding eight such
companies to the list. India had 339
CPSEs till March last year, engaged in
various activities including agriculture,
mining and exploration, manufacturing
and processing and even in the service
sector.

The contribution of CPSEs to the central

Exchequer by way of excise duty,
customs duty, corporate tax, interest on
central government loans, dividend and
other duties and taxes was Rs 3,50,052
crore, which was a Rs 10,800 crore
decline over 2016-17. Also, the
aggregate profit growth of CPSEs fell
from almost 10 percent in 2016-17 to a
mere 2.3 percent last fiscal.  And three,
the capital employed by these CPSEs
continued its year on year rise in 2017-
18 despite lower combined profitability
growth and a massive decline in their
contribution to the exchequer. The PSE
Survey quoted earlier showed that the
capital employed by the CPSEs
QUICK SURVEY
increased by Rs 1,36,000 crore in a TALK TO US
single year to Rs 22 73 969 crore (Rs
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12/4/2019 Forget exit, government continues to pump good money into loss-making PSUs - cnbctv18.com
single year to Rs 22,73,969 crore (Rs
21,38,069 crore). Capital employed
means the money pumped in majorly
from the government (since CPSEs are
at least 51% percent government
owned) and this means more of the
taxpayers’ money was used up for
CPSEs last fiscal than the previous
years.

So in effect, the number of CPSEs

jumped, their profitability growth
declined and their contribution to the
exchequer also fell but the capital
employed rose in 2017-18. This can only
be bad news going forward.

Sindhu Bhattacharya is a journalist

based in Delhi who writes on a range of
topics in business and economy.

Tags Air India BSNL CPSE losses

CPSEs Divestment

Modi government MTNL Views

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