Modi govt reduced political interference in PSUs. It’s how they became wealth creators

PSUs were generally considered a drain on government resources. However, things have changed dramatically under the Modi Government. This is evident from several metrics.

PM Modi at the inauguration of an HAL manufacturing facility in 2023 | representational image | ANI

India’s achievements in various fields over the last 11 years of the Modi Government are being rightly highlighted and celebrated. It fills Indian citizens with pride and generates hope about an even better future that awaits them. One of the areas for which the government deserves special accolades is the performance and revival of public sector undertakings. Public sector units were generally considered a drain on government resources. They were labelled lethargic and inefficient organisations that could survive only as a monopoly or through government patronage in various forms, such as allocation of contracts without competitive bidding, direct and indirect subsidies, implicit sovereign guarantee on their borrowings, etc. They were seen as destroyers of public wealth. However, things have changed dramatically under the Modi Government. This is evident from several metrics.

Gross revenue from operations of PSUs has increased from Rs 20.67 lakh crore in 2013-14 to Rs 37.89 lakh crore in 2022-23, and the overall net profit has increased from Rs 1.28 lakh crore to Rs 2.12 lakh crore during the same period. The total paid-up capital of all PSUs was Rs 1.98 lakh crore in 2013-14 and had increased to Rs 5.04 lakh crore in 2022-23. The jump in investment (equity plus long-term loans) is even more impressive—it has skyrocketed from Rs 9.92 lakh crore in 2013-14 to Rs 25.34 lakh crore in 2022-23. The contribution of PSUs to the exchequer in the form of taxes and dividends has increased from Rs 2.20 lakh crore to Rs 4.58 lakh crore in the same period. These figures have been presented by the Ministry of Heavy Industries and Public Enterprises and the Ministry of Finance. They are not only performing well and contributing to the government exchequer but are also matching the government’s push in infrastructure investment with their own Capex of more than Rs 10 lakh crore annually, propelling India’s economic growth.

One sector that has seen massive transformation is defence manufacturing. This area was a virtual monopoly of PSUs and Ordnance Factory Board (OFB). They had a captive buyer in the form of Indian defence and paramilitary forces for their low-value and low-tech products, whereas more sophisticated products were imported from all over the world. The Modi Government nudged the armed forces to procure hi-tech platforms from domestic producers without compromising on their operational ability. The armed forces responded positively, and the defence PSUs have been a great beneficiary of this push. According to the defence ministry, 65 per cent of defence equipment is now manufactured domestically, a significant shift from the earlier 65-70 per cent import dependency. In the fiscal year 2023-24, defence public sector undertakings and other PSUs contributed approximately 79.2 per cent of the total production value, while the private sector contributed 20.8 per cent. Restructuring and corporatisation of Ordnance Factory Board into seven PSUs was a major reform that involved using political capital.

PSUs have also become vehicles for strategic investments to meet India’s long-term developmental goals. The massive investment in energy transition is primarily driven by the PSUs, be it NTPC, BPCL or NHPC, which are pouring billions of dollars in solar energy, green hydrogen and the planned nuclear energy projects based on small modular reactors. They are also making foreign investments to plug vulnerabilities in the supply chain of rare earth materials that are critical for India’s growth.

Journey to wealth creation

The performance of public sector banks (PSBs) under the Modi Government deserves a special mention. Keen followers of Indian business and finance may still clearly recall that the first term of the Modi government had inherited an economy beset with a twin balance sheet problem. Massive equity infusion and governance reforms by the government led to a revival of the PSBs. Government-owned banks right now have growing loan books and an extremely healthy capital position. Their balance sheet is healthy with strong profitability and improved asset quality, and lower Non-Performing Assets. The gross NPA has reduced from 4.6 per cent in March 2015 to 2.6 per cent in September 2024, and the net NPA has reduced from 2.5 per cent to 0.6 per cent during the same period, according to the RBI’s Financial Stability Report. Business per employee (BPE) of PSBs, an indicator of operational efficiency and cost rationalisation, has been increasing steadily. Annual reports of banks show State Bank of India’s BPE has increased to Rs 13.23 crore, Punjab National Bank to Rs 26.86 crore, and Bank of Baroda to Rs 32.53 crore in the year 2024-25.

The change in the performance of the PSUs has been recognised by the stock market. They have now become wealth creators. There was a time in the not-so-distant past when the public sectors traded at a massive discount to the wider markets, having a low Price to Earnings ratio, just because of government ownership. It’s exactly the opposite now, PSUs now trade at a premium to their private sector peers.

What has led to this transformation in the performance of PSUs under the Modi Government? The government has given PSUs much more autonomy in their business and operational matters, and political interference has been eliminated. The appointments at the top management level are merit-based, and there is zero tolerance for corruption. The government’s approach to disinvestment is not dogmatic either. The disinvestment philosophy has been replaced with value creation and maximisation. There are a few loss-making PSUs on the disinvestment radar of the Government, but the goals are strategic and not revenue alone.

Indian citizens now realise that economic growth is never an automatic byproduct of enabling factors. Rather, it is a result of conscious actions of the government that takes vital decisions and then monitors and responds to challenges that emerge along the way. The performance of the public sector in the last 11 years shows the competence of the Modi Government in putting public resources to optimal use, and this fact must be applauded.

Gopal Krishna Agarwal is the National Spokesperson of BJP. Views are personal. 

(Edited by Theres Sudeep)