Thread by @tycoonmindset05

#economicsurvey2020 : Chapter 9

This chapter, examines the realized efficiency gains from privatization in the Indian context. The analysis shows that these privatized CPSEs (Centralized Public Sector Enterprise), on an average, perform better post privatization.

@PIB_India

Introduction
In November 2019, India launched its biggest privatization drive in more than a decade. Among the selected CPSEs, strategic disinvestment of Government’s shareholding of 53.29% in #bpcl was approved. See the effect on the price of BPCL after the news of disinvestment

1). To assess the impact of strategic disinvestment / privatization on performance of selected CPSEs before and after privatization, 11 are studied, that had undergone strategic disinvestment from 1999-00 to 2003-04 for which data is available both before and after #privatization

Comparison of Financial Indicators of Privatized vis-à-vis Peers:
2). On an average, the net worth of privatized firms increased from 700 crore before privatization to 2992 crore after privatization, signalling significant improvement in financial health and wealth creation.

On an average, the net profit of privatized firms increased from 100 cr before privatization to 555 cr after privatization compared to the peer firms. While, the gross revenue of privatized firms increased from 1560 cr before privatization to 4653 cr after privatization.

On an average, ROA for the privatized firms have turned around from (-)1.04% to 2.27% surpassing the peer firms. While the ROE of privatized firms increased from 9.6% before privatization to 18.3% after privatization, reflecting increase in firm’s efficiency at generating profits

On an average, growth rate of sales of privatized firms increased from 14.7% before privatization to 22.3% after privatization. On an average, the NP margin of privatized firms increased from (-3.24)% before privatization to 0.65% after privatization.

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3). The trend in the performance of the privatized CPSEs, on an average, as compared to their peers over the period of ten years before and after the year of privatization of the specific CPSE.

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4). There are about 264 CPSEs under 38 different Ministries / Departments. Of these, 13 Ministries have around 10 CPSEs each under its jurisdiction. However CPSE have underperformed a lot under the management of government, hence privatization will work well for the companies.

Conclusion:
Aggressive #disinvestment should be undertaken to bring in higher profitability, promote efficiency, increase competitiveness and to promote professionalism in management in the selected CPSEs for which the Cabinet has given in-principle approval.

#BudgetSession2020