What has been the trend in CPSE closures? Here's what data shows

Total number of CPSEs has not been trending down

The government has put out a new policy on central public sector enterprises (CPSEs). It says that closure would happen within seven months of approval from the cabinet or the cabinet committee on economic affairs. This applies to public sector companies in the non-strategic sector. Strategic sectors include segments like atomic energy and defence.

“Only a bare minimum presence of CPSEs in the aforesaid Strategic Sector is to be maintained,” said the note dated December 13.

There has been an increasing number of public sector companies under closure or liquidation, shows data from the Public Enterprises Survey. The number rose from two in 2016-17 to 14 in 2019-20.

It is not surprising therefore to see a drop in operational CPSEs as a share of total CPSEs.  Around 77 per cent of CPSEs were operational ones as of 2016-17. These are companies which report some operational income.  The proportion of such CPSEs has dropped to 69.9 per cent as of 2019-20. A closer look at the numbers shows that the absolute number has not changed by much. It has actually increased from 255 in 2016-17 to 256 in 2019-20. The increase has therefore been driven not by a drop in operational CPSE numbers, but by the total number of CPSEs in existence.

There were only five CPSEs in 1951. This had risen to 260 by 2011-12 and 331 by 2016-17. The four years between 2016-17 and 2019-20 has seen the addition of 35 to the total count. This means that a new CPSE was added almost every month on average in this period. This has taken the number of CPSEs to 366 as of 2019-20.

The newer CPSEs account for an increasing share of the total number. They accounted for 22.4% by number in 2016-17. This has risen to 26.2 per cent by 2019-20. The corollary of the rising number of under construction CPSEs is that there have been more new ones established than old ones closed down. A number of them appear to be subsidiaries of existing ones or those set up for a specific project.

The under construction ones include the Delhi-based India International Convention and Exhibition Centre, Indian Space Research Organisation (ISRO) commercial arm NewSpace India and Jharkhand-based Deoghar Airport.

This comes even as the profitability of CPSEs has been under pressure. The turnover of all CPSEs was Rs.12.4 trillion in 2009-10. This rose to Rs 24.6 trillion as of 2019-20. This 98.4 per cent increase in turnover has not been accompanied by a commensurate increase in profits. Profits have remained between Rs.1-1.4 trillion during the same period.