PSU: Dancing to official tunes

SECTOR IN THE NEWS

The PSU index dropped 1.68 per cent on the BSE after the government approved the Sixth Pay Commission recommendations, giving a salary hike bonanza to the government employees. Fifteen public sector companies, excluding banks, have already made a provision of Rs 2,600 crore in staff costs as per the suggestion of the sixth Pay Commission.

The aggregate net profits of PSU companies have declined by 4 per cent to Rs 11,900 crore (Rs 12,397 crore) due to higher staff costs. If one excludes the provision for staff costs, the net profits of government owned companies rose significantly by 17 per cent at Rs 14,500 crore.
 

Company	Aug 14, ’08	Chg (%)*
HPCL	223.10	-6.44
Power Finance	130.35	-6.01
RCF	66.95	-5.49
BHEL	1707.50	-4.47
STC	271.15	-4.41
MRPL	67.15	-3.38
Neyveli Lignite	117.90	-3.20
National Alum	392.60	-2.75
Indian Oil	440.55	-2.64
NTPC	181.65	-2.55
*change over previous close

The total staff costs of the fifteen companies increased by 58 per cent to Rs 6,932 crore in the June 2008 quarter from Rs 4,399 crore in the same quarter last year. The Sixth Pay Commission had submitted its report to the government in March 2008, recommending an average 28 per cent hike for central government staff and defence personnel.

This salary hike would increase the administrative expenses of the PSU companies. The BSE PSU index had jumped recently on hopes that the government will kickstart the PSU divestment process after winning the trust vote in Parliament on July 22.

The BSE PSU index has risen by 22.78 per cent from a low of 5,752.70 made on July 16. It has outperformed the market over the past one month till August 13, gaining 20.38 per cent compared to the Sensex’s returns of 12.05 per cent. It had also outperformed the market in the past one quarter, declining 6.86 per cent compared to Sensex’s decline of 9.91 per cent.