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Statsguru: Value erosion in PSUs can Restrict govt’s disinvestment Goal


While announcing the financial package to take care of the effect of Covid-19, Finance Minister Nirmala Sitharaman had stated that the government would formulate a new policy for public sector undertakings (PSUs).


All industries will be opened for private companies and PSUs will be privatised in non-strategic businesses. This won’t only aid in improving efficiency in the machine but also raise resources for your authorities. The government has budgeted to increase more than two trillion through disinvestment in the present financial year (graph 1). Especially, PSUs have enhanced their dividend payment at the previous couple of decades.


On the other hand, the data demonstrates that recent improvements in PSUs can restrict the value the authorities can expect to increase. In FY20, the largest chunk of disinvestment inflow arrived by selling stakes in PSUs through exchange-traded funds (ETFs), as shown in graph 2. Additionally, the operation of PSUs has been feeble on the marketplace.


The BSE PSU index has dropped more sharply compared to BSE Sensex in the previous two years (graph 3). The drop in stock prices has generated significant value in a few of the biggest PSUs, which will restrict receipts to the authorities (graph 4). 1 obvious reason for this might be the bad fiscal performance of PSUs: Their earnings and gains have come down considerably in recent times (graph 5).


There are a few sectors where earnings functionality of PSUs has been better than private businesses, like the electricity sector (graph 6). However, the situation differs from the refinery business.



StatsGuru is a weekly feature. Each Monday, Business Standard guides you through the amounts you Want to know to Create sense of the Article Source: Capitaline, BS Research Bureau

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