The Path Back from the Brink: Modi Government Has Improved the Performance of State-Owned Companies


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The Path Back from the Brink: Modi Government Has Improved the Performance of State-Owned Companies Blog Image

Why in News?

  • In any democracy, a competent opposition is crucial for fixing accountability and ensuring balanced governance but the absence of a capable opposition can hinder the democratic process, leading to baseless accusations and ineffective critiques.
  • Prime Minister Narendra Modi's government has faced such challenges, particularly regarding its management of public sector enterprises (PSEs).
  • Therefore, it is important to analyse the performance of PSEs under the Modi administration, contrasting it with the past, and highlights the government's strategic approach towards their transformation.

A Comprehensive Analysis of PSEs Under the Modi Government

  • Oil and Gas Sector
    • Oil India Ltd, a prominent upstream oil company, reported its highest-ever crude and natural gas production.
    • Similarly, Indian Oil Corporation Limited (IOCL) capped an exceptional year with historically high refinery throughput, sales volume, and net profit.
    • These achievements not only underscore the efficiency and productivity of these enterprises but also contribute significantly to India's energy security.
  • Energy Generation
    • Furthermore, Bharat Petroleum Corporation Limited (BPCL) reported its highest-ever profit for the first nine months of any fiscal year, showcasing the company's resilience and adaptability in a competitive market.
    • Coal India, another key player in the energy sector, recorded its highest-ever production, underscoring the government's focus on maximising domestic coal production to meet growing demand.
  • Financial Sector
    • One of the most notable achievements of the Modi government has been the revitalisation of the banking sector, particularly public sector banks (PSBs).
    • Inherited with a legacy of non-performing assets (NPAs) from previous administrations, PSBs were on the brink of a crisis.
    • However, decisive government intervention, coupled with structural reforms, has turned the tide.
    • PSBs reported their highest-ever profits and lowest-ever NPAs in the fiscal year 2022-23, signalling a turnaround in their financial health.
    • The government's emphasis on transparency, accountability, and prudent risk management has instilled confidence in the banking sector and restored investor trust.
  • Infrastructure Development and Expansion
    • In addition to the energy sector, PSEs have played a pivotal role in driving infrastructure development across the country.
    • National Thermal Power Corporation (NTPC) set a new record for the highest-ever electricity generation in a year, bolstering India's power infrastructure and ensuring reliable electricity supply to industries and households.
    • Moreover, the government's emphasis on strategic infrastructure projects has led to significant investments in sectors such as railways, highways, and ports.
    • PSEs like Indian Railways and Ports have undertaken ambitious expansion plans, leveraging their expertise and resources to modernise and enhance infrastructure capacity.

Significant Differences in Approach and Outcomes Between the Current Government and its Predecessors

  • UPA Era Mismanagement
    • During the UPA regime, PSEs were often treated as personal fiefdoms of those in power, leading to rampant corruption, inefficiency, and stagnation.
    • PSEs, including Indian Railways and other key sectors, were plagued by systemic issues such as bureaucratic red tape, political interference, and lack of accountability.
    • This resulted in suboptimal performance, missed targets, and a general decline in the public sector's contribution to the economy.
  • Corruption and Cronyism During Past Administrations
    • The UPA era was marred by numerous corruption scandals, including the infamous "2G scam," "Coalgate," and "Commonwealth Games scam."
    • These scandals not only tarnished the reputation of PSEs but also eroded public trust in the government's ability to manage public resources effectively.
    • The nexus between politicians, bureaucrats, and corporate interests further undermined the integrity and efficiency of PSEs, hindering their ability to fulfil their mandate of serving the public interest.
  • Policy Paralysis and Inefficiency
    • Under the UPA regime, policy paralysis and bureaucratic inertia stifled innovation and growth in the public sector.
    • Projects were delayed or shelved due to indecision and administrative bottlenecks, resulting in missed opportunities for economic development and job creation.
    • PSEs were often burdened with unviable projects and excessive government interference, impeding their ability to compete in a rapidly changing global market.
  • Modi Government's Transformative Reforms
    • In contrast, the Modi government has pursued a comprehensive agenda of reform and restructuring aimed at revitalising the public sector and enhancing its competitiveness.
    • The government's approach has been characterised by a combination of strategic vision, bold decision-making, and emphasis on transparency and accountability.
  • Decisive Leadership and Accountability
    • Prime Minister Modi's leadership has brought a renewed focus on accountability and performance in the public sector.
    • The government has introduced measures to streamline decision-making processes, reduce bureaucratic red tape, and hold PSEs accountable for their performance.
    • This has created a culture of responsibility and efficiency, driving improved outcomes across various sectors.
  • Proactive Governance and Strategic Initiatives
    • The Modi government has implemented a series of strategic initiatives to modernise and strengthen PSEs, including divestment, strategic partnerships, and investment in critical infrastructure.
    • These initiatives have unlocked new growth opportunities, enhanced operational efficiency, and positioned PSEs for long-term success in a competitive global environment.

Divestment Strategy Pursued by the Modi Government

  • Air India Privatisation
    • Air India, despite its storied history, had become a loss-making entity requiring substantial government subsidies to sustain operations.
    • Recognising the need for structural reform in the aviation sector, the government opted for privatisation as the most viable solution.
    • By divesting its stake in Air India, the government aimed to inject flexibility and efficiency into the airline's operations, enabling it to compete more effectively in a fiercely competitive industry.
    • Post-privatisation, Air India has initiated ambitious plans for fleet expansion, signalling a renewed focus on growth and profitability.
  • Retaining Stake in BPCL
    • In contrast to Air India, the government decided to retain its stake in Bharat Petroleum Corporation Ltd (BPCL), citing its strategic importance in sectors such as fuel retailing and energy transition.
    • BPCL's extensive network of fuel retail outlets, along with its expertise in areas like ethanol blending and carbon emissions reduction, aligns closely with the government's long-term energy objectives.
    • By retaining control over BPCL, the government ensures continued influence over critical sectors while leveraging the company's capabilities to drive national priorities such as sustainability and energy security.
  • Strategic Considerations
    • The decision-making process regarding divestment involves a careful assessment of strategic considerations beyond immediate financial gain.
    • Factors such as sectoral importance, market dynamics, and long-term implications are meticulously evaluated to determine the optimal course of action.
    • By adopting a strategic approach to divestment, the government seeks to strike a balance between fiscal objectives and broader national interests, ensuring that divestment decisions align with the country's development goals and priorities.


  • The stewardship of PSEs under Prime Minister Modi's leadership signifies a new era of governance characterised by proactive reforms, effective management, and a vision for national development.

Despite accusations from the opposition, the government's strategic interventions have enabled PSEs to emerge as key drivers of India's growth story, paving the way for a brighter and more prosperous future for all citizens.

Q) What are some key objectives of Indian Public Sector Enterprises (PSEs)?

Indian Public Sector Enterprises (PSEs) play a crucial role in the country's economic development. PSEs contribute significantly to India's Gross Domestic Product (GDP) through their operations in various sectors like manufacturing, infrastructure, energy, and services. One of the primary goals of PSEs is to create employment opportunities across different regions of the country, thereby contributing to poverty alleviation and social welfare.

Q) What are some challenges faced by Indian Public Sector Enterprises (PSEs)?

Despite their significant contributions, Indian Public Sector Enterprises (PSEs) encounter various challenges. PSEs often face bureaucratic red tape and procedural delays, which can hinder decision-making processes and operational efficiency. Many PSEs struggle with financial inefficiency, including issues related to overstaffing, low productivity, and cost overruns, leading to losses and decreased competitiveness. Some PSEs lag behind in technology adoption and innovation, making them less competitive in rapidly evolving markets

Source:The Indian Express