The Union Budget 2026-27, presented by Finance Minister Nirmala Sitharaman, signals an intensified push to close or privatize “dead” and loss-making Public Sector Undertakings (PSUs) to reduce fiscal strain on the government.
According to media reports, it was based on the 16th Finance Commission’s report that has recommended the immediate closure of inactive public sector enterprises (PSEs) to reduce fiscal strain on central and state governments while emphasizing the need for the deployment of their valuable land and buildings to alternative uses.
The panel has remarked in its report that its detailed review of central and state PSEs revealed considerable scope for reforming them to enhance their contribution to economic growth.
While shedding light on the New Public Sector Enterprise Policy, adopted in Feb 2021, the commission has also revealed in its report that the new policy commits to closing or privatising central PSEs (CPSEs) in nonstrategic sectors. The panel report says that while the closure of loss-making enterprises has gathered speed, action on privatisation is yet to take off the way it should have.
The report further adds that based on the experience of CPSEs privatised from 1999 to 2004, significant efficiency gains can be reaped through the privatisation of CPSEs and SPSEs in non-strategic sectors.
The panel headed by noted economist Arvind Panagariya cited the Public Enterprise Survey 2023-24 to share the details that there are 17 CPSEs under liquidation, 24 approved for closure by the government, and 31 nonoperational as of Mar 31, 2024. “Altogether, assets of 72 CPSEs have been unproductive,” the commission disclosed, as per reports.
The panel’s report highlights a similar problem in states, saying that 308 of a total of 1,635 state PSEs (SPSEs) have ceased operations.
According to its report, almost one-third of CAG-audited CPSEs incurred losses ranging from Rs 36,213 crore to Rs 51,419 in each of the last four years. In states, 489 of 1,055 SPSEs incurred losses totalling Rs 1.14 lakh crore in 2022-23.
The report stressed the need for the concerned department to mandatorily take to the Cabinet any enterprise incurring losses in three out of four consecutive years for consideration for closure, privatisation or continuation, as reported by media.
In this way, the government will be actively fast-tracking the closure of permanently closed or unproductive entities in the days to come.
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