In Central PSU Turnaround Stories, There’s a Lesson for the States
With the Union Budget only a couple of days away, it is important to trace the evolution of public-sector enterprises over the last decade. With the collapse of economic planning worldwide, PSEs have been in a process of transformation. This has been visible across countries such as China and, most importantly, India in the last decade.
Globally, reforms in PSEs were triggered by the massive influence exerted by the public sector on the economy, requiring better efficiency and delivery of services. Among the many reforms over the years, the listing of enterprises and technology upgrades are prominent; adopting corporate governance standards and taking the lead in low-carbon transitions are more recent developments. As per the OECD, in 2023, the public sector owned over 25 per cent of 2,037 listed companies worldwide, representing 11.6 per cent of total market capitalisation.
The term PSE has wide connotations in India and includes both Central and state PSEs. For our purpose, we will primarily concentrate on Central PSEs, which have undergone a remarkable transformation.
The Policy Framework
In the Indian context, the 2020 New PSE Policy for Atmanirbhar Bharat streamlined PSEs by classifying sectors as strategic or non-strategic. In the non-strategic sectors, the government has minimised presence, while in the strategic sectors (defence, energy, space, etc.) it will maintain a bare minimum presence with one to four PSEs, making room for private-sector participation.
This policy clarity was long overdue. For decades, PSEs operated in a fuzzy zone, neither fully commercial nor entirely strategic. The 2020 policy drew clear lines, allowing enterprises in non-strategic sectors to be privatised or consolidated, while ensuring that strategic sectors retained a public-sector presence without crowding out private players.
The Turnaround in Numbers
During the last decade, CPSEs in India have shown a remarkable turnaround, from policy paralysis and stagnant growth to becoming significant drivers of financial value, higher profitability, and capital expenditure. The listed CPSEs have outpaced broader market indices and the impact of reforms is clearly visible in their finances.
The number of profit-making CPSEs has increased from 157 in FY15 to 227 in FY25, while the number of loss-making CPSEs declined from 77 to 63 during the same period. Consequently, the net profit of profit-making CPSEs stood at Rs 3.09 lakh crore in FY25 as compared to Rs 1.30 lakh crore in FY15, an increase of around 2.4 times.
The total paid-up capital of all CPSEs was Rs 6.87 lakh crore as on March 31, 2025, as against Rs 2.13 lakh crore as on March 31, 2015. The net worth of all CPSEs swelled from Rs 9.85 lakh crore in FY15 to Rs 22.33 lakh crore as on March 31, 2025.
These are not marginal improvements; they are transformational changes. CPSEs have gone from being a drain on the exchequer to significant contributors.
Contribution to the Exchequer
The contribution of all CPSEs to the central exchequer stood at Rs 4.94 lakh crore in FY25 as against Rs 2.00 lakh crore in FY15. Additionally, the total market capitalisation of 66 CPSEs traded on stock exchanges of India was Rs 38.57 lakh crore as on March 31, 2025 — three times larger than the capitalisation as on March 31, 2015.
This wealth creation benefits all citizens. The government’s ownership stake represents public assets that have appreciated substantially. When CPSEs perform well, the entire nation gains.
Investment and Savings
Gross capital formation by non-financial CPSEs has grown by 11.9 per cent and has been a mainstay of investment demand in core sectors. It has been a net saving sector, accounting for 10 per cent of national savings, and has financed gross capital formation internally with minimal exposure to the rest of the world.
In an economy where private investment has been sluggish, CPSE investment has provided crucial support. The multiplier effects ripple through supply chains, creating jobs and demand.
The Banking Turnaround
Among the financial CPSEs, banks have seen phenomenal turnarounds after the twin balance sheet crisis. Following the amalgamation exercise, the financial performance of PSU banks has improved, and the pace of technology adoption has increased.
The profitability of banks has been enhanced significantly with net profits rising from Rs 80,913 crore in FY14 to Rs 4 lakh crore in FY25. PSBs’ profit increased to Rs 1.78 lakh crore in FY25 from Rs 37,019 crore in FY14. The return on assets increased to 1.37 per cent in FY25 from -0.22 per cent in FY18, while return on equity jumped to 14.09 per cent from -2.74 per cent during the same period.
This is a remarkable recovery. Banks that were once burdened with non-performing assets are now profitable and well-capitalised.
Exports and Global Presence
Another remarkable aspect of the PSE reforms has been their growing contribution to exports. CPSEs have achieved notable success in defence, engineering, and commodities exports with defence exports surging to a record high of Rs 23,622 crore in 2024-25.
Following the government decision to allow CPSEs to acquire foreign assets, Indian oil PSUs have established a significant presence globally, with a total of 45 assets spread across 21 countries. They have a cumulative investment of about $40.6 billion.
Indian PSEs are no longer confined to domestic markets; they are becoming global players.
The Green Transition
In terms of the green transition, the contribution of CPSEs has been notable. Let’s take the example of Indian Railways, although not a PSE as per definition. With the successful trial of India’s first hydrogen-powered coach at the Integral Coach Factory in July 2025, Indian Railways may achieve rapid decarbonisation in coming years.
In the last 10 years, Railways has electrified close to 45,000 km of its broad-gauge network, reducing diesel dependence and cutting emissions sharply. The transition is complemented by large-scale renewable integration with 553 MW of solar, 103 MW of wind and 100 MW of hybrid capacity.
The Lesson for States
In the coming decades, CPSEs will continue to face headwinds and challenges as technology evolves and market dynamics change. Growing use of technology will put the focus on the need for digital transformation and the need for new technologies to be adopted.
Furthermore, the positive reform process that has achieved the transformation of CPSEs should move to the state level in the coming years. Greater transparency in PSE operations at the state level can be a catalyst for regional development.
Many state-level PSEs continue to operate in the old mode—opaque, inefficient, and loss-making. The central government’s experience shows that reform is possible, that PSEs can be turned around, and that transparency and professionalism pay dividends. States should learn from this example.
Conclusion: A Model for Reform
The turnaround of Central PSEs is one of the unsung success stories of the past decade. Through policy clarity, professional management, and strategic focus, loss-makers have become profit-makers, and laggards have become leaders.
The challenge now is to sustain this momentum, to adapt to new technologies, and to extend the reform process to the state level. If states can replicate the Centre’s success, the gains for India’s economy could be enormous.
Q&A: Unpacking the PSE Turnaround
Q1: What was the 2020 New PSE Policy for Atmanirbhar Bharat?
The policy classified sectors as strategic or non-strategic. In non-strategic sectors, the government minimised its presence. In strategic sectors (defence, energy, space), it maintains a bare minimum presence with one to four PSEs, leaving room for private participation. This provided long-overdue clarity on the government’s role.
Q2: What do the numbers show about CPSE performance?
Profit-making CPSEs increased from 157 to 227 between FY15 and FY25, while loss-making ones declined from 77 to 63. Net profit rose 2.4 times to Rs 3.09 lakh crore. Net worth swelled from Rs 9.85 lakh crore to Rs 22.33 lakh crore. Market capitalisation tripled to Rs 38.57 lakh crore.
Q3: How have PSU banks performed?
PSU banks have seen a phenomenal turnaround after the twin balance sheet crisis and amalgamation. Net profits rose from Rs 80,913 crore in FY14 to Rs 4 lakh crore in FY25. Return on assets increased from -0.22% to 1.37%, and return on equity from -2.74% to 14.09%. Technology adoption has also accelerated.
Q4: What has been the contribution of CPSEs to exports and global presence?
Defence exports surged to Rs 23,622 crore in 2024-25. Oil PSUs have acquired 45 assets across 21 countries with cumulative investment of about $40.6 billion. CPSEs are becoming global players, not just domestic enterprises.
Q5: What is the lesson for states from the Centre’s experience?
Many state-level PSEs remain opaque, inefficient, and loss-making. The Centre’s experience shows that reform is possible, that PSEs can be turned around, and that transparency and professionalism pay dividends. Extending these reforms to the state level could catalyse regional development and unlock enormous value.
