Study On Impact Of Environmental Change On Selected Public Sector Enterprises In India

Government policy measures adopted by many developing countries to reform the public sector enterprise performances can be classified into two broad categories in terms of decision criteria taken into consideration. The first category of reform primarily focuses on distancing the government from ownership change and control issues of these enterprises. Partial privatization or divestment falls in this category of change reform mechanism. The second category aims at improving the environmental change aspects in which these enterprises operate and function. One such reform is delegation of operational and functional autonomy to managers of publicly owned enterprises through performance contracts and reviews. Empirical evidence on the gains of privatization versus benefits of autonomy delegation from the developing countries that have undertaken these reforms in the past are yet inconclusive. The present study of India spanning over two decades of panel data with a decade of data for evaluating the post reform performance of the centrally owned enterprises, provides evidence of significant positive impact of autonomy delegation to public enterprise management on firms profitability. The study, however, does not find any evidence of significant impact of partial privatization and divestment. Further the study also finds significant impact of environmental reforms of hard-budget constraint and deregulation of sectors earlier under government domain to private participants on the profitability performance of the public enterprises in India.