Financing of Public Enterprises

Public enterprises in India are typically financed through a combination of internal and external sources.

Public enterprises in India are typically financed through a combination of equity capital, debt financing, retained earnings, government grants and subsidies, and internal resources. The Ministry of Heavy Industries and Public Enterprises publishes annual reports that provide detailed information on the financing of public sector enterprises in India.

Sources of financing for public enterprises in India:

• Equity capital: Public enterprises may issue equity shares to raise capital. These shares may be subscribed by the government, institutional investors, or the public.
• Debt financing: Public enterprises may also raise funds through debt financing, such as issuing bonds or taking out loans from banks or financial institutions.
• Retained earnings: Public enterprises may use their retained earnings, which are profits that are not distributed to shareholders as dividends, to fund capital expenditure or other investments.
• Government grants: Public enterprises may receive grants from the government to finance specific projects or to support their operations.
• Subsidies: Public enterprises may receive subsidies from the government to support their operations, especially in sectors where prices are regulated or where the enterprise provides essential services.
• Internal resources: Public enterprises may use their own internal resources, such as cash reserves or assets, to fund their operations or investments.

In terms of data, the Ministry of Heavy Industries and Public Enterprises publishes annual reports on the performance of public sector enterprises, which includes information on their financing. According to the latest report for the year 2019-20, the total investment in all public sector enterprises was Rs. 20.52 lakh crore, with equity capital accounting for Rs. 2.48 lakh crore and long-term loans and borrowings accounting for Rs. 8.82 lakh crore. The report also includes data on the financial performance of individual enterprises, including their revenue, profit, and debt-to-equity ratio.

In addition to these sources of financing, public enterprises may also receive funding from external sources, such as multilateral development banks or foreign investors. However, the government of India typically retains a controlling stake in public enterprises, which limits the extent to which they can be financed through external sources.

Here is a table showing the total investment in public sector enterprises in India from 2010-11 to 2019-20, according to the annual reports published by the Ministry of Heavy Industries and Public Enterprises: