Industry- Public Sector Undertakings

Public Sector Undertakings (PSU), both at the Central and State level, have played an important role in the industrialisation and the overall development of the country. They have been set up with the objective to help the country achieve self-sufficiency in manufacturing and technology. As on 31 March, 2016, there were 320 Central Public Sector Undertakings under the administrative control of various ministries/departments in India. Out of these, only 244 are in operation. In 2015-16, the combined profit of 165 Central PSUs was 1,400 billion while there were 78 sick Central PSUs, generating a combined loss of 287.5 billion.

Central Sector Investment

The aggregate real investment in Central PSUs in India, measured in terms of ‘gross blocks’, increased from 19,069.3 billion in 2014-15 to 20,263.2 billion in 2015-16, a growth of 6.3 per cent over the previous year. The investment in Central PSUs in Kerala in terms of gross block grew 14 per cent from 380.2 billion in 2014-15 to 433.5 billion in 2015-16. The State’s share in total investment by Central PSUs increased from 2 per cent in 2014-15 to 2.1 per cent in 2015-16 (Public Enterprises Survey 2015-16). Among Indian States, Maharashtra was ranked first with respect to shares in investment by Central Public Sector Undertakings (with a share of 8.8 per cent) followed by Uttar Pradesh (share of 6.4 per cent), Tamil Nadu (6.1 per cent) and Orissa (6.1 per cent). Details of Central Sector investment in Kerala from 2012-13 to 2015-16 are given in Appendix 3.1.5 and Central Sector investment in selected States as on 31st March, 2016 are given in Appendix 3.1.6.

Kerala’s share in investment Central PSUs from 2012-13 to 2015-16 is exhibited in Figure 3.1.3. It may be seen that the share of Kerala has declined in 2013-14 and started increasing thereafter.

Figure 3.1.3
Share of Kerala in investment by Central PSUs, in per cent
Source: Public Enterprises Survey 2015-16

State Public Sector Undertakings

In Kerala, State Public Sector Undertakings play a crucial role in the development of the economy, especially in the manufacturing sector. PSUs consist of State Government companies and Statutory Corporations established to carry out activities of commercial nature. As per the report of the Comptroller and Auditor General of India on Public Sector Undertakings in Kerala, there were 128 Public Sector Undertakings as on 31 March 2016. Out of the 128 Government companies, 113 (109 Government Companies and 4 Statutory Corporations) are currently working while 15 are non-working PSUs. The working PSUs in Kerala registered a combined turnover of 198.7 billion (which is equivalent to 3.4 per cent of State’s GSDP). The working PSUs had accumulated a loss of 3,136.8 crore and the total investment as on 31 March 2016 in 128 PSUs was 19,786.9 crore. An analysis of the latest finalised accounts of all working PSUs in the State revealed that the total profit of 50 PSUs was 395.5 crore whereas the total loss of 56 PSUs was 10,19.3 crore. Three working PSUs had no profit or loss.

State Public Sector Undertakings under Industries Department

Under the Industries Department, Government of Kerala, there are 40 PSUs, of which 7 are in chemical sector, 4 in electrical sector, 6 in engineering sector, 3 in electronic sector, 8 in textile sector, 2 in ceramic sector, 6 in traditional sector, 1 in wood based sector and 3 in development sector. Performance trend of 40 State PSUs from 2012-13 to 2016-17 is depicted in Figure 3.1.4.

Figure 3.1.4
Performance Trend of Public Sector Undertakings under Industries Department*
Source: Public Sector Restructuring and Internal Audit Board. *Excluding KINFRA

The combined value of production and turnover of 40 State PSUs under the Industries Department from 2012-13 to 2016-17 are shown in Figure 3.1.5.

Figure 3.1.5
Value of Production and Turnover of State PSUs under Industries Department, Government of Kerala*
Source: Public Sector Restructuring and Internal Audit Board. *Excluding KINFRA

It may be seen that there has been no significant changes in the total turnover and total value of production of these State PSUs for the last five years. The combined net profit made by all 40 State PSUs under the Industries Department was 110.41 crore in 2012-13. However, from 2013-14 onwards, the combined net profits of these State PSUs has been negative. It was (-)131.9 crore in 2015-16 and (-)80.7 crore in 2016-17. The performance of State PSUs under Industries Department during the last 5 years is given in Appendix 3.1.7.

The trend of net profit/loss made by State PSUs during the last five years is shown in Figure 3.1.6.

Figure 3.1.6
Net Profit/Loss of State PSUs Under Industries Department

Erosion of working capital, lack of timely up-gradation of technology, limited product diversification, inability to cope up with the changing market demand, increase in cost of production, tough competition from other firms, competition from cheap imports and mounting financial liabilities (including statutory payouts) have adversely affected the performance of State PSUs. The sector-wise financial performance of State PSUs under Industries Department during the Twelfth Five-Year Plan is shown in Table 3.1.3.

Table 3.1.3
Financial Performance of State PSUs Under Industries Department
Items 2012-13 2013-14 2014-15 2015-16 2016-17
Total Units (Nos) 7 7 7 7 7
Plan fund allocation, in crore 5.5 9.4 22.0 10.0 19.7
Turnover, in crore 1132.9 1216.7 1123.1 1191.5 1324.5
Net profit, in crore 106.1 19.3 -43.7 12.9 44.2
Total Units 8 8 8 8 8
Plan fund allocation, in crore 27.6 47.1 24.6 38.1 42.3
Turnover, in crore 167.3 149.5 139.2 96.3 82.2
Net profit, incrores -23.1 -46.8 -58.6 -72.2 -71.1
Total Units 6 6 6 6 6
Plan fund allocation, in crore 35.1 20.5 13.7 9.0 24.9
Turnover, in crore 135.0 132.7 131.4 121.5 118.3
Net profit, in crore -14.9 -18.3 -19.9 -34.2 -23.0
Total Units 3 3 3 3 3
Plan fund allocation, in crore 6.2 11.3 7.0 2.2 5.00
Turnover, in crore 379.5 381.0 368.5 483.9 450.6
Net profit, in crore 4.6 2.8 2.5 0.6 2.4
Total Units 4 4 4 4 4
Plan fund allocation, in crore 23.1 18.8 14.0 18.5 15.5
Turnover, in crore 262.7 380.0 360.7 398.6 420.2
Net profit, in crore -17.2 -9.2 -46.3 -47.2 -15.3
Traditional and wood based
Total Units 7 7 7 7 7
Plan fund allocation, in crore 12.3 6.5 7.6 2.4 4.9
Turnover, in crore 91.4 86.8 97.3 102.7 90.95
Net profit, in crore -10.0 -14.1 -15.1 -20.2 -19.0
Total Units 2 2 2 2 2
Plan fund allocation, in crore 6.0 8.6 2.0 7.6 5.1
Turnover, in crore 9.4 12.3 15.2 5.5 4.1
Net profit, in crore -3.8 -3.5 -3.5 -11.1 -9.7
Total Units 3 3 3 3 3
Plan fund allocation, in crore 0.0 0.0 0.0 10.71 5.50
Turnover, in crore 321.2 401.5 432.2 393.0 231.8
Net profit, in crore 68.6 45.3 34.7 38.5 10.2
Source: RIAB

PSUs under chemical and electronic sectors contributed to the better performance of PSUs in the industry sector in 2016-17. At the same time, PSUs in the textile sector recorded large losses, pulling down the overall performance of PSUs. The total value of production in the 40 State PSUs under the Industries Department fell from 2444.4 crore in 2015-16 to 2,421.2 crore in 2016-17, registering a fall of 0.9 per cent. Turnover of these State PSUs also declined 2.4 per cent in 2016-17 over the previous year. Details of PSU-wise turnover and profit/loss from 2012-13 to 2016-17 and 2017-18 (as on 30th August, 2017) are shown in Appendix 3.1.8.

The increased dependency on budgetary support even for continuing regular operations of PSUs was a major concern during the Twelfth Five-Year Plan. However, from the last year of the Twelfth Five-Year Plan (2016-17) onwards, major initiatives for strengthening and revamping of PSUs under the Industries Department are being undertaken. Five units namely Travancore Titanium Products Ltd., Travancore Cochin Chemicals Ltd., Traco Cable Company Ltd., Steel Industrial Forgings Ltd. and Transformers and Electricals Kerala Ltd. have seen a turn around in 2016-17. But in 2017-18, PSUs under Industries Department have made remarkable achievements. The combined net profit made by all 40 State PSUs as on 30th August, 2017 was 21.5 crore. It is notable that these PSUs have registered positive combined net profit after incurring net combined losses for 4 years. An amount of 270 crore was allocated in the State budget for 2017-18 specifically for various projects as part of capacity enhancement and also to meet some of the working capital needs. Steps have also been taken to formulate action plans to optimize the operation in all units through capacity augmentation and introduction of new products. Details of modernisation/expansion projects of Public Sector Undertakings, being implemented in 2017-18 are shown in Appendix 3.1.9.

Box 3.1.2
Encouraging Trends in Public Sector Undertaking’s Performance

State PSUs under the Industries department have been showing sign of improvement from 2016-17 onwards. Thirteen State PSUs under the Industries Department reported profits in 2016-17 as against only eight in 2015-16. The total profit made by the profit-making PSUs increased from 94.7 crore in 2015-16 to 99.8 crore in 2016-17. Major profit making units in 2016-17 were Kerala Minerals and Metals Limited (40.4 crore), Kerala State Industrial Development Corporation Ltd (32.1 crore), and Travancore Titanium Products Limited (8.5 crore).

The number of loss-making State PSUs decreased from 32 in 2015-16 to 27 in 2016-17, and the total losses made by loss-making State PSUs during this period also decreased from 226.6 crore to 180.5 crore. Major loss-making State PSUs during 2016-17 were Kerala State Textile Corporation Ltd. (29.4 crore), Kerala Small Industries Development Corporation (16 crore) and the Travancore Cements Limited (10.2 crore).

Box 3.1.3
Major Initiatives for Performance Improvement of PSUs
  • Induction of professional management
  • Capacity enhancement of profit making PSUs
  • Modernisation and technology up-gradation of loss making PSUs
  • Increased budgetary support for capital expenditure and synergy among PSUs

Public Sector Restructuring and Internal Audit Board (RIAB)

Public Sector Restructuring and Internal Audit Board (RIAB), constituted in 1993, undertakes reform initiatives in state-owned enterprises in Kerala. RIAB has been playing a major role in the rejuvenation and revival of PSUs under the Industries department. Major responsibilities of the agency include performance planning and monitoring of PSUs, enterprise reconstruction, capacity building, recruitments in PSUs and governance advisory support to State PSUs.

Joint Stock Companies

There were 27,305 joint stock companies in Kerala as on March 2017, of which 25,714 (94.2 per cent) were private limited companies and 1,591 (5.8 per cent) were public limited companies. In 2016-17, there were 3,711 new companies registered (3,477 Private Limited and 234 Public Limited).

The numbers of companies wound up/dissolved/struck off/amalgamated in 2016-17 were 297. Three public companies were converted to private companies and 3 companies were converted from private to public companies. Total number of government companies as on March 2017 was 152 (83 public limited and 69 private limited companies).

There were 14,648 (1,285 private and 13,363 public) joint stock companies started by women entrepreneurs in Kerala as on March 2017. Details of joint stock companies working in Kerala are given in Appendix 3.1.10.

Industrial Financing

Kerala Financial Corporation (KFC)

Kerala Financial Corporation (KFC) has been playing a major role in the industrialisation of Kerala. The main objective of KFC is to extend financial assistance to micro, small and medium enterprises (MSME) in the manufacturing and services sectors. Financial assistance is provided in the form of term loans, working capital loans and special schemes. KFC is a member of Credit Guarantee Fund Trust for Micro and Small Enterprises.

Activities of the Corporation are the following.

  • Sanction of term loans to new micro, small and medium enterprises in the manufacturing and services sector.
  • Sanction of term loans to existing industrial concerns and services sector units for expansion/modernisation/diversification.
  • Sanction of working capital loans to meet working capital requirements of industrial/service enterprises under special schemes.
  • Special schemes for financial assistance to civil contractors.
  • Special scheme for financial assistance for producing feature film and TV serials.
  • Special scheme for modernisation, upgradation and expansion of existing cinema theatres and establishment of new multiplexes.
  • Special scheme for purchase of lab equipments/waste management.

In 2016-17, the operating profit of KFC was 7.9 crore and net profit was 5.7 crore. The corporation sanctioned financial assistance of 385.3 crore in 2016-17 as against 1,026 crore in the previous year. Amount disbursed in
2016-17 was 655.3 crore was as against 838.4 crore in 2015-16. The changes in the Government policies and other external factors affected business in certain sectors such as hospitality, tourism, mining and real estate. The total recovery in the year 2016-17 was 874.3 crore compared to 758.2 crore in 2015-16. Performance of KFC during the last five years is given in Appendix 3.1.11. The details of loan operations and industry-wise classification of loans in 2016-17 of KFC are shown in Appendix 3.1.12 and Appendix 3.1.13.

Kerala State Industrial Development Corporation (KSIDC)

Kerala State Industrial Development Corporation Ltd. (KSIDC), a wholly owned company of Government of Kerala, was established in 1961, for the promotion and development of medium and large-scale units in the State. KSIDC has initiated major industrial and infrastructure projects, which are strategically important to Kerala’s industrial and economic development. KSIDC also plays a vital role in entrepreneurship development in the State. As the nodal agency for foreign and domestic investment in Kerala, KSIDC provides comprehensive support to investors besides processing various incentives, schemes and facilitating constant interaction between the Government and the industrial sector.

In financial year 2016-17, KSIDC sanctioned projects worth 180.5 crore, with direct term loan assistance of 85.8 crore. These projects are expected to generate employment for 1,200 persons directly and indirectly. The corporation achieved 64.1 crore of disbursements, and a total amount of 75.5 crore was recovered by way of principal and interest. The operating profit of the corporation in 2016-17 was 34.2 crore. Currently there are 39 projects under various stages of implementation with a total investment of 4,464.7 crore, which would create employment for around 4,500 persons. The physical and financial performance of KSIDC in 2016-17 is given in Appendix 3.1.14. The Plan outlay for and expenditure by KSIDC in 2015-16, 2016-17 and 2017-18 are given in Table 3.1.4.

Table 3.1.4
Plan Outlay and Expenditure, KSIDC ( in crore)
Sl. No Year Outlay Expenditure
1 2015-16 74.0 29.1
2 2016-17 87.5 50.2
3 2017-18* 96.7 119.1
Source:-Budget Estimate. *Expenditure as on October, 2017
Box 3.1.4
Ongoing Projects Initiated by KSIDC
  • Mega Food Park, Cherthala with major thrust on the processing and export of sea food items.
  • Investment facilitation and industrial promotion activities.
  • Entrepreneur support through mentoring.
  • Angel/seed fund scheme.
  • Electronic Hardware Park at Kochi – a world class manufacturing and R&D facility for the Electronic Sector.
  • Life Science Park - for setting up a geographical cluster of industries and R&D institutions in key life sciences sector.
  • Second phase of Light Engineering Industrial Park, Palakkad.
  • Infrastructure development at Industrial Growth Centres.
  • Business incubator for medical devices of Sree Chithira Thirunal Institute of Medical Science and Technology.

Completed Projects of KSIDC during the Twelfth Five-Year Plan

  • First Phase of Light Engineering Industrial Park, Palakkad
  • Manufacturing Industrial Zone at Angamaly

Major initiatives of KSIDC

Ease of Doing Business

Ease of Doing Business (EoDB) is an initiative by the Department of Industrial Policy and Promotion, Government of India, for simplifying clearance procedures for starting an industrial project. M/s KPMG was appointed as Consultant by KSIDC to undertake a study and submit a report on necessary reforms in the existing rules and acts relating to clearance procedures for starting an industrial unit in Kerala. The report has been submitted and based on the recommendation of the study report, amendment to seven Acts was approved by the Cabinet. The Governor of Kerala has approved and signed the “Kerala Investment Promotion and Facilitation Act 2017” amending 7 existing laws. Amendments to ten Rules have been cleared by the concerned departments and will be issued shortly.

Single Window Clearance System

The Government of Kerala has introduced the ‘Single Window Clearance System’ to ease the setting up of industrial projects in the State. KSIDC is the nodal agency for the scheme and National Informatics Centre (NIC) has been engaged for the development of online clearance mechanism and online Common Application Form. In the last financial year, KSIDC has cleared 8 major projects across various sectors.

Young Entrepreneurs Summit YES 3D

The third edition of Young entrepreneurs Summit was held at Kochi in September 2017. The summit was titled “YES 3D” and the theme was: Disrupt an existing process, Discover an alternate technology, and Develop better products/services. The aim of this flagship event is to foster the growth of entrepreneurship in young minds and to promote an enabling environment for entrepreneurship across all sectors.

Angel Fund/Seed Fund

Kerala State Industrial Development Corporation has also initiated a special finance assistance scheme known as “Angel Fund/Seed Fund” to promote entrepreneurship among the youth of the State by making them job providers rather than job seekers. It aims to support scientific, technological and innovative projects promoted by young entrepreneurs which are commercially viable. As on 31st March, 2017, KSIDC has sanctioned seed fund assistance to 58 innovative start-ups for an amount of 12.3 crore.

Industrial Growth Centers (IGC)

Kerala State Industrial Development Corporation has developed key infrastructure facilities in its Industrial Growth Centers (IGC) at Kannur, Kozhikode and Alappuzha districts. Number of jobs created in these IGCs as on October, 2017 are1400, 640 and 650 respectively. Total number of operational units as on October, 2017 is 33, 28 and 18 respectively.

Land available with KSIDC

The total land available with Kerala State Industrial Development Corporation is 1,635 acres. Of this, land available for industrial development purposes was 1,078.7 acres. Out of the land available for industrial purposes (1078.7 acres), 364.5 acres have already been allotted to industrial units. The remaining land (714.3 acres) is still available with KSIDC for allotment to industrial units. Details of allotment of land in KSIDC Industrial Parks as on 31/07/2017 are shown in Appendix 3.1.15.

Kerala Industrial Infrastructure Development Corporation (KINFRA)

Kerala Industrial Infrastructure Development Corporation (KINFRA) was setup in 1993 aimed to accelerate industrial development in the State by providing infrastructure facilities to industries. KINFRA specifically aims at the economic development of the industrially backward regions of the State by setting up industrial parks/townships/zone, which provide all the facilities required for the entrepreneurs to start an industry. The outlay for and expenditure by KINFRA in 2015-16, 2016-17 and 2017-18 are shown in Table 3.1.5.

Table 3.1.5
Plan Outlay and Expenditure, KINFRA ( in crore)
Sl. No Year Outlay Expenditure
1 2015-16 55.1 44.8
2 2016-17 101.2 56.0
3 2017-18 * 111.3 13.5
Source:-Budget Estimate
*Expenditure as on October, 2017

The industrial parks developed by KINFRA have facilities such as developed land, built up space, dedicated power supply, continuous water supply and communication facilities, in addition to the supporting social infrastructure facilities such as administrative block, bank, post office and security. KINFRA industrial parks provide a ready-made manufacturing environment for easy starting up of industrial units with minimum time and cost. The details of allotments in KINFRA industrial parks as on 15, October 2017 are given in Appendix 3.1.16.

KINFRA has promoted investments in the State and created investment friendly climate within its Parks, contributing significantly to the State’s economy. In this regard, 715 industrial units have been allotted land in the various industrial parks of KINFRA with a total investment of 1,669.6 crore, providing direct employment of 21,581 people. KINFRA has also implemented a single window clearance system in all the parks. The single window clearances system operating in the parks are helping investors to establish their units without hassles.

KINFRA has created world-class infrastructure in 22 industrial parks, of which 8 are catering exclusively to the small and medium enterprises. Some of the notable achievements are the successful completion of International Apparel Park at Trivandrum, Export Promotion Industrial Park at Ernakulam, Infotainment Park, Film and Video Park at Trivandrum, and Food Processing Industrial Park at Malappuram. KINFRA has developed small Industries Park at Trivandrum, Pathanamthitta, Ernakulam, Thrissur, Kannur, Wayanad and Kasaragod. In addition to this, the following three projects have been completed and allocation of built- up space is under progress.

Box 3.1.5
Ongoing Projects of KINFRA
  • KINFRA integrated industrial and textile park, Palakaad
  • Industrial water supply project, Palakkad
  • Construction of Standard Design Factory, Ottappalam
  • Industrial park, Ottappalam
  • Water supply and road works for Infopark, Smart city and KEPIP
  • Upgradation of existing industrial infrastructure, KSIP, Koratty
  • Global Ayurveda Village, Thiruvananthapuram
  • Industrial Park, Mattannur
  • Green field electronic park, Ernakulam

Industrial Park, Ottapalam: Construction of standard design factory completed and allocation of built-up space under progress. Internal roads and other common facilities have been completed.

Construction of standard design factories (SDF): SDF completed in Kerala Small Industries Park Kunnamthanam, Koratty and Nellad. Foundation Stone laid for an additional SDF (Phase II) in KSIP Koratty.

Industrial Park, Piravanthoor: Construction of Standard Design Factory completed and allocation of built up space under progress.

Centre for Management Development (CMD)

The Centre for Management Development (CMD) is a leading, self-supporting autonomous institution, which provides research, consultancy and training support to development agencies, corporates and governments at the national, State and local levels. Established in 1979, it is sponsored by the Government of Kerala as an independent, professional, registered society. In 2016-17, the centre completed 26 research projects, while 18 research projects were under various stages of completion. In addition, the Centre also conducted 2 entrepreneurship development programmes, 15 management development programmes/workshops and 8 micro enterprise development programmes.

Major Issues/Challenges facing medium and large industries in Kerala

Inadequate industrial infrastructure, relative shortage of land for industrial development, difficulty in entry and exit due to procedural issues, mismatch between the relatively large supply of skilled workers and the slow growth of demand for their skills, technological backwardness and absence of innovation, poor marketing support infrastructure and absence of focus on local resource based enterprises are the major challenges facing medium and large industries in Kerala.

The vision of the State is to transform Kerala into an investor friendly destination through inclusive, eco-friendly and sustainable economic growth, with a focus on the creation of employment opportunities. Adoption of new technologies in various stages of production, design and marketing are needed to increase the productivity in this sector. Also effective product diversification methods in line with new trends will be key to success.