Effect of policy stimulus and deregulation in performance of public sector and private sector companies in Indian steel industry

Abstract

Steel is considered as backbone of human civilization and it is considered as one of most important pillar of modern economy. Government of India also realized this fact and after independence steel industry was reserved for public sector. As per new industrial policy adopted after independence responsibility of the development of steel industry was left to government. After 1991, in backdrop of Balance of Payment crisis economy was deregulated and steel industry was removed from the list of industries reserved for public sector. Objective of deregulation inter alia was to make Indian steel industry efficient and world class industry making India self-sufficient in steel. After deregulation Indian steel industry grew handsomely and currently India is 4th largest steel maker in world. After deregulation, share of private sector in Indian Steel industry grew constantly. Comparing the financial performance of public sector and private sector companies, it indicates that financial performance of private sector companies is better than that of public sector companies. However when efficiency is compared there is no clear evidences of the fact that efficiency of private sector companies is better than public sector companies. The analysis reveals that the efficiency of companies has improved after the deregulation but that necessarily has not transferred into financial gains for public sector companies. One thing was worth noting that expansion of capacity has sufficiently increase after deregulation and capacity expansion of private sector companies has improved more than that of public sector companies.