Technical efficiency and productivity growth in the Central Public Sector Enterprises in India during 1990s

The present study is based on the data for 58 large Central Public Sector Enterprises (CPSE) manufacturing/producing goods as well as data on industry groups provided by the Department of Public Enterprises, Ministry of Industries, Government of India for the period 1990-91 to 1998-99. The 58 firms cover more than 90 percent share by sales or the gross assets. The objective of the study is to analyse the technological change, technical efficiency and total productivity growth of CPSE, industry group-wise and firm-wise. Partial productivities and the Solow index of total factor productivity growth have been used for estimating productivity growth at the industry group level while panel data estimation method using the Random Effects Model and a modified form of the Composite Error Term Frontier Production Function Model as developed by Cornwell, Schmidt and Sickles, has been used for estimating the technological change and growth of technical efficiency at the firm level. The results show that the public sector enterprises have not experienced a significant technological change during the 1990s. Further, the results point to a decreasing returns to scale in production. Results also suggest that a majority of the firms have low levels of technical efficiency and that the efficiency has not improved significantly over time. However, the growth of technical efficiency is observed in some firms in the engineering sector and many firms in the petroleum producing/selling sector.