Financing decisions of management in dealing a significant role with government companies occupy a key place in the financial management of PSUs. At the end of March 1994, the government investment stood at 55,683 crore which was about 20 per cent of the total investment in PSUs. Some state governments, financing institutions and banks, both Indian and foreign, have also contributed to the investment in these enterprises. The sources of financing in PSUs have many salient features. The government has been the main provider of both equity and long term debt in PSUs. Internal financing plays an insignificant role as a source of financing. The financial institutions have provided about 2 per cent of the total long-term investment needs.

The capital structure in PSUs is formulated on the basis of 1:1 debt equity mix suggested by the government of India in 1961. Such a mix has been vehemently opposed by the PUSs managers. The committee on public undertakings and the administrative reforms commission lent their support to the contention of managers. Those who support the government policy argue that differentiating between equity and loans is immaterial in the case of PSUs, as both the dividend and interest are transfer entry. Public enterprises for a long-time were not permitted to approach the capital market to raise money through the flotation of debentures, public deposits and other securities. Scooters Indian limited was permitted to offer in 1975 a part of its equity to the public at large. In 1981, PSUs were allowed to approach the capital market to mobilize money through public deposits. On March 31, 2003 PSUs had raised 21,017 crore through this source. Between 1984-85 and 1988-89 they were permitted to raise long-term funds throught he flotation of non-convertible 7-year redeemable debentures which formed a part of the funds raised through capital market.

During the sixth plan period some public enterprises were given permission to approach the foreign bond markets and to raise borrowings with limits provided under the category of external commercial borrowings. In 1978, Hindustan machine tools limited had offered its debentures to finance 50 per cent of its loan requirements for the lamp project. Other PSUs however, did not emulate this example. Many PSUs have raised short-term finance through commercial papers in the post-1990 period.

Some of its main topics are:

1. Features of the PSU financial management
2. Financial benefits
3. Financial controls
4. Financial futures
5. Spot prices of financial futures

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