The financial planning of many public sector enterprises also suffer from several drawbacks due to which they face the problem of over­capitalization. According to the study team of the Administrative Reforms Commission, many undertakings such as Hindustan Aeronautics, Heavy Engineering Corporation, Heavy Electrical, Fertilizer Corporation, and Indian Drugs and Pharmaceuticals were found to be over-capitalized.

The various reasons that have contributed for over-capitalization are the inadequate planning, surplus capacity, delays in construction, heavy investment on housing and labour welfare, and bad location of projects.