Since the mid-1980s, the public sector's share in domestic investment has been nearly halved, but its output share has remained roughly constant at about a quarter of GDP, suggesting a sustained rise in productivity over nearly two decades. The improvement in performance is also evident from (i) a rise in physical efficiency in electricity generation; (ii) a fall in public sector employment growth; and (iii) an increase in central public sector enterprises' profitability (even after excluding the petroleum sector). Yet public sector finances have remained adverse. Why? In electricity, passenger road transport and railways the revenue-cost ratio is less than one, and has declined since the early 1990s. Moreover, over the last 40 years, the public sector price deflator declined by 17 percentage points, relative to the GDP deflator. Hence, correct pricing and collecting user charges are probably key to setting public sector finances right.