After independence, a lot of public enterprises were set up in India under government ownership and control, to carry on diversified industrial and commercial activities. The speed of setting up public enterprises was so fast that it virtually reduced further scope of private sector in the economic field in the country. It is very unfortunate, that most of the public sector enterprises are running at loss since inception and need subsidization. In this respect it was rightly concluded that “The concept of perpetual subsidization at the hands of the rest of the economy appears to be neither feasible nor desirable and hence the public enterprises should be commercially agile in their operational framework.”1 A loss incurring company is always a source of loss to the society. It is an indirect form of taxation on the society which it has to bear because of the inefficiency of public sector management.”2 A case study has been conducted on the effect of government policy decisions on commercial viability of state transport undertakings with particular focus on motor vehicles tax, passenger tax and concessions in fare.