PUBLIC SECTOR UNDERTAKINGS (PSUs)

INTRODUCTION
In India, a government-owned corporation is known as a Public Sector Undertaking (PSU). A PSU is defined as an enterprise in which the Government of India or a State Government, or both together, hold a minimum of 51 percent of the paid-up equity capital. Public Sector Undertakings constitute a significant pillar of the Indian economy and play a crucial role in providing essential goods and services, building infrastructure, generating
employment and promoting balanced regional development.

Public Sector Enterprises are primarily guided by socio-economic objectives rather than pure profit maximisation, unlike private sector enterprises which are driven mainly by commercial considerations.

CLASSIFICATION OF PUBLIC SECTOR UNDERTAKINGS

Public Sector Undertakings in India can broadly be classified into three categories:

1. Departmental Undertakings

• These are directly managed by the concerned Ministry or Department of the Government.
• They do not have a separate legal identity and their employees are government servants.
• Examples include Indian Railways and Department of Posts.

2. Non-Departmental Undertakings

• These are government-owned companies or statutory corporations registered under the
• Companies Act or created through special Acts of Parliament.
• They enjoy operational autonomy and have separate legal status.
• Examples include Indian Oil Corporation Limited, Hindustan Petroleum Corporation Limited, and Coal India Limited.

3. Financial Institutions

• These are public sector entities engaged in financial intermediation.
• Examples include State Bank of India, Life Insurance Corporation of India and Unit Trust of India.

RATIONALE FOR ESTABLISHMENT OF PSUs

• The establishment of Public Sector Undertakings was driven by the need for rapid industrialisation and economic development in post-independence India.
• The private sector lacked the capital, technology and risk-taking capacity to invest in heavy industries and infrastructure projects.
• Therefore, the State assumed a dominant role in building basic and capital goods industries.

OBJECTIVES OF SETTING UP PUBLIC SECTOR UNDERTAKINGS

• Creation of a strong industrial base
• Generation of employment opportunities
• Development of basic and strategic infrastructure
• Mobilisation of resources for the government
• Promotion of exports and reduction of import dependence
• Reduction of regional and income inequalities
• Acceleration of economic growth and inclusive development

CATEGORIES OF CENTRAL PUBLIC SECTOR ENTERPRISES (CPSEs)

MAHARATNA CPSEs

The Maharatna category was introduced in 2009 to empower large CPSEs to expand their operations globally and compete with multinational corporations.

Eligibility Criteria

• The CPSE must already have Navratna status
• It must be listed on an Indian stock exchange with prescribed minimum public shareholding
• Average annual turnover exceeding Rs 25,000 crore for the last three years
• Average annual net worth exceeding Rs 15,000 crore for the last three years
• Average annual net profit after tax exceeding Rs 5,000 crore for the last three years
• Significant global presence or international operations

List of Maharatna CPSEs

• Bharat Heavy Electricals Limited
• Coal India Limited
• GAIL (India) Limited
• Indian Oil Corporation Limited
• NTPC Limited
• Oil and Natural Gas Corporation Limited
• Steel Authority of India Limited

NAVRATNA CPSEs

The Navratna scheme was introduced in 1997 to identify high-performing CPSEs with the potential to become global players and grant them greater financial and operational autonomy.

Eligibility Criteria

• The enterprise must be a Miniratna Category I or Schedule A CPSE
• It should have obtained excellent or very good MoU ratings in three of the last five years
• It must score at least 60 out of 100 on selected performance parameters

Performance Parameters

• Net profit to net worth
• Manpower cost to cost of production or services
• Gross margin on capital employed
• Gross profit as a percentage of turnover
• Earnings per share
• Inter-sectoral comparison based on profitability

List of Navratna CPSEs

• Bharat Electronics Limited
• Container Corporation of India Limited
• Engineers India Limited
• Hindustan Aeronautics Limited
• Hindustan Petroleum Corporation Limited
• Mahanagar Telephone Nigam Limited
• National Aluminium Company Limited
• National Buildings Construction Corporation Limited
• NMDC Limited
• Neyveli Lignite Corporation Limited
• Oil India Limited
• Power Finance Corporation Limited
• Power Grid Corporation of India Limited
• Rashtriya Ispat Nigam Limited
• Rural Electrification Corporation Limited
• Shipping Corporation of India Limited

MINIRATNA CPSEs

Miniratna status is granted to profit-making CPSEs to provide them enhanced autonomy while retaining government ownership.

Eligibility Criteria

• The CPSE must have made profits continuously in the last three years
• It must have a positive net worth

Categories of Miniratna CPSEs

Category I
PSUs that have earned profits in the last three years or earned profit of Rs 30 crore or more in at least one of the last three years

Category II
PSUs that have earned profits and maintained positive net worth in all of the last three years

STRATEGIC AND NON-STRATEGIC SECTORS

In March 1999, the Government of India classified PSUs into strategic and non-strategic sectors for the purpose of disinvestment.

Strategic Sectors

• Defence production including arms, ammunition, defence aircrafts and warships
• Atomic energy excluding nuclear power generation and medical or agricultural applications
• Railway transport

Non-Strategic Sectors
All other sectors where public ownership is not essential for national security or sovereignty
In these sectors, government stake reduction below 51 percent or up to 26 percent is considered on a case-to-case basis.

Factors Considered Before Disinvestment
Need for public sector presence to prevent private monopoly
Existence of effective regulatory mechanisms to protect consumer interests

CHAMPION SERVICE SECTORS

The Government of India has identified 12 Champion Service Sectors to promote growth, exports and employment generation in services.

These include

• Information Technology and IT-enabled Services
• Tourism and Hospitality Services
• Medical Value Travel
• Transport and Logistics Services
• Accounting and Finance Services
• Audio Visual Services
• Legal Services
• Communication Services
• Construction and Related Engineering Services
• Environmental Services
• Financial Services
• Education Services

These sectors are provided focused policy support, skill development initiatives and
export promotion measures to realise their full potential.

CONCLUSION
Public Sector Undertakings have played a foundational role in nation-building, industrial development and social welfare in India. While reforms such as disinvestment and enhanced autonomy are being pursued to improve
efficiency, PSUs continue to remain vital instruments for achieving strategic, economic and developmental objectives of the Indian state.

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Subject: Economics

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