Public Sector Undertakings (PSU) or Public Sector Enterprises (PSE) in India are government-owned enterprises in which 51 percent or more share capital is held by the Government of India or state governments or Joint venture between multiple Public Sector Enterprises. Depending on the level of government ownership, they can be broadly categorised as Central PSUs or State PSUs.^[1] These entities include government companies, statutory corporations, banking institutions, and departmentally run companies.^[2][3] PSUs are officially classified into three categories, which are Central Public Sector Enterprises (CPSE) and Public Sector Banks (PSB) owned by the central government or other CPSEs/PSBs, and State Level Public Enterprises (SLPE) owned by state governments or other SLPEs. CPSE is further classified into Strategic Sector and Non-Strategic Sector. Depending on their financial performance and progress, CPSEs are granted the status of Maharatna, Navaratna, and Miniratna (Category I and II).^[1]

Following India's independence in 1947, the limited pre-existing industries were insufficient for sustainable economic growth. The Industrial Policy Resolution of 1956, adopted during the Second Five-Year Plan, laid the framework for PSUs. The government initially prioritized strategic sectors, such as communication, irrigation, chemicals, and heavy industries, followed by the nationalisation of banks and international corporations. PSUs subsequently expanded into consumer goods production and service areas like contracting, consulting, and transportation. Their goals include increasing exports, reducing imports, fostering infrastructure development, driving economic growth, and generating job opportunities. Each PSU has its own recruitment rules and employment in PSUs is highly sought after in India due to its job security, with most preferring candidates with a GATE score.^[1]

In 1951, there were five PSUs under the ownership of the government. By March 2021, the number of such government entities had increased to 365.^[4] These government entities represented a total investment of about ₹16.41 lakh crore as of 31 March 2019. Their total paid-up capital as of 31 March 2019 stood at about ₹200.76 lakh crore. CPSEs have earned a revenue of about ₹24.43 lakh crore + 1 lakh crore during the financial year 2018–19.^[4]

History

When India achieved independence in 1947, it was primarily an agrarian entity, with a weak industrial base. There were only eighteen state-owned Indian Ordnance Factories, previously established to reduce the dependency of the British Indian Army on imported arms.^[5]

The British Raj had previously elected to leave agricultural production to the Private sector, with tea processing firms, Jute mills (such as the Acland Mill), railways, electricity utilities, banks, coal mines, and steel mills being just some of the economic entities largely owned by private individuals like the industrialist Jamsetji Tata. Other entities were listed on the Bombay Stock Exchange.^[6]

Critics of private ownership of India's agricultural and industrial entities—most notably Mahatma Gandhi's independence movement—instead advocated for a self-sufficient, largely agrarian, communal village-based existence for India in the first half of the 20th century.^[7][8] Other contemporary criticisms of India's public sector targeted the lack of well-funded schools, public libraries, universities, hospitals and medical and engineering colleges; a lack seen as impeding an Indian replication of Britain's own industrialization in the previous century.^{[9][10][11][12][13]}

Post-Independence, the national consensus turned in favor of rapid industrialisation of the economy, a process seen as the key to economic development, improved living standards and economic sovereignty.^[14] Building upon the Bombay Plan, which noted the necessity of government intervention and regulation in the economy, the first Industrial Policy Resolution announced in 1948 laid down in broad strokes such a strategy of industrial development. Later, the Planning Commission was formed by a cabinet resolution in March 1950 and the Industrial (Development and Regulation) Act was enacted in 1951 with the objective of empowering the government to take necessary steps to regulate industry.^[15]

The first Prime Minister of India, Jawaharlal Nehru, promoted an economic policy based on import substitution industrialisation and advocated a mixed economy.^[16] He believed that the establishment of basic and heavy industry was fundamental to the development and modernisation of the Indian economy. India's second five year plan (1956–60) and the Industrial Policy Resolution of 1956 emphasized the development of public sector enterprises to meet Nehru's national industrialisation policy. His vision was carried forward by V. Krishnamurthy, a figure known as the "Father of Public sector undertakings in India". Indian statistician Prasanta Chandra Mahalanobis was instrumental to its formulation, which was later termed the Feldman–Mahalanobis model.^[17][18]

In 1969, Indira Gandhi's government nationalised fourteen of India's largest private banks, and an additional six in 1980. This government-led industrial policy, with corresponding restrictions on private enterprise, was the dominant pattern of Indian economic development until the 1991 Indian economic crisis.^[15] After the crisis, the government began divesting its ownership of several PSUs to raise capital and privatize companies facing poor financial performance and low efficiency.^[19][20]

Management

The public sector undertakings are headed by the head of board of directors also known as chairperson cum managing director cum chief executive officer and a vice chairperson cum deputy managing director cum co-chief executive officer along with the members of the board of directors also known as executive director cum c-level officer who are Group 'A' gazetted officers appointed by the President of India in case of central public sector undertakings, its subsidiaries & its divisions and appointed by the Governor of States of India in case of state public sector undertakings, its subsidiaries & its divisions. The officers and employees working for public sector undertakings, subsidiaries of public sector undertakings and divisions of public sector undertakings are also classified as gazetted officers and full-fledged government employees.

All of the public sector undertakings have been awarded additional financial autonomy. Public Sector Undertakings are government establishments that have comparative advantages", giving them greater autonomy to compete in the global market so as to "support [them] in their drive to become global giants".^[21] Financial autonomy was initially awarded to nine PSUs as Navratna status in 1997.^[22] Originally, the term Navaratna meant a talisman composed of nine precious gems. Later, this term was adopted in the courts of the Gupta emperor Vikramaditya and Mughal emperor Akbar, as the collective name for nine extraordinary courtiers at their respective courts.

In 2010, the central government established the higher Maharatna category, which raises a public sector unit's investment ceiling from ₹1,000 crore to ₹5,000 crores.^[23] The Maharatna public sector units can now decide on investments of up to 15 per cent of their net worth in a project while the Navaratna companies could invest up to ₹1,000 crore without explicit government approval. Two categories of Miniratnas afford less extensive financial autonomy.

Guidelines for awarding Ratna^[24] status are as follows:

PSUs in India are also categorized based on their special non-financial objectives and are registered under Section 8 of Companies Act, 2013 (erstwhile Section 25 of Companies Act, 1956).

Top profit making CPSEs

Top loss making CPSEs

List of CPSEs

Public Sector Undertakings (PSUs) can be classified as Central Public Sector Enterprises (CPSEs), Public Sector Banks (PSBs), or State Level Public Enterprises (SLPEs). CPSEs are administered by the Ministry of Heavy Industries and Public Enterprises. The Department of Public Enterprises (DPE), Ministry of Finance is the nodal department for all the Central Public Sector Enterprises (CPSEs).

As of October 2021, there are 13 Maharatnas, 14 Navratnas and 72 Miniratnas (divided into Category 1 and Category 2).^[27][28]

List of CPSEs privatized

• Air India – sold to Tata Group in 2020
• Axis Bank, a part of UTI was privatized in 2007^[31]
• Bharat Aluminium Company – sold to Vedanta Limited in 2000, BALCO closed in 2002
• CMC Limited – sold to Tata Consultancy Services in 2001, merged with TCS in 2016
• Lagan Engineering – in 2001
• Hindustan Zinc Limited – sold to Vedanta Limited in 2001^[32]
• HTL Limited - sold to HFCL in 2001
• Maruti Udyog Limited - sold to Suzuki
• Modern Food Industries – sold to Hindustan Unilever in 2000
• Neelachal Ispat Nigam Limited - sold to Tata Steel Long Products in 2022
• Paradeep Phosphates Limited(PPL) - sold to Adventz Group in 2001
• Videsh Sanchar Nigam Limited – sold to Tata Group in 2008
• Jessop & Company – sold to Ruia Group in 2003 but bankrupt in 2013 ^[33]
• ICICI Bank, ICICI Ltd. a government entity, parent company of ICICI Bank was merged with ICICI Bank leading to its privatization in 2002.
• Indian Petrochemicals Corporation Limited – sold to Reliance Industries
• IDFC in 2005 via IPO cutdown ownership from 100% to 34.91%^[34]
• Protean eGovernment Technologies, formerly known as NSDL e-Gov Infrastructure Limited(a subsidiary of NSDL), Government of India to sell stakes via SUUTI(Specified Undertaking of The Unit Trust of India), IDBI Bank, Union Bank of India and State Bank of India through IPO in 2023.^[35]

List of Central PSUs (Financial Services)

List of State PSUs

See also

• Indian company law
• List of Public service commissions in India
• List of agencies of the government of Gujarat

References