Public sector undertakings in India

A state-owned enterprise in India is called a public sector undertaking (PSU) or a public sector enterprise. Those companies are owned by the union government of India or one of the many state or territorial governments or both. The company stock needs to be majority-owned by the government to be a PSU. PSUs strictly may be classified as central public sector enterprises (CPSEs) or state level public enterprises (SLPEs). In 1951 there were just five enterprises in the public sector in India, but in March 1991 this had increased to 246.

CPSEs are companies in which the direct holding of the Central Government or other CPSEs is 51% or more. They are administered by the Ministry of Heavy Industries and Public Enterprises.

History

When India achieved independence in 1947, it was primarily an agricultural country with a weak industrial base. There were only eighteen Indian Ordnance Factories in the country which the British had established for their own economic interest and rule the subcontinent with brute force.[1] The national consensus was in favour of rapid industrialisation of the economy which was seen as the key to economic development, improving living standards and economic sovereignty.[2] Building upon the Bombay Plan, which noted the requirement of government intervention and regulation, the first Industrial Policy Resolution announced in 1948 laid down broad contours of the strategy of industrial development. Subsequently, 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 industrial development.[3] Prime Minister Jawaharlal Nehru promoted an economic policy based on import substitution industrialisation and advocated a mixed economy.[4] 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 emphasised the development of public sector enterprises to meet Nehru's national industrialisation policy. His vision was carried forward by Dr. V. Krishnamurthy known as the "Father of Public sector undertakings in India". Indian statistician Prasanta Chandra Mahalanobis was instrumental to its formulation, which was subsequently termed the Feldman–Mahalanobis model.[5][6]

The major consideration for the setting up of PSUs was to accelerate the growth of core sectors of the economy; to serve the equipment needs of strategically important sectors, and to generate employment and income. A large number of "sick units" were taken over from the private sector. Additionally, Indira Gandhi's government nationalised fourteen of India's largest private banks in 1969, 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.[3] After the crisis, the government began dis-investing its ownership of several PSUs to raise capital and privatise companies facing poor financial performance and low efficiency.[7][8]

Governance

Certain public sector undertakings have been awarded additional financial autonomy. These companies are "public sector companies 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".[9] Financial autonomy was initially awarded to nine PSUs as Navratna status in 1997.[10] Originally, the term Navaratna meant a talisman composed of nine precious gems. Later, this term was adopted in the courts of Gupta emperor Vikramaditya and Mughal emperor Akbar, as the collective name for nine extraordinary courtiers at their respective courts.

In 2010, the government established the higher Maharatna category, which raises a company's investment ceiling from Rs. 1,000 crore to Rs. 5,000 crore.[11] The Maharatna firms 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 Rs 1,000 crore without explicit government approval. Two categories of Miniratnas afford less extensive financial autonomy.

Guidelines for awarding Ratna[12] status are as follows:

MaharatnaNavratnaMiniratna Category-IMiniratna Category-II
Eligibility Three years with an average annual net profit of over Rs. 2500 crore, OR

Average annual Net worth of Rs. 10,000 crore for 3 years, OR Average annual Turnover of Rs. 20,000 crore for 3 years (against Rs 25,000 crore prescribed earlier)[13]

 A score of 60 (out of 100), based on six parameters which include net profit, net worth, total manpower cost, total cost of production, cost of services, PBDIT (Profit Before Depreciation, Interest and Taxes), capital employed, etc., AND

A company must first be a Miniratna and have 4 independent directors on its board before it can be made a Navratna.

Have made profits continuously for the last three years or earned a net profit of Rs. 30 crore or more in one of the three years Have made profits continuously for the last three years and should have a positive net worth.
Benefits for investment Rs. 1,000 crore - Rs. 5,000 crore, or free to decide on investments up to 15% of their net worth in a project up to Rs. 1,000 crore or 15% of their net worth on a single project or 30% of their net worth in the whole year (not exceeding Rs. 1,000 crores). up to Rs. 500 crore or equal to their net worth, whichever is lower. up to Rs. 300 crore or up to 50% of their net worth, whichever is lower.

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

List of public sector undertakings

As of 23 October 2019, there are 10 Maharatnas, 14 Navratnas and 74 Miniratnas.[14]There are nearly 300 CPSEs (central public sector enterprises) in total.[15]

See also
  • Public sector undertakings in Kerala
  • Disinvestment of Public Sector Units in India
  • Indian company law

References
  1. "Home | Ordnance Factory Board | Government of India".
  2. "Chapter 1, Industrial Policy Handbook" (PDF). Industrial Policy Handbook. Office of the Economic Adviser, Ministry of Commerce and Industry. p. 2. Archived from the original (PDF) on 28 May 2015. Retrieved 17 September 2015.
  3. Jadhav, Narendra. "Industrial Policy since 1956" (PDF). Dr. Narendra Jadhav. Retrieved 17 September 2015.
  4. Ghose, Shankar. Jawaharlal Nehru. Allied Publishers. p. 243. ISBN 978-8170233695.
  5. Ahluwalia, Isher J. (1993). Productivity and Growth in Indian Manufacturing, part of Recent Developments in Indian Economy: With Special Reference to Structural Reforms, Part 2. New Delhi: Academic Foundation. p. 25. ISBN 9788171880942.
  6. Baldev Raj Nayar, Globalization And Nationalism: The Changing Balance Of India's Economic Policy, 1950–2000 (New Delhi: Sage, 2001)
  7. "Disinvestments-A Historical Perspective". Bombay Stock Exchange. Retrieved 19 September 2015.
  8. Sankar, T.L., Mishra, R.K., Lateef Syed Mohammed, A. (1994). "Divestments in Public Enterprises: The Indian Experience". International Journal of Public Sector Management. 7 (2): 69–88. doi:10.1108/09513559410055242.CS1 maint: multiple names: authors list (link)
  9. Original govt. announcement about the Navratnas 1997 Archived 9 February 2012 at the Wayback Machine
  10. "Maharatnas, Navratnas: India's best PSUs!". Rediff.
  11. "Maharatna status for mega PSUs gets nod". The Times of India. 25 December 2009. Retrieved 29 December 2009.
  12. "bsepsu.com". www.bsepsu.com. Retrieved 25 July 2016.
  13. http://www.archive.india.gov.in/spotlight/spotlight_archive.php?id=78
  14. "Home | Department of Public Enterprises | MoHI&PE | GoI".
  15. http://www.bsepsu.com/list-cpse.asp List of CPSEs - BSE
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