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Public Sector Undertakings in India, Types, Disinvestment

Public Sector Undertakings in India

India’s Public Sector Undertakings (PSUs) have long played a crucial role in the nation’s economic and social development. These government-owned corporations, spanning diverse sectors such as energy, telecommunications, manufacturing, and finance, form a significant pillar of India’s public sector. With their extensive reach and substantial contribution to the country’s GDP, PSUs have been instrumental in driving infrastructure growth, ensuring employment opportunities, and promoting socio-economic welfare. This article aims to delve deeper into this concept, exploring its various dimensions. 

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Public Sector Undertakings Meaning

According to the Government of India documents, Public Sector Undertakings (PSUs) are government-owned corporations or companies in which the central or state government has a substantial stake. These entities are established to undertake commercial activities and provide goods and services to the public while operating under the ownership and control of the government.

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List of Public Sector Undertakings in India

Here is a list of some of the most important PSUs in India. 

PSU Name Year of Establishment Importance in Socio-economic Development
Oil and Natural Gas Corporation Limited (ONGC) 1956 ONGC is India’s largest oil and gas exploration and production company. It plays a vital role in ensuring energy security, contributing to the country’s self-sufficiency in oil and gas, and supporting economic growth and industrial development.
State Bank of India (SBI) 1955 SBI is the largest public sector bank in India and a key player in the country’s banking and financial sector. It provides essential banking services, supports economic activities, promotes financial inclusion, and contributes to the nation’s financial stability.
Bharat Heavy Electricals Limited (BHEL) 1964 BHEL is a leading engineering and manufacturing company in the power sector. It plays a critical role in power generation, transmission, and infrastructure development. BHEL’s products and services contribute to the country’s energy security and industrial growth.
National Thermal Power Corporation Limited (NTPC) 1975 NTPC is India’s largest power generation company. It plays a crucial role in meeting the country’s growing electricity demand, ensuring power supply to industries, households, and rural areas, and supporting economic activities and social development.
Steel Authority of India Limited (SAIL) 1973 SAIL is one of the largest steel producers in India. It contributes significantly to the infrastructure and manufacturing sectors, supporting the construction of bridges, buildings, railways, and industrial machinery, and creating employment opportunities.
Indian Oil Corporation Limited (IOCL) 1964 IOCL is India’s largest commercial enterprise and a major player in the oil and gas industry. It ensures the availability of petroleum products, including fuels, LPG, and lubricants, across the country, supporting transportation, industries, and household needs.
Power Grid Corporation of India Limited (POWERGRID) 1989 POWERGRID is responsible for the transmission of electricity across India. It plays a crucial role in ensuring reliable power supply, integrating renewable energy sources, and strengthening the country’s power infrastructure, contributing to economic growth and development.
Bharat Petroleum Corporation Limited (BPCL) 1952 BPCL is a leading oil refining and marketing company. It plays a critical role in meeting the country’s petroleum product requirements, ensuring the availability of fuels and lubricants, supporting transportation, industrial growth, and contributing to the energy security of the nation.
Hindustan Petroleum Corporation Limited (HPCL) 1974 HPCL is another major player in the oil refining and marketing sector. It contributes to the availability of petroleum products across the country, supporting energy needs, industrial activities, and transportation infrastructure, thereby facilitating economic development.
National Aluminium Company Limited (NALCO) 1981 NALCO is a prominent integrated aluminium producer. It contributes to the manufacturing sector, providing essential raw materials for industries, infrastructure development, and promoting employment opportunities in the mining and metal sector.
Gas Authority of India Limited (GAIL) 1984 GAIL is responsible for the transportation and marketing of natural gas in India. It plays a crucial role in ensuring a reliable supply of natural gas for various sectors, including power, industries, and households, supporting energy diversification and sustainable development.
Coal India Limited (CIL) 1975 CIL is the world’s largest coal mining company. It plays a pivotal role in meeting the country’s coal demand, supporting power generation, industries, and household needs. CIL’s operations contribute to energy security, employment generation, and economic growth.
Power Finance Corporation Limited (PFC) 1986 PFC is a leading non-banking financial institution in the power sector. It provides financial assistance, facilitates investments, and promotes the development of power infrastructure, contributing to the growth of the power sector and supporting energy access for all.
Rural Electrification Corporation Limited (REC) 1969 REC is a key financial institution that focuses on financing and promoting rural electrification projects in India. It plays a crucial role in extending electricity access to rural areas, facilitating agricultural activities, and enabling socio-economic development in rural communities.
National Hydroelectric Power Corporation Limited (NHPC) 1975 NHPC is India’s largest hydropower company. It develops, operates, and maintains hydroelectric power projects, contributing to the clean energy mix, supporting industrial growth, and providing renewable and sustainable power to various regions of the country.
Container Corporation of India Limited (CONCOR) 1988 CONCOR is a major logistics company specializing in containerized cargo transportation. It facilitates international and domestic trade, enhances supply chain efficiency, and supports the growth of industries by providing reliable and cost-effective logistics solutions.
Engineers India Limited (EIL) 1965 EIL is a premier engineering consultancy and project implementation company. It plays a vital role in infrastructure development, providing technical expertise, project management, and engineering services across various sectors, supporting industrial growth and innovation.

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Types of Public Sector Undertakings

On the basis of ownership, there are two types of PSUs, namely Central PSU and State PSU. The following table highlights their characteristics. 

Type Definition Examples (PSU Name)
Central Public Sector Enterprises (CPSEs) CPSEs are government-owned corporations or companies in which the central government holds a substantial stake (usually over 51%). They operate at the national level and play a significant role in various sectors of the economy. Oil and Natural Gas Corporation Limited (ONGC), State Bank of India (SBI), Bharat Heavy Electricals Limited (BHEL), National Thermal Power Corporation Limited (NTPC), Steel Authority of India Limited (SAIL), Indian Oil Corporation Limited (IOCL), Power Grid Corporation of India Limited (POWERGRID), and more.
State Level Public Enterprises (SLPEs) SLPEs are government-owned corporations or companies in which the state government holds a substantial stake (usually over 51%). They operate at the state level and play a crucial role in regional development and sector-specific activities. Kerala State Industrial Development Corporation Ltd. (KSIDC), Tamil Nadu Industrial Development Corporation Limited (TIDCO), Maharashtra State Electricity Distribution Co. Ltd. (MSEDCL), Karnataka State Tourism Development Corporation (KSTDC), Gujarat State Fertilizers & Chemicals Limited (GSFC), Odisha Mining Corporation Limited (OMC), Haryana State Industrial and Infrastructure Development Corporation (HSIIDC), and more.

Similarly, on the basis of autonomy, PSUs can be classified into three types namely- Maharatna, Navratna and Miniratna. The following table describes them. 

Type Definition Examples (PSU Name)
Maharatna Maharatna PSUs are the top-tier PSUs with significant operational and financial autonomy. They have greater decision-making powers and can undertake substantial investments without seeking government approval. Indian Oil Corporation Limited (IOCL), Oil and Natural Gas Corporation Limited (ONGC), Bharat Petroleum Corporation Limited (BPCL), Steel Authority of India Limited (SAIL), Coal India Limited (CIL), NTPC Limited, Power Grid Corporation of India Limited (POWERGRID), and more.
Navratna Navratna PSUs are the second-tier PSUs that enjoy more autonomy compared to other PSUs. They have the authority to make substantial investment decisions within certain limits and can form joint ventures. National Aluminium Company Limited (NALCO), Hindustan Petroleum Corporation Limited (HPCL), Container Corporation of India Limited (CONCOR), Bharat Electronics Limited (BEL), Engineers India Limited (EIL), National Buildings Construction Corporation (NBCC), and more.
Miniratna Miniratna PSUs are the third-tier PSUs that have moderate autonomy and limited investment decision-making powers. They are further categorized into Category I and Category II based on their performance. Mineral Exploration Corporation Limited (MECL), IRCON International Limited, Telecommunications Consultants India Limited (TCIL), National Small Industries Corporation Limited (NSIC), RITES Limited, Bridge & Roof Co. (India) Limited, Mishra Dhatu Nigam Limited (MIDHANI), and more.

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Disinvestment of Public Sector Undertakings in India 

Disinvestment in India refers to the government’s strategic action of selling its stake in public sector undertakings (PSUs) and other assets to private entities or the public. This process, initiated as part of economic liberalization in 1991, aims to relieve the government of the burden of production and enhance its focus on providing public goods and essential services such as infrastructure, education, and healthcare. By divesting its ownership in PSUs, the government seeks to improve the management and performance of these enterprises while promoting the growth of the private sector.

Disinvestment not only generates funds to reduce public debt and lower the debt-to-GDP ratio but also enables competitive public undertakings to operate more effectively. Overall, disinvestment serves as a significant policy tool, enhancing efficiency, fostering private sector participation, and facilitating the government’s role in ensuring the welfare and development of the nation.

The objectives of disinvestment in India include reducing the burden of loss-making PSUs, improving public finances, fostering competition, funding growth and social welfare, encouraging wider ownership, and depoliticizing non-essential services. It aims to enhance efficiency, promote private sector participation, and drive socio-economic development in the country.

The importance of disinvestment lies in its ability to address key financial challenges and support vital initiatives. The proceeds from disinvestment are instrumental in financing the burgeoning fiscal deficit and retiring government debt, which relieves the strain on public finances. Additionally, these funds can be channelled towards large-scale infrastructure development, stimulating spending and driving economic growth. Moreover, disinvestment plays a crucial role in funding social sector welfare programs in areas such as health, education, and initiatives like MGNREGA, which contribute to the overall well-being of the population.

Over the years, disinvestment of Public Sector Undertakings in India has been done in a phased manner. Here is a short timeline about the same.

  • 1991: Government announces 20% disinvestment in selected PSUs, selling shares to Mutual funds and financial institutions.
  • 1992: Shares sold to FIIs, PSU employees, and banks.
  • 1993: Rangarajan Committee suggests disinvestment in PSUs, but the government does not implement it.
  • 1996: The disinvestment commission under GV Ramakrishna is formed.
  • 1998-2000: Vajpayee Government classifies PSUs as strategic and non-strategic, initiating phased disinvestment.
  • 2004: UPA Government updates disinvestment policy in its Common Minimum Program.
  • 2005: Money earned from disinvestment goes to the National Investment Fund (NIF).
  • 2009: UPA-2 resumes the disinvestment process, allowing disinvestment of all PSUs up to a limit of 49% through public offers.
  • 2013-14: Attempts to earn funds through disinvestment face challenges and a lukewarm response from investors.
  • 2014: Modi Cabinet approves disinvestment in various PSUs and closure of certain non-viable PSUs while reviving some loss-making but viable ones.

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Largest Public Sector Undertaking in India 

The Indian Railways stand as the largest public sector enterprise in India, encompassing an extensive network that spans the entire country. As a vital lifeline of transportation, it plays a crucial role in connecting people, facilitating trade, and fostering economic growth. The Indian Railways is renowned for its vast infrastructure, including thousands of kilometers of tracks, numerous railway stations, and a diverse fleet of trains catering to various needs and preferences.

It not only serves as a reliable mode of transport for millions of passengers every day but also carries a significant portion of the nation’s freight, facilitating the movement of goods across different regions. With its rich history and continuous modernization efforts, the Indian Railways remains a significant contributor to the country’s socio-economic development, supporting connectivity, employment generation, and the overall mobility of people and goods.

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Public Sector Undertakings in India 

The topic of Public Sector Undertakings (PSUs) in India is important for the UPSC (Union Public Service Commission) examination as it falls under the UPSC Syllabus, particularly in areas such as Indian Economy, Governance, and Current Affairs. Understanding the functioning, significance, and disinvestment-related aspect of PSUs is crucial for aspirants preparing for the UPSC examination. Additionally, knowledge of PSUs can be acquired by attempting UPSC Online Coaching and UPSC Mock Test, as questions related to the role of PSUs in the economy, government policies, and their impact on various sectors often feature in the examination.

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Public Sector Undertakings in India FAQs

How many public sector undertakings are there in India?

The exact number of public sector undertakings (PSUs) in India varies, but there are over 250 PSUs at the central and state levels.

What is called Public Sector Undertaking?

Public Sector Undertaking refers to a government-owned corporation or company in which the government holds a significant stake.

Which is the largest PSU in India?

Oil and Natural Gas Corporation Limited (ONGC) is the largest PSU in India.

Who is the father of PSU in India?

First PM of India, Jawaharlal Nehru is often considered the father of PSUs in India.

What is disinvestment in public sector called in India?

Disinvestment in the public sector is called divestment or disinvestment itself in India.


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