In India, a government owned sector is termed as a public sector undertaking (PSU).

This
term is used to refer companies which the government own a majority (51 percent or more)
of the company’s equity.

The Public Sector Undertakings is considered as major instrument of state intervention in

economic activities in the developing sector. These countries were facing the matter of
income and regional inequality along side the low level of employment and lack of skilled
manpower. Further, the main contribution to Gross Domestic Product(GDP) in developing
economies comes from the agricultural sector due to the weak industrial base and absence of
service sector. At an equivalent time, the low level of savings & poor infrastructure fail to
encourage private investment. Given the set-up of economic system, the state decided to
come forward with a clear long-term development strategy.There by, the government
followed a plan-led development strategy wherein the major role was given to the public
sector. The objective behind the plan-led development strategy was to make ensure efficient
utilization of limited economic resources along with the social objective of growth with
equity
1.in the last 6 years, there have been four positive developments with respect to the reform of
India’s public sector enterprises. According to Dr. Bimal Jalan, the Governor of the RBI, the
most significant for the future is the partial disinvestment of equity of selected enterprises. In
most cases, however, the extent of disinvestment is very small (less than even 20% of equity).
But it is no doubt an important first step in the commercialization of enterprises and in
making them subject to public scrutiny and accountability.

2.public sector enterprises including commercial banks are now encouraged to boost fresh
equity directly from the general public instead of depend upon government subsidy. If this
measure is properly taken the future expansion of enterprises would depend on their ability to
attract capital from the public. This, of course, will depend to some extent on their financial
performance.

3. public sector monopolies called ‘natural monopolies’ are now forced to face competition
from new private enterprises in most sectors. According to Dr. Jalan, A competitive
environment may be a necessary, though not, sufficient condition for efficient use of
resources by enterprises.

4.steps are being taken to make the institutional relationship between the government and
commercial enterprises more contractual and less ad hoc. It may be noted that the Central
Government has signed a memorandum of undertaking with more than 100 commercial en-
terprises in the past few years. No doubt a proper and contractual relationship is more
conducive to raised performance than an off-the-cuff and unplanned system of supervision
and control.

However, these measures are not sufficient to impart the needed dynamism to the economy
and to remove fiscal deficit. India’s internal debt has reached a staggering figure and is
becoming unmanageable day by day. Moreover, it is no longer possible and economically
feasible to provide any revenue or capital support to public enterprises.

In truth, in the next few years, fiscal discipline as also welfare objectives for the poor require
that the burden of interest payments on internal debt is drastically reduced. This is likely, if a
part of the general public sector assets are sold to the general public and receipts are wont to
retire debt .A more positive policy is now required for partial disinvestment in profit-making
enterprises and outright sale of losing concerns.

The combination of partial sale of equity in profit-making enterprises and outright sale of los-
ing and sick enterprises can generate substantial resources. Moreover, shares of well-
performing enterprises including banks can be sold at a substantial premium over book value.
The sale of losing concerns, in addition to recovering the costs of some past investments, will
also relieve the budget from the burden of financial losses of such enterprises.
ROLE of PSU In India

Government of India, as a part of its national agenda to market growth, increase in efficiency
and international competitiveness, has been continuously framing policies for industrial
growth, fiscal, trade and foreign investment to realize overall socio-economic development of
the country. As a result of exceptionally
severe balance of payments and monetary crisis within the year 1991, the government
decided to shift to a liberalized economy with greater reliance upon economic process ,a
larger role for the private sector including foreign direct investment.

The Indian Government has categorized public sector enterprises into 3 categories i.e
Maharatan , Navratan , Miniratan . The categorization is done on the basis of Turnover, Net
worth, and Net profit on Annual
basis. The companies should be present on Stock Exchange as per SEBI rules.

The Maharatan Status

The Government of India has currently given the status of Maharatan to
10 PSUs.The status of Maharatan is given in order to give them more
power and autonomy to control the financial matters, so that they can
grow and excel and can compete in foreign markets internationally.

Eligibility and Benefits of Maharatna:

 The company already holds Navratna status.

 It is listed on the Indian stock exchange fulfilling the minimum prescribed public
shareholding according to the SEBI regulations.
 Average annual profit more than Rs 5000 crore for 3 years or average annual net
worth more than Rs 15000 crore for 3 years or Average annual turnover more than Rs
25000 crore for 3 years.
 Invest up to 15% of net worth or Rs 1000 crore to 5000 crore.

Companies with Maharatan status in India

1.Bharat Heavy Electricals Limited
2. Bharat Petroleum Corporation Limited
3. GAIL (India) Limited
4. Coal India Limited
5. Hindustan Petroleum Corporation Limited
6. Indian Oil Corporation Limited
7. Steel Authority of India Limited
8. Oil & Natural Gas Corporation Limited(ONGC)
9. Power Grid Corporation of India Limited
10. NTPC limited

Navaratna scheme

The Government of India had introduced navaratna sceheme in 1997 to identify CPSEs that
had corporate advantage to support them in their drive to become global giants.

Eligibility and Benefits of Navaratna:

 The company must have ‘Miniratna Category – I‘ status along with a Schedule ‘A’
listing.
 It should have at least 3 ‘Excellent’ or ‘Very Good’ Memorandum of Understanding
(MoU) during the last five years.
 Need a score of 60 out of 100 on the following parameters like net profit, net worth,
total manpower cost, total cost of production etc.
 Invest up to 15% of net worth or upto Rs 1000 crore.

 Companies with Navaratna status in India

1. Bharat Electronics Limited

2. Hindustan Aeronautics Limited

3. Mahanagar Telephone Nigam Limited

4. National Aluminium Company Limited

5. NBCC (India) Limited

6. NMDC Limited

7. NLC India Limited

8. Oil India Limited

9. Power Finance Corporation Limited

10. Rashtriya Ispat Nigam Limited

11. Rural Electrification Corporation Limited

12. Shipping Corporation of India Limited

 13. Container Corporation of India Limited
14. Engineers India Limited

Eligibility and Benefits of Miniratna Category -I:

 profit of Rs 30 crore or more for consecutive 3 years.

 Invest up to Rs 500 crore or equal to net worth whichever is lower.

Eligibility and Benefits of Miniratna Category -II:

 profit for consecutive 3 years.

 Invest up to Rs 300 crore or 50% of net worth whichever is lower.

Miniratna Category - I CPSEs

(as on January, 2020)
1. Airports Authority of India
2. Antrix Corporation Limited
3. Balmer Lawrie & Co. Limited
4. Bharat Coking Coal Limited
5. Bharat Dynamics Limited
6. BEML Limited
7. Bharat Sanchar Nigam Limited
8. Bridge & Roof Company (India) Limited
9. Central Warehousing Corporation
10. Central Coalfields Limited
11. Central Mine Planning & Design Institute Limited
12. Chennai Petroleum Corporation Limited
13. Cochin Shipyard Limited
14. Cotton Corporation of India Limited
15. EdCIL (India) Limited
16. Kamarajar Port Limited
17. Garden Reach Shipbuilders & Engineers Limited 18. Goa Shipyard Limited
19. Hindustan Copper Limited
20. HLL Lifecare Limited
21. Hindustan Newsprint Limited
22. Hindustan Paper Corporation Limited
23. Housing & Urban Development Corporation Limited 24. HSCC (India) Limited
25. India Tourism Development Corporation Limited
26. Indian Rare Earths Limited
27. Indian Railway Catering & Tourism Corporation Limited 28. Indian Railway Finance
Corporation Limited
29. Indian Renewable Energy Development Agency Limited
30. India Trade Promotion Organization
37. Mineral Exploration Corporation Limited
43. National Small Industries Corporation Limited
31. IRCON International Limited
32. KIOCL Limited
33. Mazagaon Dock Shipbuilders Limited
34. Mahanadi Coalfields Limited
35. MOIL Limited
36. Mangalore Refinery & Petrochemical Limited
38. Mishra Dhatu Nigam Limited
39. MMTC Limited
40. MSTC Limited
41. National Fertilizers Limited
42. National Projects Construction Corporation Limited
44. National Seeds Corporation
45. NHPC Limited
46. Northern Coalfields Limited
47. North Eastern Electric Power Corporation Limited
48. Numaligarh Refinery Limited
49. ONGC Videsh Limited
50. Pawan Hans Helicopters Limited
51. Projects & Development India Limited
52. Railtel Corporation of India Limited
53. Rail Vikas Nigam Limited
54. Rashtriya Chemicals & Fertilizers Limited
55. RITES Limited
56. SJVN Limited
57. Security Printing and Minting Corporation of India Limited 58. South Eastern Coalfields
Limited

Disinvestment and Privatization

 Privatisation means allowing the private sector to set up more and more of
industries that were previously reserved for public sector.
 Change in ownership: Degree of privatisation judged by the extent of ownership
transferred from public to private sector.

Objectives of Privatisation

 To increase efficiency & competitive power of the enterprises

 To strengthen industrial management.
  To earn more & more Foreign currency.
 To make optimum use of resources
 To achieve rapid industrial development of the country.

Disinvestment
The action of an organisation or government selling or liquidating an asset or
subsidiary .

Objectives of Disinvestment
 To reduce the financial burden on government
 To improve public finances
 To introduce, competition and market discipline
 To increase growth of the firm
 To encourage wider share of ownership

Disinvestment and Privatization of LIC by Indian Government

The government has decided to get LIC listed on the markets. The announcement was made
by Finance Minister Nirmala Sitharaman in her Budget Speech. 

Rationale behind the LIC Disinvestment policy 

The government in clarifying the rationale behind the LIC stake sells policy comments, the
categorization of companies on the stock market additionally to regulating a corporation
allows access to markets (financial) and determines its value. Retail investors also are in
process allowed a chance to urge a share within the wealth created. the govt has agreed to
auction a neighborhood of tis holding to the to LIC by IPO (Initial Public Offering).
However, with regards to the IPO there are a couple of things that must clarified and borne in
mind:

Firstly, the LIC is owned one hundred percent by the govt and there's a disinvestment of
shares it's unlikely to exceed 10% of the shares to the general public sector insurance
company . It must be taken into consideration LIC is governed by the LIC act, so before the
IPO is executed the act must be amended accordingly.

As mentioned above the Modi government for the FY20 has set a disinvestment target of
two .1 lakh crores and therefore the disinvestment of LIC is meant to fetch 70-80 thousand
crore. The listing shall make the IPO one among India’s largest in terms of “market
capitalization”. it's being contemplated by experts the IPO shall attract foreign investors also .
LIC has consecutively been ranked because the country’s biggest insurer, with a share of
76.28%. LIC features a plethora of subsidies e.g. IDBI Bank. NPAs for LIC increased to six .
10 for the initial six months of 2019-2020. Insurers have successfully doubled the Gross
NPAs within the last five years. Therefore, perceiving the initiative from a holistic
perspective entails certain pros thereto also .