Professional Documents
Culture Documents
Diagnosis of PSU 9
Diagnosis of PSU 9
What is PSU?
Public sector Unit (PSU) or Central Public Sector Enterprise (CPSE) is the company that is owned by
the government of India and the government holds 51% of the stake or more in them.
In 1969, the banks were nationalised because firstly, the private sector banks were biased and
worked with a sole intention of generating profits giving least attention to the social sectors of the
nation. Secondly, nationalisation of banks was done with an intention to bring rural lending and
reach out to the rural areas to increase credit availability to poor by banks. Thirdly, the purpose to
set up PSU’s was to strengthen the core sectors of the economy like rural, agriculture, small and
medium enterprises, generate employment and income for the people of India. There are 300 PSU’s
in India as on March 2019 and gives employment to 15 lakh employees. PSU’s in India hold key
position in sectors like Power, Petroleum, Railways, Coal, Mines, Telecom, Civil Aviation, banks.
Bruised PSU:
Resolution:
According to the announcement made in Tranche 5 of stimulus package in 2020, the government of
India is framing a new public sector enterprise (PSE) policy in which it will categorise strategic and
non-strategic sectors on the basis of industrial policy, 1991 (under which 90% of the companies were
inclined towards private sector and rest 10% into PSU). Under strategic sector like defence, railways,
medicine, at least, 1 and maximum of 4 should be PSU and also there would be private sector
allowed. While, in non-strategic sector like insurance, mining, discoms and power distribution
companies, PSU’s will be privatised based on feasibility and are open to consolidation. Gradually, the
government is reducing its ownership below 51% and allowing the PSU’s to go private and gain more
competitiveness. Privatisation is aimed at improving the foreign direct investment (FDI) or
investment in sectors that require technological advancements thereby providing a boost to the
economy.
However, the sale of the stake in BPCL, SCI and CONCOR will fetch around 78,400 crore to the
government, moving closer to their disinvestment target for the year. This will give a boost to their
disinvestment programme for CPSE’s and the resources that will unlock from such strategic
disinvestment/privatisation would be used to finance the developmental programmes of
government benefiting the public.
The government officials and market experts suggest that the government must distance
itself from PSU governance in order to give PSU’s a better perception of more flexibility in
the market and make them independent of any government restrictions so that PSU
management can take decisions with more ease and no political interference.
The government must transfer its stake to a holding company and professional board
amendments to ensure effective governance.
Dual regulation of government and Ministry of Finance (MoF) should stop micromanaging
PSU’s and set them free of constraints like lending, management compensation and
recruitment.
They also assert that if PSU’s are privatised, the private players eventually would think only
about profits and least about the development of core sectors of the economy.
Concluding Thoughts:
Privatisation of PSU’s have its good and bad points. Therefore, the government must adopt a
balanced approach wherein they can retain their stake in the PSU’s and also do not let them
completely go in to the hands of private players. Their retained stake and intact management
control helps the government to monitor and keep a tight vigilance in case of any manipulative and
unlawful activities occur within the institutions.