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Public sector undertakings or Public Sector Enterprises

Public Sector Undertakings (PSUs)

The government-owned corporations are termed as Public Sector Undertakings (PSUs).

In a PSU majority (51% or more) of the paid up share capital is held by central government or by any state government or partly by the central governments and partly by one or more state governments.

Administration

Ministry of Heavy Industries and Public Enterprises.

The Department of Public Enterprises acts as a nodal agency for all Public Sector Enterprises (PSEs).

Audits

Comptroller and Auditor General of India (CAG)

Evolution of PSU's
    1. The Industrial Policy Resolution 1948 envisaged the active engagement of the State in development of industries for continuous and equitable growth in economy.
    2. The Industrial Policy Resolution 1956classified industries into three categories with respect to the role played by the State :
      1. Schedule A:  included industries whose future development would be the exclusive responsibility of the State.
      2. Schedule B: included Enterprises whose initiatives of development would principally be driven by the State but private participation would also be allowed to supplement the efforts of the State.
      3. Schedule C:  included the remaining industries, which were left to the private sector.
    3. In 1969, the government nationalized 14 major banks.
    4. The Industrial Licensing Policy 1970 placed certain restrictions on undertakings belonging to large industrial houses, defined on the basis of assets exceeding Rs 350 mn.
    1. In 1973, the definition of large industrial houses was adopted in conformity with that of the Monopolies and Restrictive Trade Practices Act (MRTP) 1969 and included companies whose assets exceeded Rs 200 mn.

    Classification

    Public Sector Undertakings (PSUs) are classified in to three categories:

    1. Public Sector Enterprises (PSEs),
    2. Central Public Sector Enterprises (CPSEs),
      1. Strategic Central Public Sector Enterprises
        1. Arms & Ammunition and the allied items of defence equipments, defence air-crafts and warships.
        2. Atomic Energy (except in the areas related to the operation of nuclear power and applications of radiation and radio-isotopes to agriculture, medicine and non-strategic industries)
        3. Railways transport.
      2. Non-strategic Central Public Sector Enterprises
    3. Public Sector Banks (PSBs).

    Non-profit or 'No Profit - No Loss' companies.

    Objective: to promote commerce, art, science, religion, charity or any other useful purpose and not having any profit motive.

    Registered as non-profit company under Section 25 of the Companies Act, 1956.

    Can be registered as a company with limited liability, without the addition of the words `Limited' or `Private Limited' to its name.

    Ratna companies

    Various PSUs have been awarded additional financial autonomy by the Department of Public Enterprises.

    Financial autonomy was initially awarded to 9 PSUs as Navaratna status in 1997. 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"

    Maharatna:

    The government established the Maharatna status in 2010.

    Qualification
      1. An average annual turnover of Rs 20,000 crore during the last three years against Rs 25,000 crore prescribed earlier.
      2. The average annual net worth of the company should be Rs 10,000 crore.

      Advantages
        1. The boards of firms can take investment decisions of up to Rs 5,000 crore as against the present Rs 1,000 crore limit without seeking government approval.
        2. They can decide on investments up to 15% of their net worth in a project, limited to an absolute ceiling of Rs 5,000 crore.

        List of Maharatnas
          1. Bharat Heavy Electricals Limited
          2. Coal India Limited
          3. GAIL (India) Limited
          4. Indian Oil Corporation Limited
          5. NTPC Limited
          6. Oil & Natural Gas Corporation Limited
          7. Steel Authority of India Limited

          Navaratna:

          Qualification
            1. Having Schedule 'A' and Miniratna Category-1 status.
            2. Having at least three 'Excellent' or 'Very Good' Memorandum of Understanding (MoU) ratings during the last five years.

            Advantages
              1. It empowers PSEs to invest up to Rs. 1000 crore or 15% of their net worth on a single project without seeking government approval.
              2. In a year, these companies can spend up to 30% of their net worth not exceeding Rs. 1000 cr.
              3. They also enjoy the freedom to enter joint ventures, form alliances and float subsidiaries abroad.

              List of  Navaratnas
                1. Bharat Electronics Limited
                2. Bharat Petroleum Corporation Limited
                3. Container Corporation of India Limited
                4. Engineers India Limited
                5. Hindustan Aeronautics Limited
                6. Hindustan Petroleum Corporation Limited
                7. Mahanagar Telephone Nigam Limited
                8. National Aluminum Company Limited
                9. National Buildings Construction Corporation Limited
                10. NMDC Limited
                11. Neyveli Lignite Corporation Limited
                12. Oil India Limited
                13. Power Finance Corporation Limited
                14. Power Grid Corporation of India Limited
                15. Rashtriya Ispat Nigam Limited
                16. Rural Electrification Corporation Limited
                17. Shipping Corporation of India Limited

                Miniratna Category:

                Miniratna category I:

                Qualification

                The CPSE should have made profit in the last three years continuously, the pre-tax profit should have been Rs. 30 crores or more in at least one of the three years and should have a positive net worth.

                Advantages

                Can enter into joint ventures, set subsidiary companies and overseas offices but with certain conditions.

                Have autonomy to incurring the capital expenditure without government approval up to Rs. 500 crore or equal to their net worth, whichever is lower.

                Miniratna category I companies

                There are presently 54 Miniratna category I companies.

                Miniratna category II:

                Qualification

                The CPSE should have made profit for the last three years continuously and should have a positive net worth.

                Advantages

                Can enter into joint ventures, set subsidiary companies and overseas offices but with certain conditions.

                Have autonomy to incurring the capital expenditure without government approval up to Rs. 300 crore or up to 50% of their net worth whichever is lower.

                Miniratna category II companies

                There are presently 18 Miniratna category II companies.