- Date : 23/12/2021
- Read: 4 mins
PSUs are pivotal to India’s economy, and here are some of the exceptional ones among them
PSUs or Public Sector Undertakings have a crucial role to play in developing a nation. The Indian government, in its last budget, made it clear that while most of the PSUs are going to be privatised, they are a must in the strategic industries segment. The government also mentioned that there will be only 3-4 PSUs for each of the sectors.
What is a PSU?
In a PSU (public sector enterprise), the majority of the stake is held by the state or central government. PSUs can be completely owned by the government, but the minimum stake has to be 51%.
According to the stakeholding by state and central government, PSUs are classified as State Public Sector Enterprises and Central Public Sector Enterprises. Furthermore, depending on the profits made, PSUs are categorised as Maharatna, Navratna, and Miniratna companies.
There is also another classification of PSUs, public sector banks or PSBs.
Classification of PSUs
Central Public Sector Enterprises (CPSEs)
CPSEs are those enterprises where the central government has a stake of 51% or more. They are further classified as strategic and non-strategic CPSEs.
State Public Sector Enterprises (SPSEs)
SPSEs are PSUs where a state government owns (and has direct control over) a 51% stake or more.
Public Sector Banks
PSBs are banks where the central government has more than 51% capital share ownership.
These are PSUs that have already attained Navratna status. To become a Maharatna, a company must show more than Rs 20,000 crore of sales in the previous three years. The average net worth of the enterprise must be more than Rs 10,000 crore for the previous three years. Maharatna companies have full discretion regarding investment decisions up to a maximum of 15% of the net worth.
The Navratna Companies are PSUs that do not need government approval to invest up to Rs 1000 crores or about 15% of their own net worth on any project. Some examples of Navratna companies are BEL, MTNL, NBCC, OIL, Shipping Corporation, Hindustan Aeronautics, NALCO, etc.
However, it needs to be categorised as a Miniratna Category-I company first with schedule A status. There are six criteria for eligibility where the enterprise must score a minimum of 60 points out of 100. The criteria are:
- Net profit to net worth or total profit to total worth
- Total cost of production
- Total labour cost
- Cost of services
- Profit before depreciation, interest, and tax (PBDIT)
- Capital employed
- These companies, too, can invest up to 15% of their net worth without any approval from the government.
- Category–I: A PSU enterprise is categorised as Category-1 Miniratna when it earns a profit of Rs 30 crore or more (pre-tax) for at least one year in the previous three years. Moreover, the enterprise must have made profits in the past three years.
- Category–II: These PSU enterprises should have earned a profit for three years in a row, along with showing positive net worth. They are allowed to use 50% of the net worth without consent from the government.
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How many PSUs are there in India?
According to a report published by BSE, there were 366 PSUs as of 31 March 2020. However, out of these, only 171 were profit-making ventures. The number of PSUs is seen to be declining due to losses.
Here are some of the top PSUs in India that are earning high profits and running properly:
- Indian Oil Corporation Ltd
- Bharat Electronics Ltd
- National Aluminium Company Ltd
- State Bank of India
- Coal India Ltd
- Steel Authority of India Ltd
PSUs are pivotal to the nation’s development and growth. Some enterprises cannot be handed over to the private sector for multiple reasons. However, due to various reasons, the number of PSUs has been declining over the past many years.