In view of the coronavirus pandemic, we are making LIVE CLASSES and VIDEO CLASSES completely FREE to prevent interruption in studies

PSU stands for Public Sector Undertakings. They are also often come across by the term Public Sector Enterprises. PSUs are state-owned enterprises in India.  Moreover, the union government of India or any of the many state and territorial governments own the PSUs. In addition, the government owns a majority of the company’s stocks. Here, find all you need to know about PSUs in Economics.

There are two different classifications of public sector undertakings:

  • The Central Public Sector Enterprises (CPSEs) which the Central Government controls.
  • The State Level Public Enterprises (SLPEs) which the State Governments control.

Features of PSUs in Economics

The main characteristics of PSUs in economics are as follows:

  1. State Ownership: Public sector undertakings are in full ownership and control of the Government or some other public authority. For instance, the Central Government owns the Reserve Bank of India. Similarly, the Government of Delhi State owns the Delhi Transport Corporation.
  2. Government Control: The governments of India not only own but also control the functions of the PSUs in India.
  3. Service Motive: The primary aim and objective of a public sector undertaking (PSU) are to offer quality service to the public. In order to serve the people, it may even incur losses. For instance, the Food Corporation of India provides food grains to the public at subsidised prices.
  4. State Financing: The Government provides the capital and funds through appropria­tions from its budget. The government may also provide loans from time to time with the aim to improve the overall functioning of the PSU.
  5. Public Accountability: Public sector undertakings (or PSUs) are accountable to the public at large. Their performance and results are very critical to the public. The Comptroller and Auditor General of India conduct the annual audit of these undertakings. Moreover, their annual reports are subject to discussion in the Parliament or the State legislature.
  6. Bureaucratic Management: The management of these PSUs is bureau­cratic in nature. Furthermore, this means that certain Government rules and regulations govern their operations.

List of Indian PSUs in Economics

There are 8 Maharatnas, 16 Navratnas and 74 Miniratnas as on 13th September of the year 2017. Some of the Maharatnas are as follows.

  1. National Thermal Power Corporation (NTPC)
  2. Coal India Limited (CIL)
  3. Gas Authority of India Limited (GAIL)
  4. Oil and Natural Gas Corporation (ONGC)
  5. Bharat Heavy Electricals Limited (BHEL)

Further, some of the Navratnas are as follows.

  1. Hindustan Aeronautics Limited (HAL)
  2. National Aluminium Company (NALCO)
  3. Oil India Limited (OIL)
  4. Power Finance Corporation (PFC)

Finally, some of the Miniratnas are as follows:

  1. Airport Authority of India (AAI)
  2. Bridge and Roof
  3. Cochin Shipyard (CSL)

Objectives of PSUs in Economics

Furthermore, some of the objectives that PSUs aim are accomplishing are as follows.

  • Promoting rapid economic development with emphasis on creating and expanding infrastructure.
  • PSUs also aim at generating financial resources for the development of the economy.
  • Moreover, creating employment opportunities is one of the primary goals of PSUs.
  • Promoting balanced regional growth.
  • Encouraging and developing small scale and ancillary industries in India.
  • Accelerate export promotion.
  • Also, accelerate import substitution.
  • Promoting redistribution of wealth and income.

Roles of PSUs in Economics and Economic Development

  1. Capital and Public Sector Formation: The role of public sector in collecting saving and investing them during the planning ear is very important. Moreover, during the first and second five-year plan it was 54% of the total investment. Furthermore, we see a decline to 24.6 % in the year 2010-11.
  2. Balanced Regional Development: Public sector undertakings locate their plants in backward parts of the country. These areas lack basic industrial and civic facilities like electricity, water supply, township and manpower. Public enterprises then develop these facilities, thereby bringing about a complete transformation. Transformation in the socio-economic life of the people in these regions. Moreover, steel plants of Bhilai, fertilizer factory at Sindri, are few examples of the development of backward regions by the public sector.
  3. Employment Generation: Public sector creates millions of jobs to fight the obvious problem of unemployment in India. However, the number of people without employment in March 2011 was 150 lakh. Furthermore, the public sector contributes a lot towards the improvement of working and living conditions of workers.
  4. Promotion of Research and Development: Since most of the public enterprises are engage in high technology and heavy industries, they undertake research and development programmes. Public sector lays the strong and wide base for self-reliance in the field of technical know-how. Also, there is a strong emphasis on the maintenance and operation of sophisticated industrial plants, machinery and equipment in the country. Moreover, the expenditure on research and development reduces the cost of production.
  5. Export Promotion and Foreign Exchange Earnings: Some public enterprises have done much to promote India’s export. The State Trading Corporation (STC), the Minerals and Metals Trading Corporation (MMTC), Hindustan Steel Ltd., the Bharat Electronics Ltd., the Hindustan Machine Tools, etc., have done very well in export promotion

Problems faced by PSUs in India

Some of the critical problems of Indian PSUs in Economics are as follows.

  • Poor policy making and poor execution
  • Over-staffing
  • Very high operation costs
  • Lack of a realistic and proper pricing policy
  • Lack of vision and motivation for self-improvement
  • Wastage of resources or under-utilization of resources

To conclude, the role of PSUs in macroeconomics are as follows.

Being the largest commercial enterprises in the country, PSUs provide a huge leverage to the government (their controlling shareholder) to intervene in the economy. Their intervention is either directly or indirectly to achieve the desired socio-economic objectives. PSUs play a key role in steering the national economy in the right direction.

A recent study by The Economist magazine shows the difficulty for an emerging economy with a small or non-existent public sector to achieve sustainable economic growth. The Philippines is one such economy. The government-owned commercial enterprises possess the unique ability to rise above the short-term commercial interest to invest in local assets and resources so as to maximise the long-term economic gains.
The rural growth story, which has recently caught the attention of the private sector could not have been possible without the number of basic infrastructure services offered by the public sector in this area. LIC, one of the largest PSUs, was probably the only large investor in the Indian equity market when rest of the large investors preferred to stay away during the market turmoil of 2008.

Shock your Mom with more marks than she expected

Get access to 300,000+ questions curated by India’s best academic experts.

+91
No thanks.

Request a Free 60 minute counselling session at your home

Please enter a valid phone number
  • Happy Students

    7,829,648

    Happy Students
  • Questions Attempted

    358,177,393

    Questions Attempted
  • Tests

    3,028,498

    Tests Taken
  • Doubts Answered

    3,020,367

    Doubts Answered