ROLE OF PUBLIC SECTOR UNITS IN THE

GROWTH OF INDIAN ECONOMY

SUBMITTED TO

SUBMITTED BY

DR. DIPTI SHARMA

JAIN

KUMAR(2011UCP1190)
Assistant Professor

JITENDRA

KHATRI(2011UCP1192)
MNIT JAIPUR

ADARSH KUMAR(2011UCP1166)
PERMESHWAR

LAL(2011UIT)

INTRODUCTION
The

government-owned corporations are termed as Public Sector

Undertakings (PSUs) in India

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.

The

public sector might provide services that non-payer cannot be

excluded from (such as street lighting), services which benefits all
of society rather than just the individual who uses the service (such as
public education), and services that encourage equal opportunity.

 Arms

& Ammunition and the allied items of defence

equipment, defence air-crafts and warships

Railways

transport, air transport etc. come under PSUs.

OBJECTIVES OF PUBLIC SECTOR UNITS

Economic development
Public

enterprises were set up to accelerate the rate of

economic growth in a planned manner.

These

enterprises have created a sound industrial base

for rapid industrialisation of the country.

They

are expected to provide infrastructure facilities

for promoting balanced and diversified economic
structure of development.

Growth of investment in CPSEs

Particulars

Total
investment(Rs.
in crore)

Enterpri
ses
(Number
s)

On the eve of the 1st Five Year Plan (1.4.1951)

29

On the eve of the 2nd Five Year Plan (1.4.1956)

81

21

On the eve of the 3rd Five Year Plan (1.4.1961)

948

47

At the end of 3rd Five Year Plan (31.3.1966)

2410

73

On the eve of the 4th Five Year Plan (1.4.1969)

3897

84

On the eve of the 5th Five Year Plan (1.4.1974)

6237

122

At the end of 5th Five Year Plan (31.3.1979)

15534

169

On the eve of the 6th Five Year Plan (1.4.1980)

18150

179

On the eve of the 7th Five Year Plan (1.4.1985)

42673

215

At the end of 7th Five Year Plan (31.3.1990)

99329

244

On the eve of the 8th Five Year Plan (1.4.1992)

135445

246

Cont
Particulars

Total
Enterprise
investment
s
(Rs. in crore) (Numbers)

At the end of 8th Five Year Plan (31.3.1997)

213610

242

At the end of 9th Five Year Plan (31.3.2002)

324614

240

At the end of 10th Five Year Plan (31.3.2007)

421089

247

At the end of 11th Five Year Plan (31.3.2012)

CONTIRBUTION OF CPSEs IN INDIAs GDP

Turnover ranged between 20-24%

Highest contribution in FY09 was

24%

Decline in turnover in FY10

primarily due to reduction in sale
of refined petroleum, steel,
fertilizer, and telecom sectors

Again in FY12 it has incresed to

22.1%

CONTRIBUTION IN INDIAS EXPORT

PSUs are increasingly focusing on

international trade in goods and services,
which directly has a bearing on the foreign
exchange earnings of the country

CPSEs foreign exchange earnings primarily

through export of goods and merchandise,
income from royalty and consultancy
services

Foreign earning is accounted for 9% of the

total export earning during FY08-FY12

The share of forex earnings to overall

turnover of the PSUs has averaged to 6%
during FY08-FY12 and stood at 6.8% in FY12

Approximate 90% of earning from the

export of goods and merchandise.

TREND IN SECTRO WISE TURNOVER

The

turnover of the CPSEs during

FY12 grew from 14,980.2 bn in FY11
to 18,419.2 bn in FY12.

The

turnover of CPSEs has grown at

13.9% CAGR during FY08-FY12.

The

sector witnessed the highest

CAGR of 29.5% during FY08-FY12,
followed by the electricity sector
with 17.4% CAGR.

PROFIT/LOSS MAKING CPESs AND THEIR

PROFIT AND LOSS

225 operating CPSEs in FY12, a majority i.e.

161 CPSEs (72%) were profit making and 63
CPSEs incurred losses

The number of profit making CPSEs

marginally increased from 160 in FY08 to
161 in FY12.

The profit of these profit making CPSEs

increased from`915.7 bn in FY08
to`1,251.2 bn in FY12.

The number of loss making CPSEs has also

grown from 54 in FY08 to 63 in FY12 and the
loss of these loss-making CPSEs has
increased from`103.3 bn in FY08 to`276
bn in FY12.

EMPLOYMENT GENERATION

PSUs have very important role for

generating employment in country.

Approximate 5% employment of organized

sector.

In FY12, they employed 1.4mn people , of

which 25% belonged to the managerial and
supervisory cadre, indicating that PSUs
have a high percentage of skilled
workforces.

The total no. of employees has a declined

trend from FY08-FY12 at -2.8% CAGR.

Average Annual Per Capita Emoluments is

increasing.

SELF-RELIANCE
Another

aim of public enterprises is to promote

self-reliance in strategic sectors of the national
economy.

For

this purpose, public enterprises have been set

up in transportation, communication, energy,
petro-chemicals, and other key and basic
industries.

Development of backward Areas

Several

public enterprises were established in

backward areas to reduce regional imbalances in
development.

Balanced

development of different parts of the

country is necessary for social as well as
strategic reasons.

EGALITARIAN SOCIETY
An

important objective of public enterprises is to prevent

concentration of economic power and growth of private
monopolies.

Public

sector helps the Government to enforce social

control on trade and industry for ensuring equitable
distribution of goods and services.

Public

enterprises protect and promote small scale

industries.

CONSUMER WELFARE
Public

enterprises seek to protect consumers from

exploitation and profiteering by ensuring supply of
essential commodities at cheaper prices.

They

aim at stabilising prices

PUBLIC UTILITIES
Private

sector is guided by profit motive.

Therefore,

it is reluctant to invest money in public

utility services like water supply, gas, electricity,
public transport.

Therefore

the Government has to assume

responsibility for providing such services

DEFENCE

Government
Supply

has to set up public enterprises for

production of defence equipment.

of such equipment cannot be entrusted for

private sector due to the reason of the security.

Labour welfare
Public

enterprises serve as model employers.

They

ensure welfare and social security of

employees.

Many

public enterprises have developed townships,

schools, college and hospitals for their workers.

DIFFERENT TYPES OF CPEs

MAHARATNA
NAVRATNA
MINIRATNA

MAHARATNA

CRITERIA

1. Three

years with an annual net profit of

overRs.2500crore

2. Net

worth of Rs. 10,000 crore

3. Turnover

of Rs. 20,000 crore

NAVRATNA

CRITERIA

The company must obtain a score of 60 (out of

100) The score is based on six parameters

Net profit to net worth

Cost of services

PBDIT(Profit Before Depreciation, Interest and Taxes)to

turnover

PBDIT to capital employed

EPS (Earning Per Share).

Inter-sectoral performance.

MINIRATNA

CRITERIA

Category I

These miniratnas granted certain autonomy like incurring

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

Category II

These

miniratnas granted certain autonomy like

incurring capital expenditure without government
approval up to Rs. 300 crore or equal to their net
worth, whichever is lower.

Maharatna CPSEs
Bharat

Heavy Electricals Limited

Coal

India Limited

GAIL

(India) Limited

Indian
NTPC
Oil

Oil Corporation Limited

Limited

& Natural Gas Corporation Limited

Steel

Authority of India Limited

Navratna CPSEs
Bharat

Electronics Limited

Bharat

Petroleum Corporation Limited

Container

Corporation of India Limited

Engineers

India Limited

Hindustan

Aeronautics Limited

Hindustan

Petroleum Corporation Limited

Mahanagar

Telephone Nigam Limited

National

Aluminium Company Limited

National

Buildings Construction Corporation Limited

NMDC

Limited

Miniratna Category - I CPSEs

Airports
Antrix

Authority of India

Corporation Limited

Balmer

Lawrie & Co. Limited

Bharat

Coking Coal Limited

Bharat

Dynamics Limited

BEML

Limited

Bharat

Sanchar Nigam Limited

Miniratna Category-II CPSEs

Bharat

Pumps & Compressors Limited

Broadcast

Engineering Consultants (I) Limited

Central

Mine Planning & Design Institute Limited

Central

Railside Warehouse Company Limited

Ed.CIL

(India) Limited

Engineering
FCI

Projects (India) Limited

Aravali Gypsum & Minerals India Limited

Ferro
HMT

Scrap Nigam Limited

(International) Limited

HSCC

(India) Limited

Problems in Public Sector:

Even though the public sector is going in a correct path,
some problems and short comings are there. The main
short comings are as follows.

1.Delay in completion:Often a very long time is taken in the

establishment and completion of public enterprises. Delay in
completion leads to increase in the cost of establishment and
benefits extracted from them are delayed.

2.Faulty evaluation:There is no proper evaluation of demand and

supply and expected costs and benefits. There are no clear cut
objectives and guidelines.

3.Heavy overhead costs:Public enterprises often spend huge

amounts on providing housing and other amenities to employees.
Though such investment is useful for employees but it takes away
a large part of capital and the project suffers from financial
difficulties.

4.Poor returns:Majority of the public enterprises in India are

incurring loss. In some of them the profits earned do not yield a
reasonable return on huge investment. wasteful expenditure
and dogmatic pricing policy result in losses.

5.Inefficient management:High level posts are often occupied

by persons lacking necessary expertise but enjoying political
support.

6.Political interference:Such interference leaves little scope

for initiative and freedom of action. Public enterprises enjoy
little autonomy and flexibility of operations.

7.Labour problems:In the absence of proper manpower

planning public enterprises suffer from over-staffing. Jobs are
created to fulfil employment goals of the Government.
Guarantee of job in these enterprises encourages trade unions
to be militant in pursuing their aims.

Suggestions to Improve the Performance of Public

Sector Enterprises

Controlling the cost at every level of public sector

enterprises.

Increase

the production.

Reforms in capital base.

Increase

the standard of public sector enterprises to manage

the competition from both domestic and foreign competitors.

Identifying

redundant manpower and dealing with it through

means a retraining, redeployment and encouraging selfemployment etc.

CONCLUSION
Over

the years, PSUs have expanded their presence in

diverse sectors such as manufacturing, engineering,
steel etc. Due to enhanced empowerment and
autonomy of the CPSEs by the government. Due to
enhanced empowerment and autonomy of the CPSEs
by the government.