Growth in India is significantly dependent on the performance of the measures taken by both the private and public sector enterprises. The Public Sector Undertaking (PSUs) is an organization that is owned and founded by the government. It can be either the central or the state government. The key objective for the creation of the Public sector is to provide public goods or services to people and not to earn profit. It is behind the provision of key public goods that are significantly large in scale and the operation might incur losses. Public goods are non-rivalrous and non-excludable. Hence, it becomes challenging to ensure its provision. The public sector was allotted the ‘role of commanding heights’ in accordance with the second Five Year Plan (2nd FYP). The Industrial Policy Resolution (IPR), 1956 has classified the industries into 3 classes. Those are as follows
Category A – comprised 17 industries which were earmarked exclusively for the public sector Category B – had 28 industries and the public sector was charged with contributing to the future investment
Category C – it comprises the industries having private sector share. However, the public sector is free to invest if needed.
A government company has more than 50 percent of the share in the organization I.e. the majority share.
The public sector plays a major role in the overall landscape of the Indian economy. It can be enumerated as follows-
- It promoted the diversification of manufacturing commodities. The variety of goods produced immensely increased after the liberalization reforms of 1991.
- The setting up of the public sector assisted in the development of modern industries in India like, electronics and chemicals among others.
- It contributed to infrastructure development specifically in the arena of transportation and energy.
- The public sector led to the promotion of capital formation in the country. The humongous investment led to employment creation and also the training of human resources. Along with that, there was a focus on enhancing social security, better wages and working conditions.
- Regional development of several underdeveloped regions was affected by the upcoming public sector. Hence it led to regionally balanced growth in a way.
- It helped in the provision of quality services to the public and hence enhanced the standard of living.
The Public Service Undertakings (PSUs) are specified in Section 2(45) of the Companies Act 2013. Based on governing agencies, it can be categorized as the Central PSUs and the State PSUs.
Similarly, based on classifications, they can be divided into three types
- Mini Ratnas- It had two categories in further classification.
- Navratnas – it was elucidated in the budget released by the then Finance Minister P. Chidambaram. The system evaluated PSUs based on their performances. It was named so as there were nine such PSUs in the beginning.
The MAHARATNAS status was accorded by the Government of India (GOI) to the Public Sector Undertakings (PSUs) that had the capability to emerge as global giants and the idea was to enable the same by granting them some autonomy to operate.
The Companies granted the Maharatna status were provided with the freedom to make investments up to the tune of Rs. 5000 crores, to move into foreign collaborations, and to put together all appointments till the Chief Executive Officer (CEO) level (excluding the Board Of Directors).
They also have complete autonomy to make operational decisions.
As of 10th May 2023, as per a notification by the Department of Public Enterprise, Ministry of Finance, there are a total of 12 companies listed as Maharatnas. Those are as follows
1. Bharat Heavy Electricals Limited (BHEL)
- Steel Authority of India Limited (SAIL)
- Coal India Limited
- GAIL India Limited
- Hindustan Petroleum Corporation Limited (HPCL)
- Indian Oil Corporation Limited (IOCL)
- NTPC Limited (National Thermal Power Corporation)
- Oil & Natural Gas Corporation Limited,
- Power Finance Corporation
- Power Grid Corporation of India Limited (PGCIL)
- Rural Electrification Corporation Limited
- Bharat Petroleum Corporation Limited (BPCL)
Eligibility criteria for getting listed as the Maharatna –
The CPSEs complying with the following criteria are qualified to be deemed for a grant of Maharatna status.
- The PSU should be having the Navratna status.
- It should be listed on the Indian stock exchange with minimum prescribed public shareholding in accordance with the SEBI regulations.
- The average annual turnover of more than Rs. 25,000 crore, during the last 3 years. 4. An average annual net worth of more than Rs. 15,000 crore, during the last 3 years. 5. The PSU should also have an average annual net profit after tax of more than Rs. 5,000 crore, during the last 3 years.
- Lastly, it should have considerable global presence/international operations.
This method of clarification of PSUs based on Navratna, Miniratna, and Maharatna status was conceived with the set objectives of leveraging their full potential and engaging them in ensuring the growth of the Indian economy.
The advantages offered by this classification are as follows-
It stimulates the performance of PSUs by incentivizing higher investment for enabling more autonomy. Along with that a competitive spirit to perform is incorporated in the public sector company.
All this in turn translates to higher turnover and more profits in the balance sheet of Public Sector Undertakings (PSUs). Hence, this scheme of categorizing the public sector undertakings is beneficial for the Indian economy.