Introduction Characteristics Advantages Disadvantages Categories Role of PSUs Disinvestment Recommendations

Overview Of The Presentation!!!

WHAT IS PSU ?

Central and state Public Sector Undertakings (PSUs) play a prominent role in India’s industrialization and economic development. Since independence, various socio-economic problems needed to be dealt with in a planned and systematic manner. A predominantly agrarian economy, a weak industrial base, low savings, inadequate investments and lack of industrial facilities called for state intervention to use the public sector as an instrument to steer the country’s underlying potential towards self reliant economic growth.

Why PSU in INDIA

Public sector enterprises in India have grown from only five enterprises post independence and with an investment of ` 0.3 bn in the year 1951 to 249 enterprises as on Mar 31, 2010. Aggregate investment in Central PSUs has been increasing over the years. Total investment, including equity plus long-term loans of Central PSUs went up from ` 5,135.32 bn in FY09 to ` 5799.20 bn in FY10, growing 12.93%.

Evolution of Public Sector Enterprises in India

1. State Ownership:Public undertakings are fully owned by the Government or some public authority. For example, Reserve Bank of India is owned by the Central Govern ment while Delhi Transport Corporation is owned by the Government of Delhi State.

2. Government Control:The ultimate control of a public sector undertaking lies with the Government.

CHARACTERISTICS OF PSU’S

3. Service Motive: The primary objective of a public sector undertaking is to render service to the public at large. In order to serve the public, it may even incur loss. For example, 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 appropria tions from its budget. The government may also provide loans from time to time from the State exchequer.

5. Public Accountability: Public sector undertakings are accountable to the public at large for their performance and results. The annual audit of these undertakings is con ducted by the Comptroller and Auditor General of India. Moreover, their annual reports are subject to discussion in the Parliament or the State legislature.

6. Bureaucratic Management: The management of public sector undertakings is bureau cratic in the sense that their operations are governed by certain rules and regulations prescribed by the Government.

1. Balanced growth2. Long period planning3. Facilities for economic development4. Greater public welfare5. Equal distribution of wealth6. Abolition of monopoly7. Better relation with labour force8. Achievement of self-reliance9. Utilization of local resources

ADVANTAGES OF PSU

1. Lack of initiation and efficiency2 Lack of selection of goods3. Political interference4. Slow growth5. Poor management6. Lack of flexibility

Limitations: PSU

Maharatna

Navaratna

Miniratna

Categories

Allows the PSU’s to raise its Investment Ceiling from Rs.1000 to Rs.5000 cr.

Criteria1) Granted to Navaratna companies 2) Listed in Stock Exchange3) turnover more than Rs.25000 crore. 4) Net profit Rs.5000 crore

Maharatna

Bharat Heavy Electricals LimitedCoal India LimitedGAIL (India) LimitedIndian Oil Corporation Limited NTPC LimitedOil & Natural Gas Corporation LimitedSteel Authority of India Limited

LIST of MAHARATNA

Allows to raise up to Rs. 1,000 crore or 15% of their net worth on a single project or 30% of their net worth in the whole year

Criteria1) A score of 60 (out of 100), based on six parameters

which include net profit, net worth, total manpower cost, total cost of production, cost of services, PBDIT ,capital employed.

2) A company must first be a Miniratna and have 4 independent directors on its board before it can be made a Navratna.

NAVARATNA

Miniratna-I: up to Rs. 500 crore or equal to their net worth, whichever is lower.

Miniratna-II: up to Rs. 300 crore or up to 50% of their net worth, whichever is lower.

Criteria1) Have made profits for the last three years

continuously and should have a positive net worth.

MINIRATNA

Maximizing the rate of Economic growth

Development of capital intensive sector

Development of agriculture

Balanced regional development

Increasing employment opportunities

Roles of PSU

Preventing private monopoly

Export promotion & Import substitution

Research & Development

Mobilization of resources

Establishment of socialist pattern

Selling or liquidating an asset or subsidiary.

Disinvestment is the withdrawal of capital from a country or corporation.

Disinvestment

SALIENT FEATURES

Sale of only part of equity holdings held by the government to private investors.

Leads only to dilution of ownership and not transfer of full ownership.

Privatization refers to the transfer of ownership from government to private investors.

Disinvestment is called as Partial Privatization.

Releasing large amount of public resources

Reducing the public debt

Transfer of Commercial Risk

Expose the privatised companies to market discipline

Wider distribution of wealth

Effect on the Capital Market

Increase in Economic Activity

OBJECTIVES OF DISINVESTMENT

Social security for Employees

Choosing out area for disinvestment

Threat to national security

No transparency

Failure to attract foreign buyers

Challenges in Disinvestment

Clear description of policies

Improving benefits for the employees

Support from PSU banks

Disinvestments

Improved operational excellence & Marketing strategy

Recommendations

IOC

Bharat petroleum

Hindustan petroleum

SBI

ONGC

Indian PSU in Fortune 500

1) ONGC2) NTPC3) IOC4) NMDC5) BHEL6) SAIL7) CIL8) GAIL9) OIL INDIA10)Power Grid Corporation of India

Top 10 PSU