Public Sector Undertakings

CONTROL, MANAGEMENT & PERFORMANCE

Parth R Shah Viral Doshi 11MBAO91 11MBAO14

WHAT IS PSU?
A pubic sector undertaking may be defined as any commercial or industrial undertaking owned and managed by the government with a view to maximise social welfare and uphold the public interest
Public enterprises consist of nationalised private sector enterprises, such as, banks, Life Insurance Corporation of India and the new enterprises set up by the government such as Hindustan Machine Tools (HMT), Gas Authority of India (GAIL), State Trading Corporation (STC) etc.

Objective of public sector

1. To attain commanding heights of the economy. 2. To provide commercial

surplus to finance

economic development. 3. To provide rapid economic development by filling critical gaps in the industrial structure. 4. To provide basic infrastructure facilities. 5. To ensure balance regional development.

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6. To reduce sharp disparity of income and prevent
concentration of economic power in few hands.
7. To effect social control and regulation of long-term finances through government financial institutions. 8. To achieve self-reliance in critical areas.

9. To create employment opportunities on an increasing scale.

10. To help improve foreign exchange earnings.

Forms of Public Units

DEPARTMENTAL UNDERTAKINGS
It is established by the government and its overall control rests with the minister.

It is a part of the government and is managed like any other government department.
It is financed through government funds.

It is subject to budgetary, accounting and audit control. Its policy is laid down by the government and it is accountable to the legislature.

STATUTORY CORPORATIONS
It is incorporated under a special Act of Parliament or State Legislative Assembly. It is an autonomous body and is free from government control in respect of its internal management However, it is accountable to parliament and state legislature.
It has a separate legal existence. Its capital is wholly provided by the government.

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It is managed by Board of Directors, which is composed of individuals

who are trained and experienced in business management. The members

of the board of Directors are nominated by the government.

It is supposed to be self sufficient in financial matters. However, in case of necessity it may take loan and/or seek assistance from the government.

GOVERNMENT COMPANIES
(a) It is registered under the Companies Act, 1956. (b) It has a separate legal entity. It can sue and be sued, and can acquire property in its own name. (c) The annual reports of the government companies are required to be presented in parliament. (d) The capital is wholly or partially provided by the government. In case of partially owned company the capital is provided both by the government and private investors. But in such a case the central or state government must own at least 51% shares of the company.

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It is managed by the Board of Directors. All the Directors or the majority of Directors are appointed by the government, depending upon the extent of private participation.

Its accounting and audit practices are more like those of private enterprises and its auditors are Chartered Accountants appointed by the government.
Its employees are not civil servants. It regulates its personnel policies according to its articles of associations.

Performance of PSE
No of PSE which was only 5 in 1950 was raised to 242 in 2008 Investment in CPSE raised from 29 crores (1951) to 4,55,409 crores in 2008. In number of profit making PSE was increased to 160 from 119 No. loss making PSE was came down to 53 from 105 PSE earned foreign exchange of Rs. 74,283 crores in 2008 major earnings from oil companies The total number of employees in Central PSUs was 1.53 mn in FY09 and came down to 1.49 mn in FY10

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The 18 Navratnas had a total income of Rs 8,478 bn in FY09, as compared to Rs 7,052.56 bn in FY08.
In FY09, the navratnas total income was equivalent to 15.20% of Indias GDP (at current market prices) and it rose from 14.15% in FY07 to 14.25% in FY08.

Maharatna Company
Having Navratna status. Listed on Indian stock exchange with minimum prescribed public shareholding under SEBI regulations. An average annual turnover of more than Rs. 20,000. crore during the last 3 years. An average annual net worth of more than Rs. 10,000 crore during the last 3 years.

An average annual net profit after tax of more than Rs. 2500 crore during the last 3 years. Should have operations. significant global presence/international

Navratna company
Having Schedule A and Miniratna Category-1 status. Having atleast three Excellent or Very Good Memorandum of Understanding (MoU) ratings during the last five years. Having a composite score of 60 or above out of 100 marks based on its performance during the last three years on the following six identified efficiency parameters:

Performance Parameters Net Profit to Net Worth Manpower cost to cost of production or services Gross margin as capital employed Gross profit as Turnover Earnings per Share Inter-Sectoral comparison based on Net profit to net worth Total

Maximum Marks 25 15

15 15 10 20 100

Miniratna Company
Category I This category applies to PSEs that have made profits continuously for the last three years or earned a net profit of Rs. 30 crore or more in one of the three years. 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

This category include those PSEs which have made profits for the last three years continuously and should have a positive net worth. Category II miniratnas have autonomy to incurring the capital expenditure without government approval up to Rs. 300 crore or up to 50% of their net worth whichever is lower.

MAHARATNA CPSEs
Coal India Limited Indian Oil Corporation Limited NTPC Limited Oil & Natural Gas Corporation Limited Steel Authority of India Limited

NAVRATNA CPSEs
Bharat Electronics Limited Bharat Heavy Electrical Limited Bharat Petroleum Corporation Limited GAIL (India) Limited Mahanagar Telephone Nigam Limited Power Grid Corporation of India Limited

MINIRATNA Category I CPSEs

Airports Authority of India Bharat Dynamics Limited Bharat Sanchar Nigam Limited Indian Railway Catering & Tourism Corporation Limited Central Warehousing Corporation

MINIRATNA Category-II CPSEs

Bharat Pumps & Compressors Limited Broadcast Engineering Consultants (I) Limited Central Mine Planning & Design Institute Limited Ed.CIL (India) Limited Engineering Projects (India) Limited