Public Sector Undertakings (PSU) in India aregovernment-owned entities in which at least 51% of stake is under theownership of theGovernment of India orstate governments. These types of firms can also be a joint venture of multiple PSUs. These entities perform commercial functions on behalf of the government.[1][2]Depending on the level of government ownership, PSUs are officially classified into two categories:Central Public Sector Undertakings (CPSUs), owned by the central government or other CPSUs; andState Public Sector Undertakings (SPSUs), owned by state governments. CPSU and SPSU is further classified into Strategic Sector and Non-Strategic Sector. Depending on their financial performance and progress, CPSUs are granted the status ofMaharatna,Navaratna, andMiniratna (Category I and II).
FollowingIndia's independence in 1947, the limited pre-existing industries were insufficient forsustainable economic growth. TheIndustrial Policy Resolution of 1956, adopted during theSecond Five-Year Plan, laid the framework for PSUs. The government initially prioritized strategic sectors, such as communication, irrigation, chemicals, andheavy industries, followed by thenationalisation ofcorporations. PSUs subsequently expanded into consumer goods production and service areas like contracting, consulting, and transportation. Their goals include increasing exports, reducing imports, fostering infrastructure development, driving economic growth, and generating job opportunities. Each PSU has its own recruitment rules and employment in PSUs is highly sought after in India due to high pay and itsjob security, with most preferring candidates with aGATE score.[3] These jobs are very well known for very high pay scale compared to other Government jobs such as UPSC, facilities such asbungalow,pensions and other subsidized facility and for also very goodplanned townships settlement life. A PSU non-executives such as workers have a huge payscale difference compared to private sector.
In 1951, there were five PSUs under the ownership of the government. By March 2021, the number of such government entities had increased to 365.[4] These government entities represented a total investment of about₹16,410,000,000,000 as of 31 March 2019. Their total paid-up capital as of 31 March 2019 stood at about ₹200.76 lakh crore. CPSEs have earned a revenue of about ₹24,430,000,000,000 + ₹1,000,000,000,000 during the financial year 2018–19.[4]
When India achieved independence in 1947, it was primarily an agrarian entity, with a weak industrial base. There were only eighteen state-ownedIndian Ordnance Factories, previously established to reduce the dependency of theBritish Indian Army on imported arms.[5]
The British Raj had previously elected to leave agricultural production to thePrivate sector, with tea processing firms, jute mills (such as theAcland Mill),railways, electricity utilities, banks, coal mines, and steel mills being just some of the economic entities largely owned by private individuals like the industrialistJamsetji Tata. Other entities were listed on theBombay Stock Exchange.[6]
Critics of private ownership of India's agricultural and industrial entities—most notably Mahatma Gandhi's independence movement—instead advocated for a self-sufficient, largely agrarian, communal village-based existence for India in the first half of the 20th century.[7][8] Other contemporary criticisms of India's public sector targeted the lack of well-funded schools, public libraries, universities, hospitals and medical and engineering colleges; a lack seen as impeding an Indian replication of Britain's own industrialization in the previous century.[9][10][11][12][13]
Post-Independence, the national consensus turned in favor of rapid industrialisation of the economy, a process seen as the key to economic development, improved living standards and economic sovereignty.[14] Building upon theBombay Plan, which noted the necessity of government intervention and regulation in the economy, the first Industrial Policy Resolution announced in 1948 laid down in broad strokes such a strategy of industrial development. Later, thePlanning Commission was formed by a cabinet resolution in March 1950 and the Industrial (Development and Regulation) Act was enacted in 1951 with the objective of empowering the government to take necessary steps to regulate industry.[15]
In 1969,Indira Gandhi's governmentnationalised fourteen of India's largest private banks, and an additional six in 1980. This government-led industrial policy, with corresponding restrictions on private enterprise, was the dominant pattern of Indian economic development until the1991 Indian economic crisis.[15] After the crisis, the government begandivesting its ownership of several PSUs to raise capital and privatize companies facing poor financial performance and low efficiency.[19][20]
The public sector undertakings are headed by the head of board of directors also known aschairperson cum managing director cum chief executive officer and avice chairperson cum deputy managing director cum co-chief executive officer along with the members of the board of directors also known asexecutive director cum c-level officer who are Group 'A' gazetted officers appointed by thePresident of India in case of central public sector undertakings, its subsidiaries & its divisions and appointed by theGovernor of States of India in case of state public sector undertakings, its subsidiaries & its divisions.
All of the public sector undertakings have been awarded additional financial autonomy.Public Sector Undertakings aregovernment establishments that have comparative advantages", giving them greater autonomy to compete in the global market so as to "support [them] in their drive to become global giants".[21] Financial autonomy was initially awarded to nine PSUs asNavratna status in 1997.[22] Originally, the termNavaratna meant a talisman composed of nine precious gems. Later, this term was adopted in the courts of the Gupta emperorVikramaditya and Mughal emperorAkbar, as the collective name fornine extraordinary courtiers at their respective courts.
In 2010, the central government established the higherMaharatna category, which raises a public sector unit's investment ceiling from ₹1,000 crore to ₹5,000 crores.[23] TheMaharatna public sector units can now decide on investments of up to 15 per cent of their net worth in a project while theNavaratna companies could invest up to ₹1,000 crore without explicit government approval. Two categories ofMiniratnas afford less extensive financial autonomy.
Guidelines for awardingRatna[24] status are as follows:
A score of 60 (out of 100), based on six parameters which include net profit, net worth, total manpower cost, the total cost of production, cost of services, PBDIT (Profit Before Depreciation, Interest, and Taxes), capital employed, etc., AND
A PSU must first be a Miniratna and have 4 independent directors on its board before it can be made a Navratna.
up to ₹1,000 crore or 15% of their net worth on a single project or 30% of their net worth in the whole year (not exceeding ₹1,000 crores).
Have made profits continuously for the last three years and should have a positive net worth.
up to ₹300 crores or up to 50% of their net worth, whichever is lower.
PSUs in India are also categorized based on their special non-financial objectives and are registered under Section 8 ofCompanies Act, 2013 (erstwhile Section 25 of Companies Act, 1956).
Public Sector Undertakings (PSUs) can be classified as Central Public Sector Undertakings (CPSUs) or State Public Sector Undertakings (SPSUs). CPSUs are administered by theMinistry of Heavy Industries and Public Enterprises. The Department of Public Enterprises (DPE),Ministry of Finance is the nodal department for all the Central Public Sector Undertakings (CPSUs).
As of 2025, there are 14 Maharatnas, 26 Navratnas and 65 Miniratnas (divided into Category 1 and Category 2).[27][28]
^"Chapter 1, Industrial Policy Handbook"(PDF).Industrial Policy Handbook. Office of the Economic Adviser, Ministry of Commerce and Industry. p. 2. Archived fromthe original(PDF) on 28 May 2015. Retrieved17 September 2015.
^Ghose, Shankar (1993).Jawaharlal Nehru. Allied Publishers. p. 243.ISBN978-81-7023-369-5.
^Ahluwalia, Isher J. (1993).Productivity and Growth in Indian Manufacturing,part of Recent Developments in Indian Economy: With Special Reference to Structural Reforms, Part 2. New Delhi: Academic Foundation. p. 25.ISBN978-81-7188-094-2.
^Baldev Raj Nayar, Globalization And Nationalism: The Changing Balance Of India's Economic Policy, 1950–2000 (New Delhi: Sage, 2001)
^Sankar, T.L.; Mishra, R.K.; Lateef Syed Mohammed, A. (1994). "Divestments in Public Enterprises: The Indian Experience".International Journal of Public Sector Management.7 (2):69–88.doi:10.1108/09513559410055242.
