Public Sector Undertakings (PSU)

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 Comptroller and Auditor General of India (CAG) audits government companies. In respect of government companies, CAG has the power to appoint the Auditor and to direct the manner in which the Auditor shall audit the company's accounts.

Public Sector Undertakings (PSUs) have laid a strong foundation for the industrial development of the country. The public sector is less concerned with making profits. Hence, they play a key role in nation building activities, which take the economy in the right direction. PSUs provide leverage to the Government (their controlling shareholder) to intervene in the economy directly or indirectly to achieve the desired socio-economic objectives and maximize long-term goals. As agriculture is the backbone of Indian economy, Public Sector Banks (PSBs) play a crucial role in pushing the agricultural economy on to the progressive pathway and helping develop rural India. Moreover, PSUs play a substantial role in the rural development by providing basic infrastructural services to citizens.

Post Independence, India was grappling with grave socio-economic problems, such as inequalities in income and low levels of employment, regional imbalances in economic development and lack of trained manpower, weak industrial base, inadequate investments and infrastructure facilities, etc. Hence, the roadmap for Public Sector was developed as an instrument for self-reliant economic growth. The country adopted the planned economic development polices, which envisaged the development of PSUs. Initially, the public sector was confined to core and strategic industries. The second phase witnessed nationalization of industries, takeover of sick units from the private sector, and entry of the public sector into new fields like manufacturing consumer goods, consultancy, contracting and transportation etc. The Industrial Policy Resolution 1948 outlined the importance of the economy and its continuous growth in production and equitable distribution. In this process, the policy envisaged active engagement of the State in development of industries. The Industrial Policy Resolution 1956 classified industries into three categories with respect to the role played by the State - The first category (Schedule A) included industries whose future development would be the exclusive responsibility of the State The second (Schedule B) category included Enterprises whose initiatives of development would principally be driven by the State but private participation would also be allowed to supplement the efforts of the State And, the third category included the remaining industries, which were left to the private sector. In 1969, the government nationalized 14 major banks. The Industrial Licensing Policy 1970 placed certain restrictions on undertakings belonging to large industrial houses, defined on the basis of assets exceeding Rs 350 mn. - External website that opens in a new window