Public Sector Undertakings - A Complete Overview

Public Sector Undertakings are a major part of the Indian economy that comprises public services and enterprises and it provides services that benefit the entire society. This article gives details on the objectives of setting up PSU’s, their role in the upliftment of society, problems, and reforms undertaken by them.

Aspirants can find information on the structure and other important details related to the IAS Exam, in the linked article.

Aspirants should begin their preparation by solving UPSC Previous Year Question Papers now!!

To complement your preparation for the upcoming exam, check the following links:

Public Sector – 3 Major Classifications

The public sector can be classified into:-

  1. Departmental Undertaking – Directly managed by concerned ministry or department. (e.g. Railways, Posts, etc.)
  2. Non-Departmental Undertaking – PSU (e.g. HPCL, IOCL, etc.)
  3. Financial Institution (e.g. SBI, UTI, LIC, etc.)

The rationale behind the establishment of PSU’s was Industrialisation and the establishment of Capital Goods Industries and Basic Industries. The organizations that are not a part of the public sector are termed as private sector that works to raise profit for the organization.

To know details about Public-Private partnership, check the linked article.

Public Sector (UPSC Notes):- Download PDF Here

Objectives of Setting up Public Sector Unit (PSU)

  1. To create an industrial base in the country
  2. To generate a better quality of employment
  3. To develop basic infrastructure in the country
  4. To provide resources to the government
  5. To promote exports and reduce imports
  6. To reduce inequalities and accelerate the economic growth and development of a country.

Role of Public Sector in the Upliftment of Society

The public sector plays a major role in uplifting the economic condition of society in various ways.

The major role of the Public sector can be explained below:

  1. Public sector & capital formation – This sector has been a major reason for the generation of capital in the Indian economy. A large amount of the capital comes from the Public sector Units in India
  2. Creation of Employment opportunities – Public sector has brought about a major change in the employment sector in the country. They provide a lot of opportunities under various domains and thus helps in uplifting the Indian economy and society.
  3. Development of Different Regions – The establishment of major factories and plants has boosted the socio-economic development of different regions across the country. Inhabitants of the region are impacted positively concerning the availability of facilities like electricity, water supply, township, etc.
  4. Upliftment of Research and Development – Public sector units have been investing a lot to introduce advanced technology, automated equipment, and instruments. This investment would result in the overall cost of production.

Public Sector Undertakings (PSU) – Problems

The major problems of PSUs can be stated below:

  1. Inappropriate investment decisions
  2. Improper Pricing Policy
  3. Excessive overhead cost
  4. Lack of Autonomy & Accountability
  5. Overstaffing
  6. Trade Unionism
  7. Under Utilization of capacity

Public Sector Undertaking – Reforms

The major PSU reforms are given below:

  1. New Industrial Policy 1991
  2. Voluntary Retirement Scheme, 1988 (Golden Handshake)
  3. Administered Price Mechanism
  4. The policy of Navratnas (Best performing PSUs were called Navaratnas)
    • The government gave them a significant degree of autonomy so they can perform better.
  5. The policy of Mini Ratnas (Presently 60 PSUs have been granted this status)
  6. The policy of Maharatnas (category created in 2010)
    • Net profit should be 2500 crore
    • Net worth should be 10000 crore
    • Turnover should be 20000 crore
    • PSU must be a Navratna and must be listed in Stock Exchange
    • PSU also must have a significant global presence.
    • In 2010 Govt granted 4 Navratnas Maharatnas status to ONGC, IOCL, SAIL, and NTPC. After sometime Govt granted this status to CIL.

Relevant Links

14 Navratna Companies – Central Public Sector Enterprises (CPSEs) 10 Maharatna Companies – Central Public Sector Enterprises (CPSEs)
List of Miniratna Category-I Companies in India – Central Public Sector Enterprises

Public Sector (UPSC Notes):- Download PDF Here

Candidates can find the general pattern of the UPSC Civil Service Exam by visiting the IAS Syllabus page.

Frequently Asked Questions on Public Sector in India


Q 1. What is the public sector undertaking?

Ans. Public Sector Undertakings are a major part of the Indian economy that comprises public services and enterprises, and it provides services that benefit the entire society.

Q 2. What are the different types of Public Sector undertaking?

Ans. Public sector undertaking can be classified into three types. These include Departmental Undertaking, Non-Departmental Undertaking and Financial Institution.

Q 3. What is the role of the Public Sector in India?

Ans. The Public Sector plays a very important in the development and functioning of the country. Few important roles performed by this sector include:

  • Income generation
  • Creating Employment opportunities
  • Formation of a strong industrial base
  • Import and Export of Goods
  • Contributes to the Gross domestic capital formation of the country
  • Helps in building infrastructure

Q 4. What is the main objective of the public sector in India?

Ans. The Public sector works for the welfare of the public and the overall development of the country. The public sector helps the government to enforce social control on trade and industry for ensuring equitable distribution of goods and services.

Related Links

IAS Salary Static GK
Committee on Public Undertakings Powergrid Corporation of India Limited – Overview of Public Sector Enterprise
List of Indian Government Ministries, Departments & Other Agencies for UPSC Exam Changing Indian Railways: Rajya Sabha TV (RSTV) – The Big Picture
Industrial Policy in India – (Industrial Policies – 1948 to 1991) Index of Industrial Production (IIP)
Department for Promotion of Industry and Internal Trade (DPIIT) earlier known as DIPP Core Sectors of the Indian Economy
Making India a Manufacturing Hub: Rajya Sabha TV (RSTV) – The Big Picture Small Scale & Cottage Industries


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