Everything About Public Sector Undertakings PSUs in India

Public Sector Undertakings (PSUs) in India are government-owned or controlled corporations established to undertake commercial activities and contribute to the socio-economic development of the country.

PSUs are companies where the government holds more than 50% stake, either fully owned or as the principal shareholder. These can be listed or unlisted, formed to serve economic and strategic goals. PSUs include CPSEs (Central Public Sector Enterprises) and SLPEs (State Level Public Enterprises).

Public Sector Undertakings (PSUs) are government-owned companies that play a vital role in India’s economy. They drive industrialisation, build infrastructure, and provide essential services like power, transport, and telecom. PSUs contribute to employment generation, regional development, and government revenue through taxes and profits. They also support social welfare by supplying essential goods at affordable rates. Classified as Maharatna, Navratna, and Miniratna based on their autonomy, PSUs remain crucial for both economic growth and public welfare.

Based on their financial performance, size, and strategic importance, central PSUs are classified into different categories:

Maharatna

These are the largest and most profitable PSUs with extensive operations across multiple sectors.
Eligibility Criteria Include:

• Average annual turnover of over ₹25,000 Crores in the last 3 years
  

• Net worth over ₹15,000 Crores
  

• Listed on stock exchange with significant global presence
  

Examples:

• ONGC
  

• Indian Oil Corporation
  

• NTPC
  

• Bharat Petroleum Corporation Limited (BPCL)
  

Navratna

These are PSUs with financial autonomy and solid performance records.
Criteria include:

• At least 3 ‘excellent’ or ‘very good’ ratings under the Memorandum of Understanding (MoU) system
  

• Composite score of 60+ on six parameters including profitability, asset turnover, and earnings per share
  

Examples:

• Hindustan Aeronautics Limited (HAL)
  

• Bharat Electronics Limited (BEL)
  

• Shipping Corporation of India (SCI)
  

Miniratna (Category I & II)

These are smaller PSUs with consistent profits and operational efficiency.

• Category I: Profit for the last 3 years and net worth of ₹30 Crores
  

• Category II: Profit for the last 3 years but lower net worth
  

Examples:

• Airports Authority of India (AAI)
  

• Bharat Sanchar Nigam Limited (BSNL)
  

• MECON Ltd.

Public Sector Undertakings (PSUs) in India are classified by ownership into three types:

• Central Public Sector Enterprises (CPSEs): Majority stake (51% or more) held by the central government.
  

• State-Level Public Enterprises (SLPEs): Majority stake held by a state government.
  

• Public Sector Banks (PSBs): Banks where the central government or other PSBs hold at least 51% ownership.
  

This classification reflects the level of government control and area of operation.

PSUs are found in several vital sectors of the Indian economy:

These undertakings are crucial for national security, public service, and long-term infrastructure development.

PSUs play a pivotal role in India’s economic strategy, with broad contributions including:

• Employment Generation: Major recruiters for skilled and unskilled labour
  

• Revenue Contribution: Pay substantial dividends and taxes to the government
  

• Infrastructure Creation: Build transport, energy, communication networks
  

• Strategic Security: Handle defence, atomic energy, and oil sectors
  

• Stabilising Prices: Help manage inflation by maintaining supply in essential sectors
  

Despite challenges from privatisation, PSUs remain essential in balancing public welfare with economic growth.

Since the 1990s, the Indian government has pursued disinvestment — selling its stake in PSUs to reduce fiscal burden and promote efficiency.

Types of disinvestment include:

• Minority Stake Sale: Government retains control
  

• Strategic Sale: Majority stake sold to private sector
  

• Listing PSUs: Public offering of shares on stock exchanges
  

Notable recent examples include:

• LIC IPO (2022)
  

• Air India sale to Tata Group (2021)
  

• Proposed divestment of BPCL and IDBI Bank
  

The objective is to streamline operations, attract private investment, and reduce fiscal deficits.

Many listed PSUs offer stable returns and are known for their dividend payouts. PSU stocks are widely followed by conservative investors for their predictable performance, though they may face policy and governance-related risks.

Some listed PSU indices include:

• Nifty PSE Index
  

• Nifty CPSE Index
  

These track the performance of listed PSUs on the NSE and serve as benchmarks for themed mutual funds or ETFs.

The biggest Public Sector Undertaking in India is Indian Railways. It is the largest employer in the country and plays a crucial role in passenger transport, freight movement, and national connectivity.

PSUs have played a key role in infrastructure, energy security, and affordable services, especially in rural electrification and railway modernisation. However, rising competition, bureaucracy, and inefficiencies have sparked debates on whether they should be restructured, corporatised, or phased out in non-core sectors.

PSUs in India are key to economic development, contributing to sectors like energy, defence, and banking. As India moves towards privatisation and market liberalisation, PSUs are evolving from state-controlled entities to competitive players.

This content is for informational purposes only and the same should not be construed as investment advice. Bajaj Finserv Direct Limited shall not be liable or responsible for any investment decision that you may take based on this content.