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Public Sector Undertakings (PSUs) in India are government-owned commercial entities, either controlled by the national or state governments, with the central government holding at least 51% paid-up share capital for central PSUs. They play a core role in India's economic development, covering key sectors like energy, steel, heavy engineering, and finance.
Key moments
Post-independence 1947Foundational push for PSUs to build industrial base and reduce private economic concentration
1956 Industrial Policy ResolutionFormalized PSUs as core of planned economy, labeled 'temples of modern India' by Nehru
1991 Economic LiberalizationReduced state control over PSUs amid broader market reforms
1997 onwardsIntroduction of ranking system: Maharatna, Navratna, Miniratna based on financial performance
Historical and Policy Context
India's PSU sector emerged after independence to address the lack of domestic industrial capacity and ensure equitable economic development. Early PSUs focused on heavy industry, infrastructure, and strategic sectors, replacing colonial-era economic structures. The 1991 reforms shifted the sector from strict state control to partial deregulation, allowing more private sector competition while retaining state ownership in critical areas.
Classification and Significance
PSUs are categorized by operational autonomy: Maharatna status grants the highest decision-making powers for large global players like IndianOil and SAIL, Navratna for leading domestic PSUs, and Miniratna for smaller, specialized firms. Beyond economic contributions, PSUs create large-scale employment, balance regional development, and ensure national security in strategic sectors like defense and energy.
Modern Challenges and Evolution
The sector has faced criticism for bureaucratic inefficiencies and red tape during the Licence Raj era, but post-1991 reforms have improved performance through autonomy and partial privatization. Today, PSUs remain dominant in sectors like coal, banking, and power, adapting to global market changes while maintaining their public service mandates.
Public Sector Undertakings (PSU) in India are government-owned entities in which at least 51% of stake is under the ownership of the Government of India or state 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; and State 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 of Maharatna, Navaratna, and Miniratna (Category I and II).
Following India's independence in 1947, the limited pre-existing industries were insufficient for sustainable economic growth.The Industrial Policy Resolution of 1956, adopted during the Second Five-Year Plan, laid the framework for PSUs.The government initially prioritized strategic sectors, such as communication, irrigation, chemicals, and heavy industries, followed by the nationalisation of corporations.
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 its job security, with most preferring candidates with a GATE score.[3] These jobs are very well known for very high pay scale compared to other Government jobs such as UPSC, facilities such as bungalow, pensions and other subsidized facility and for also very good planned 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]
History
When India achieved independence in 1947, it was primarily an agrarian entity, with a weak industrial base. There were only eighteen state-owned Indian Ordnance Factories, previously established to reduce the dependency of the British Indian Army on imported arms.[5]
The British Raj had previously elected to leave agricultural production to the Private sector, with tea processing firms, jute mills (such as the Acland Mill), railways, electricity utilities, banks, coal mines, and steel mills being just some of the economic entities largely owned by private individuals like the industrialist Jamsetji Tata.Other entities were listed on the Bombay 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 the Bombay 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, the Planning 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]
The first Prime Minister of India, Jawaharlal Nehru, promoted an economic policy based on import substitution industrialisation and advocated a mixed economy.[16] He believed that the establishment of basic and heavy industry was fundamental to the development and modernisation of the Indian economy.India's second five year plan (1956–60) and the Industrial Policy Resolution of 1956 emphasized the development of public sector enterprises to meet Nehru's national industrialisation policy.His vision was carried forward by V. Krishnamurthy, a figure known as the "Father of Public sector undertakings in India".Indian statistician Prasanta Chandra Mahalanobis was instrumental to its formulation, which was later termed the Feldman–Mahalanobis model.[17][18]
In 1969, Indira Gandhi's government nationalised 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 the 1991 Indian economic crisis.[15] After the crisis, the government began divesting its ownership of several PSUs to raise capital and privatize companies facing poor financial performance and low efficiency.[19][20]
Management and classification
The public sector undertakings are headed by the head of board of directors also known as chairperson cum managing director cum chief executive officer and a vice chairperson cum deputy managing director cum co-chief executive officer along with the members of the board of directors also known as executive director cum c-level officer who are Group 'A' gazetted officers appointed by the President of India in case of central public sector undertakings, its subsidiaries & its divisions and appointed by the Governor 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 are government 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 as Navratna status in 1997.[22] Originally, the term Navaratna meant a talisman composed of nine precious gems. Later, this term was adopted in the courts of the Gupta emperor Vikramaditya and Mughal emperor Akbar, as the collective name for nine extraordinary courtiers at their respective courts.
In 2010, the central government established the higher Maharatna category, which raises a public sector unit's investment ceiling from ₹1,000 crore to ₹5,000 crores.[23] The Maharatna public sector units can now decide on investments of up to 15 per cent of their net worth in a project while the Navaratna companies could invest up to ₹1,000 crore without explicit government approval. Two categories of Miniratnas afford less extensive financial autonomy.
Guidelines for awarding Ratna[24] status are as follows:
PSUs in India are also categorized based on their special non-financial objectives and are registered under Section 8 of Companies Act, 2013 (erstwhile Section 25 of Companies Act, 1956).
Top profit making CPSUs
List of CPSUs
Public Sector Undertakings (PSUs) can be classified as Central Public Sector Undertakings (CPSUs) or State Public Sector Undertakings (SPSUs). CPSUs are administered by the Ministry of Heavy Industries.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]
8.Sushila Gosalia. The Gandhian model of self-reliance in the Indian economy Intereconomics, 1979-03-01^
9.Muhammad Umair Mushtaq. Public Health in British India: A Brief Account of the History of Medical Services and Disease Prevention in Colonial India Indian Journal of Community Medicine, January 2009^
14.Chapter 1, Industrial Policy Handbook Industrial Policy Handbook, Office of the Economic Adviser, Ministry of Commerce and Industry, retrieved 17 September 2015^
17.Ahluwalia, Isher J. Productivity and Growth in Indian Manufacturing, part of Recent Developments in Indian Economy: With Special Reference to Structural Reforms, Part 2 Academic Foundation, 1993^
18.Baldev Raj Nayar, Globalization And Nationalism: The Changing Balance Of India's Economic Policy, 1950–2000 (New Delhi: Sage, 2001)^
