Public Sector Undertakings and Tools to Measure Industries

PUBLIC SECTOR UNDERTAKINGS

What is Public Sector Undertaking (PSU)?

PSU stands for Public Sector Undertakings in India and these are government-owned corporations. These Public sector companies represent the ‘Group of Companies’, owned by the union government of India, or one of the many states or territorial governments, or both. PSUs or public sector undertakings in India are very crucial elements that contribute to the economic progress of the nation. These are the companies whose majority paid share capital i.e., 51 per cent or more is owned by the Government of India.

Why PSUs Were Introduced?

Post-Independence India was dealing with serious socio- economic and financial issues due to a long time of slavery, income gap, imbalance of regional economic, and a lot of unemployment. Also, insufficient industrial base, not enough investments, and poor infrastructure facilities with untrained human resources, technological struggle all together tried to cripple the basic framework of running a successful public sector. Thus, the Public Sector in India was looked upon as the tool for making a self-reliant India and contributing towards the steady economic growth.

Public Sector Undertakings Classification

Public Sector undertakings (PSU) can be classified into three following categories

Central Public Sector Enterprises (CPSEs) – Public sector companies that are under the direct control of the Central Government or of other CPSEs by 51% or more than 51% of capital share ownership. They are further divided

Strategic Central Public-sector Enterprises (CPSEs)– Include the Arms & Ammunition and the defence equipments, defence aircraft, and other items related to defence, and in the field of atomic energy and railways transport.

Non-strategic CPSE – The rest of the CPSEs

Public Sector banks (PSBs)–Banks that are under the direct control of the Central Government or of other PSBs by 51% or more than 51% of capital share ownership.

State Level Public Enterprises (SLPEs)– Companies that are under the direct control of the State Government or other SLPEs by 51%or more than 51% of capital share ownership.

TYPES OF PSUS

There are three types of public sector companies based on various factors such as turnover stock exchange and annual revenue

Maharatna

Navratna

Mini-Ratna

The Department of Public Enterprises awards these statuses (Maharatna, Navratna, Miniratna) based on a company’s financial success and growth. This increased autonomy allows PSUs to compete better with private companies in India and abroad.

Maharatna Companies

Maharatna Companies have the highest status under this system and requires to have following

A company must already be a Navratna company (which has its own set of criteria).

The company should have an average annual turnover of INR 20,000 crore during the last three years. The average annual net worth should be INR 10,000 crore.

The Maharatna company’s status empowers the board to take investment decisions up to INR 5,000 crores as against the previous limit of 1,000 crores, without seeking government approval.The Maharatna companies are free to decide on investment matters up to 15% of their net worth in a project.

There are 13 Maharatna PSU companies in India as listed below

• Bharat Heavy Electricals Limited

• Bharat Petroleum Corporation Limited

• Coal India Limited

• GAIL India Limited

• Hindustan Petroleum Corporation Limited

• Indian Oil Corporation Limited

• NTPC Limited

• Oil & Natural Gas Corporation Limited

• Power Finance Corporation

• Power Grid Corporation of India Limited

• Steel Authority of lndia Limited

• Rural Electrification Corporation Limited

• Oil India Ltd

• Hindustan Aeronautics Limited

Navratna Companies

For being a Navratna Company, you will have to fulfil these criteria

It should be a Miniratna category-1 company and have

Schedule ‘A’ status

The record of at least three ‘Excellent’ or ‘very good’ Memorandum of Understanding (MoU) ratings during the last five years.

Being a Navratna company, it empowers PSEs to invest up to 15% of their net worth or INR 1,000 crore on a single project without asking for government approval. A Navratna company can spend up to 30% of their net worth not exceeding INR 1,000 cr. A Navratna company can decide to enter into joint ventures, form alliances, and float subsidiaries abroad.

There are 16 Navratna Public Sector Companies

1. Bharat Electronics Limited (BEL)

• Central Warehousing Corporation (CWC)

• Container Corporation of India Limited (CONCOR)

• Engineers India Limited (EIL)

• Housing & Urban Development Corporation Limited (HUDCO)

• Indian Railway Catering and Tourism Corporation Limited (IRCTC)

• Indian Railway Finance Corporation Limited (IRFC)

• Indian Renewable Energy Development Agency Limited (IREDA)

• IRCON International Limited

• Mahanagar Telephone Nigam Limited (MTNL)

• Mazagon Dock Shipbuilders Limited (MDL)

• National Aluminium Company Limited (NALCO)

• National Fertilizers Limited (NFL)

•
NBCC (India) Limited

• NHPC Limited

• NLC India Limited

NMDC Limited

Miniratna Companies: Miniratnas are divided as Category-I and Category-II

Miniratna Category-I

To achieve the Miniratnas Category-I status, the CPSE should have made a profit during the last three years continuously.

The amount of pre-tax profit should have been INR 30 crores or more in at least one year of the last three years of counting and should have a positive net worth.

Miniratnas can enter into joint ventures or set subsidiary companies or overseas offices.

Miniratna Category – II

The companies under Miniratna category-II, have controlling rights to incur the capital expenditure of up to INR 300 crore or up to 50% of their net worth, whichever is lower, without government approval.

TOOLS TO MEASURE PERFORMANCE OF INDUSTRIES

Index of industrial production

Index of Industrial Production (IIP) measures the quantum of changes in the industrial production in an economy and captures the general level of industrial activity in the country.

It is a composite indicator expressed in terms of an index number which measures the short-term changes in the volume of production of a basket of industrial products during a given period with respect to the base period.

The current base year for the IIP series in India is 2011-12.

The Index of Industrial Production is compiled and published every month by the Central Statistics Office (CSO) of the Ministry of Statistics and Programme Implementation with a time lag of six weeks from the reference month. i.e., at the time of release of IIP data, quick estimates for the relevant month along with revised and final indices of previous two months respectively, (on the basis of updated production data) are released.

The general scope of IIP, as recommended by the United Nations Statistics Division includes Mining & Quarrying, Manufacturing, Electricity, Gas steam, Air conditioning supply, Water supply, Sewerage, Waste management and Remediation activities.

But, in India, due to constraints of data availability and other resources, the index is compiled using figures of mining, manufacturing and electricity sectors only.

IIP is used as a core ingredient in the compilation of annual and quarterly national accounts and forecasts of GDP.

Index of Eight Core Industries

Electricity, steel, refinery products, crude oil, coal, cement, natural gas, and fertilizers are the eight main sectors of the Indian economy.

These industries greatly influence the majority of other industries and have a substantial impact on the Indian economy. In the Index of Industrial Production (IIP), which shows the growth rates of various industry groupings over a certain time period, the eight industries have a combined share of 40.27 percent.

The Department for Promotion of Industry and Internal Trade (DPIIT), the Ministry of Commerce & Industry, and the Office of the Economic Adviser (OEA) produce and release the Index of Eight Core Industries (ICI) each month prior to the release of the IIP.

The ICI measures the individual and collective performances of the production in these eight core industries, providing an indication of the production performance of the industries that are considered to be of a “core” type.

Annual Survey of Industries

The Annual Survey of Industries (ASI) is the principal source of Industrial statistics in India. It provides statistical information to assess and evaluate objectively and realistically, the changes in the growth, composition and structure of the organized manufacturing sector comprising of activities relating to manufacturing, processes, repair services, gas and water supply and cold storage. From 1976-77 round, data under ASI was collected under two schemes viz. (i) Census Sector (ii) Sample Sector.

The Labour Bureau processes, compiles and disseminates data on the Labour Part of the ASI. The main objectives of the Annual Survey of Industries (Labour Part) data which the Labour Bureau compiles are to build a systematic database on Absenteeism; Labour Turnover; Earnings; Employment, and Labour Cost in Manufacturing Industries, and to analyse various components of Labour Costs such as Wage/ Salary; Bonus; Provident Funds; Welfare Expenses, etc. in Manufacturing Industries.