Everything about Public Sector Undertakings in India

Public Sector Undertakings (PSUs) are government-owned companies in which the central or state government holds the majority stake. Public Sector Undertakings in India have played a key role in the country’s economic landscape—from the early years of planned development to the post-liberalisation shift toward market-driven growth. Today, many PSUs in India continue to hold significant market capitalisation and are increasing their capital expenditure in sectors aligned with national priorities. Therefore, understanding PSU in India is essential for identifying new opportunities and managing portfolio risks.

This article looks at some of India’s major listed PSUs, their roles, and why they remain relevant to investors and policymakers alike.

What is the Public Sector Undertaking?

Public Sector Undertakings, or PSUs, are commercial enterprises owned and operated by the central or state governments. To qualify as a PSU, the government must hold at least 51% of the company’s paid-up share capital, ensuring majority control over its operations, management, and strategic decisions.

PSU categories

Based on ownership, PSUs are broadly classified into:

• Central PSUs: The central government owns and manages these undertakings through various ministries. For example, Coal India Limited operates under the Ministry of Coal.

• State PSUs: State PSUs are owned and controlled by one or more state governments, often established to support regional development goals. For instance, Gujarat Gas Limited is a state PSU in which the Government of Gujarat holds a controlling stake through Gujarat State Petroleum Corporation.

The legal structure of PSUs

Public Sector Undertakings in India are structured in two main legal forms:

1. Government-controlled companies These are registered under the Companies Act of 1956 (replaced by the Companies Act 2013). As per Section 2(45) of the Companies Act, 2013, such PSUs are commercial entities where the government holds a minimum 51% share.

They follow similar norms as private companies in terms of governance, financial reporting and auditing. The Comptroller and Auditor General (CAG) appoints external and internal auditors for such PSU in India. Steel Authority of India (SAIL), Bharat Heavy Electricals Limited (BHEL), and Bharat Electronics Limited (BEL) are some of the examples.

2. Statutory corporation Statutory corporations originate and operate under the statute of special acts passed in Parliament or state legislative bodies. Life Insurance Corporation (LIC), State Bank of India (SBI), Oil and Natural Gas Commission (ONGC), Reserve Bank of India (RBI), and Food Corporation of India (FCI) are some of the prominent PSUs formed under the statute of Parliamentary acts. Similarly, the West Bengal Industrial Development Corporation (WBIDC) is an example of a state legislature-backed Statutory Corporation.

PSU classification based on scale and performance

The Government of India also classifies PSUs based on their size, strategic importance, and level of management autonomy.

• Maharatna - Maharatna company is a public sector undertaking granted Maharatna status. These companies should have a net profit of over ₹2,500 crore, net worth of ₹10,000 crore, and annual revenue exceeding ₹20,000 crore. Examples: ONGC, IOC, BPCL.

• Navratna - A Navratna company is a PSU in India that has been granted Navratna status. Requires a composite score of 60 or more under the Memorandum of Understanding (MoU) system in at least three of the past five years.

• Miniratna – For this title, the PSUs must be profitable for at least three years and have a net profit of at least ₹30 crore.

As of 2025, there are 272 central PSUs, including 14 Maharatnas, 26 Navratnas and 62 Miniratnas. Indian Railways is the biggest public sector undertaking in India.

History of Public Sector Undertakings in India

The roots of PSUs lie in the Industrial Policy Resolution (IPR) of 1948, which introduced the idea of state-sponsored undertakings for the first time in India. However, the real beginning came with the Second Five-Year Plan (Mahalanobis Plan), conceived and implemented from 1956 to 1961. This plan emphasised the need for rapid industrialisation to foster sustainable economic growth, employment, and self-reliance.

However, at the time, private entrepreneurs in India lacked experience in modern industries and had limited access to capital. So, the government took on the responsibility of rapid industrialisation.

Initially, PSUs were primarily in critical infrastructure sectors such as oil exploration, energy, fertiliser, electricity generation, heavy industries, and communication. Later, PSUs also entered the consumer goods and services industries.

Founding principles of PSU in India

Despite the commercial nature of PSU operations, the founding objectives extend beyond profit. They include:

• Development of critical infrastructure like highways, ports, transport facilities, fertilisers, irrigation facilities, etc.
• Promotion of basic and heavy industries.
• Generation of employment for the educated, skilled, and semi-skilled workforce
• Economic disparities between regions are minimised through balanced economic growth in backward and infrastructure-deprived states.
• Fostering technological capabilities of the economy through sustained capital and revenue expenditure in Research and Development activities.
• Generation of revenue for the government exchequer in the form of taxes, dividends, duties and profits.

Central PSU performance at a glance

As per data published by the Department of Public Enterprises (DPE) for FY24:

• Total net profit by profitable Central PSUs stood at ₹3.22 lakh crore.
• Number of profit-making CPSUs: 212 out of 272.
• Total value addition by all CPSUs reached ₹9.33 lakh crore.
• Total R&D expenditure incurred by Central PSUs was ₹10,813 crore.

Conclusion

As the Indian economy continues to diversify and integrate with global markets, PSUs in India are evolving, too—adopting new technologies, enhancing operational efficiency, and aligning their goals with national priorities like renewable energy, digital infrastructure, and inclusive finance. Despite increased private sector participation, the scale, stability, and strategic importance of many PSUs ensure they remain relevant to both policymakers and investors.

Sources

Indian Institute of Corporate Affairs
Comptroller and Auditor General of India