Public Sector Undertaking (PSU) is a term used for a government-owned corporation. The term is used to refer to companies in which the government (either the Union Government or state or territorial governments, or both) owned a majority (51 percent or more) of the company equity.
A lot of Public Sector Undertakings (PSU) under the aegis of Government of India regularly provide for employment opportunities in various areas. Job seekers can apply to these undertakings, according to their required job profile and area of interest.
The underlying reason for such an extensive presence of PSU in Indian economy lies in the economic policy adopted after independence. The greater thrust was given on economic development with social perspective. In order to attain this, the method of central planning was adopted.
But since the targets set in the first Five Year plan (1951-56) were not attained, then the process of setting-up national champions in strategic sectors -heavy industry, steel, oil & gas, banking & insurance among others was initiated to achieve these targets. Some of the largest and most successful PSUs-BHEL, State Bank of India, ONGC, Indian Oil Corp, Oil India, Steel Authority of India and Bharat Electronics among others owe their genesis to this period.
The biggest growth in the number of PSUs however occurred in late 1960s and early 1970s, when most of the large commercial banks were nationalised followed by a similar move in coal mining, crude oil refining & marketing and textile among others. The list of PSUs increased further in 70s and 80s with the establishment of new national companies such as National Thermal Power corp.(NTPC), National Aluminium, Gas Authority of India (GAIL) and Rashtriya Ispat Nigam among others.
Role of PSUs in Indian Economics
India succeeded in maintaining its economic growth at above 6% largely on account of large doses in shape of government stimulus package, which included a large expenditure programme on infrastructure. The government also shielded the consumer’s wallet from the vagaries of international market by subsiding fuel, food and fertiliser prices. None of these policies would have been possible without the resources made available by the large government owned enterprises.
Being the largest commercial enterprises in the country, PSUs provide a huge leverage to the government (their controlling shareholder) to intervene in the economy directly or indirectly to achieve the desired socio-economic objectives. At times, these objectives may be misplaced but at others especially in times of do-or-die situation such as in 2008, PSUs play a key role in steering the national economy in the right direction.
It’s true of other emerging economies as well. A recent study by The Economist magazine showed that it’s difficult for an emerging economy with a small or non-existent public sector (such as The Philippines) to achieve sustainable economic growth. Though its anecdotal evidence, it should not be surprising. The government-owned commercial enterprises possess the unique ability to rise above the short-term commercial interest to invest in local assets and resources so as to maximise the long-term economic gains.
Just consider the recent examples; It might be PSU banks which offered lower interest rates to revitalise the sectors like real estate, SMEs or agriculture; Oil Marketing Companies which bled but maintained the retail prices of petroleum products low when crude oil price was at its peak of $147 per barrel a year ago and helped India avoid a social and economic chaos.
The rural growth story, which has recently caught an attention of private sector could not have been possible without the number of basic infrastructure services offered by public sector in this area. LIC, one of the largest PSUs, was probably the only large investor in the Indian equity market when rest of the large investors preferred to stay away during the market turmoil of 2008.
It does not mean PSUs are important only during the time of crisis. In normal course also it is difficult to think of the Indian economy without public enterprises given India’s socio-economic and demographic reality. The sector is deeply entrenched in the domestic economy and their business operations are now enmeshed in the common man’s life.