November 14, 2025
4 mins read
Public Sector Undertakings, or PSUs, are much more than typical businesses. They are the main engine of the Indian economy. These companies are owned by the government. They work in nearly every field: energy, banking, defence, transport, and manufacturing.
Think of how they started. They were built decades ago to achieve big national goals. Public Sector Undertakings stepped in to build key infrastructure. They also created millions of jobs when private companies couldn't. That’s why we say Public Sector Undertakings are tools for development, not just businesses.
India runs a mixed economy. Both public and private firms play a role. This setup makes Public Sector Undertakings vital. Many started to build core industries from nothing. This helped cut down on imports. Reforms changed things, and some were privatised. But Public Sector Undertakings are still necessary today.
It's simple. PSUs are firms that are fully or partly owned by the central or state government. They look like any other company. But their control and ownership make them unique.
The rule is that the government must hold 51% or more. They come in different shapes. Some are special corporations. Others are government companies under the law.
Profit wasn't always the main point. Projects that offered no quick cash but had huge national value went to PSUs. Over the years, some Public Sector Undertakings listed their shares. This allowed the public to buy in. However, the government kept control.
Public Sector Undertakings operate under different ministries depending on their functions and services. They are overseen by boards of directors, audits, and the review of Parliament. It is this continual oversight that establishes the governance of PSUs.
Public Sector Undertakings (PSUs) play a crucial role in addressing infrastructure deficits across various sectors like energy, transportation, and communication, enabling economic growth and improved living standards.
PSUs are significant contributors to employment in India, offering both skilled and unskilled job opportunities. They provide stable employment and promote skill development.
By establishing units in underdeveloped regions, PSUs help foster economic activity in rural and backward areas, reducing regional disparities and promoting balanced development across the country.
PSUs support the ‘Make in India’ initiative by focusing on domestic production. They reduce the country’s reliance on imports, strengthening self-sufficiency and boosting the domestic manufacturing sector.
PSUs are instrumental in stabilizing prices of essential goods and services, especially in sectors like petroleum, food, and utilities, ensuring affordability and availability to the general population.
PSUs invest in research and development (R&D) to advance technologies and improve efficiency in critical industries, such as defence, energy, and telecommunications. This encourages innovation and technological advancement.
PSUs play a key role in disaster management and public welfare initiatives, providing essential services like food, water, healthcare, and infrastructure during emergencies, thus supporting the well-being of citizens.
In conclusion, PSUs are integral to India’s economic development by contributing to infrastructure, employment, regional development, self-reliance, price stability, innovation, and public welfare.
PSUs are categorised based on their financial muscle, freedom to act, and how well they perform. The titles Maharatna, Navratna, and Miniratna tell them how much freedom they get. Let’s look at the groups:
These Public Sector Undertakings are the absolute big ones. To join the Maharatna category, the company must already be a Navratna. It also has to be publicly listed. They need ₹5,000 crore profit for three years, a ₹15,000 crore average net worth, and ₹25,000 crore turnover. Examples include ONGC, NTPC, and IOCL.
This is the second tier. A company must first be a Miniratna Category I. It needs to score at least 60 out of 100 on performance checks. It must also have been profitable for three years straight. Think BEL, HAL, and Shipping Corporation of India.
These Public Sector Undertakings must have a positive net worth. They also need profit for three years. They can invest up to ₹500 crore on their own. Or they can invest their net worth. They pick the smaller amount without waiting for approval. Examples are the Airports Authority of India and BSNL.
These are like Category I, but the limits are lower. They still must be profitable for three years. They can invest up to ₹300 crore. Or they can invest 50% of their net worth. They must choose the lower value. MECON and PDIL fit into this group.
This system shows that when you perform better, you get more independence and grow bigger.
Government Ownership: This makes them stable. They keep running even when the economy slows down.
Strategic Control: Core areas like defence and energy stay under the direct influence of the state.
Public Welfare Focus: They prioritise long-term social needs over making a fast profit.
Infrastructure Development: Their large investments help build and expand the country’s industrial base.
Employment Generation: They create jobs for every skill level, which is a major benefit to the country.
Balanced Regional Growth: By setting up units in less developed areas, they ensure growth is fair across all states.
Support for MSMEs: They buy goods from small businesses. This partnership helps MSMEs thrive alongside them.
Resource Utilisation: They efficiently use natural and human resources for massive national projects.
Dividend Contribution: Profitable PSUs pay taxes and dividends. This adds vital money to the national budget.
Policy Implementation: We use them as direct tools to carry out major government schemes.
If you want the top name, it's Indian Oil Corporation Limited (IOCL). It was founded in 1959. IOCL is a giant in oil and gas. It manages everything: refining, pipelines, and fuel sales.
Its many refineries make essential fuels across the nation. This includes petrol, diesel, and LPG. Pipelines move these products coast to coast. IOCL also holds petroleum reserves. This protects India from global supply shocks.
The company is involved in social good, too. It helps provide LPG to rural families through the Ujjwala Yojana. Clean cooking fuel improves health and dignity for millions.
Other massive players ONGC, NTPC, Coal India also power our industry. Together, they prove that the energy sector is central to how India grows.
Operational Inefficiency: Too much paperwork slows down all decisions. This delays projects and makes them less competitive.
Overstaffing: Having too many employees increases costs. Productivity then suffers in those units.
Political Interference: Changes in policy or management are often influenced by politics. This makes long-term planning difficult.
Market Competition: Private firms enter the market. This increased competition reduces the power of Public Sector Undertakings.
Technology Obsolescence: Many Public Sector Undertakings are simply slow to use new technology. Private rivals often beat them here.
Financial Stress: Units that constantly lose money face pressure. Less funding means fewer upgrades or expansions.
Regulatory Compliance: Complex rules and audits delay approvals. This slows down when projects can finally start.
These hurdles mean that reforms are crucial. Public Sector Undertakings must adjust to stay relevant in today's fast-moving markets.
Public Sector Undertakings have a long history of supporting India. They are key in industry, transport, and services. They built our infrastructure. Their role in meeting national goals is very clear. But challenges exist.
Issues like being slow, political influence, and rising competition create major pressure. Reforms are focused on balancing things out. This includes selling stakes, improving management, and targeted sales.
The future depends on how PSUs adapt. They must accept innovation, gain independence, and remain accountable. If they keep up with India's changing economy, they will continue to drive growth.
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An example of a public undertaking is Bharat Heavy Electricals Limited (BHEL). It is a government-owned company engaged in manufacturing power generation and transmission equipment across various sectors in India.
PSUs are classified as Maharatna, Navratna, or Miniratna based on their financial performance and operational autonomy.
Indian Oil Corporation Limited (IOCL) is among the largest PSUs in India in terms of revenue and operational scale.
Public Sector Undertakings (PSUs) play a crucial role in driving economic growth by contributing to infrastructure development, generating employment opportunities, promoting regional balance, and implementing government policies effectively.
Public sector reforms focus on disinvestment, strategic sales, improved corporate governance, performance-based monitoring, and asset monetisation to enhance efficiency, transparency, and competitiveness of government-owned enterprises.
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