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India has a mixed economy, and the government of India is completely based on the socio-economic development of the country, and this has been its core principle since the time of independence. Public sector enterprises are the tool which the government uses to develop the country in various ways. It has its own firms and companies in which it has a stake of more than 51%, and through these firms or companies, the government moves towards the commercial and social upliftment of its citizens. This article is going to give an insight into the public sector enterprises of India.
Background
At the time of independence, India was a country which was majorly dependent on agriculture for its sustenance, and people wanted to continue with the same pattern until the government raised that in order to develop the country, it would have to make a switch from primary sector dependency. This started happening in 1965 with the formation of the Bureau of Public Enterprises, which was initially part of the finance ministry but was later on transferred to the ministry of heavy industries, renamed the ministry of heavy industries and public enterprises. The pattern of public enterprises was mostly visible with the conversion of 14 private banks into public sector ownership by the 1980s, and later on, more banks were transferred to the public sector. All of this worked well, but the economic crisis of 1991 led to privatisation for the sake of raising funds and reviving the economy, as many public sector undertakings failed to perform. As of today, Public sector enterprises are again part of the finance ministry after a major reshuffle made by the government in the year 2021.
Public Sector Enterprises
A public sector enterprise is a company or a firm where the major stake of ownership, which is more than 51%, is owned by the government. It can be the central government of India, the state government, or both can have a joint share. There have been various public sector undertakings since the time of Independence. Some have failed to perform, and various measures were taken to revive them, ultimately leading to either privatisation or closure if they don’t work out well. The major reason behind having public sector undertakings in India post-independence was the lack of any other sector in the country, and it was not possible to develop them without government interference. There were various industrial policies made, and many have definitely worked as India is a strong economy today and comparatively less dependent on the agricultural sector than it was during independence.
There have been various subdivisions in public sector undertakings depending on the kind and level of financial autonomy they have. There are some somneomapnies owned by the government which are given more financial freedom compared to others depending on their performance in the country in order to grow them globally. The list of some divisions is given and discussed below.
Maharatna- There are some important eligibility criteria for a company to fall under the category of a maharatna. The first one is that it should be a public sector undertaking and not private ownership. The firm should have an average annual net profit of 2,500 crore INR, which was around 5,000 crore INR earlier. Besides, if a company has an average net worth of more than 10,000 crores, then also it will be categorised as a maharatna. If both things are not available with the company, then a third criterion is also available, which is that it should have an average turnover of more than 20,000 crore INR, which was 25,000 INR earlier in a time span of three financial years. A maharatna is given the benefit of financial autonomy upto 5,000 crores or 15% of its net worth, depending upon their decision. Bharat Heavy Electricals is an example of maharatna.
Navaratna- In order to become a navratna, a company has to have a score of more than 60 out of 100 in six categories, namely, net worth, net profit, manpower cost, total cost, cost of services and cost of production. The financial autonomy which it is given is up upto 1,000 crore INR or upto 15% of its net worth on a specific project or a total of 30% of net worth in a financial year. Bharat Petroleum Corporation is a navaratnas in public sector undertakings.
Miniratna- Miniratna has two categories one where the company has either made a continuous profit for three years or 30 crores in a single financial year, and the other one which has a continuous profit for three years and positive net worth. The Benefit given to the first one is a financial autonomy of 5000 crores for 3 to the net worth of whoever is lower. The other one has complete autonomy.
Conclusion
The public sector enterprises have a major role to play in the development of the economy and have always been a major stakeholder in growth. As of now, it falls under the ministry of finance, and there have been various initiatives taken for its upliftment and those which don’t perform well are either closed or sold to private forms in order to raise funds. Overall, public sector undertakings are a major aspect of a mixed economy where the development of people is more important than commercialisation.
