PUBLIC SECTOR ENTERPRISES REFORMS

PSE’s includes Government companies in the Central and State Sectors

These industries covers a wide spectrum of activities in basic and strategic industries like:Steel Heavy Eng. TourismCoal Chemicals FinancialMinerals Fertilizers TradingPetroleum Transp. Marketing

In India, a government-owned corporation is termed as a public sector undertaking (PSU). This term is used to refer to companies in which the government (either the federal Union Government or the many state or territorial governments, or both) own a majority (51 percent or more) of the company equity

WHY THE PSE’S ? Public enterprises help in rapid economic

growth It creates the necessary infrastructure for

economic development To earn return on investment and generate

resources for development To promote redistribution of income and wealth To generate employment opportunities To promote balanced regional development To assist the development of small-scale ind. To earn foreign exchange for the economy

Investment in the PSE,s during plansFive year Investment No.of PSE,s Plan (in crores)Ist plan 29 52nd 81 213rd 953 484rth 3902 855th 6237 1226th 18,225 1867th 42,811 2218th 1,18,492 2379th 2,01,500 2381999 2,73,700 2352002 3,24,614 2402003 3,33,475 240

NEED FOR PUBLIC SECTOR ENTERPRISES REFORMS

Lack of Competition Over employment Long Gestation period Over capitalization Inefficient Management Absence of Appropriate pricing policy Social Objectives Lack of Efficient and Trained Staff

HIGHLIGHTS OF PUBLIC ENTERPRISES SURVEY (2002-2003)

Gross turnover of all 240 PSU’s during 2002-03 has been Rs.544390 crore against Rs.478732 crore during 2001-02

Net profit of all 240 PSU’s during 2002-03 has been Rs. 32141 crore against Rs. 25978 in 2001-02

During 2002-03 profit earning PSU’s earned net profit of Rs. 43085 crore while loss making PSU gave net loss of Rs. 10944 crore.

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PSU earning highest turnover is Indian Oil Corporation with Rs.123628 crore. Second, third & fourth places gone to HPCL, BPCL and ONGC respectively.

PSU earning highest net profit is ONGC with Rs. 10529 crore.

PSU showing highest deficit is FCI with Rs.1166 crore. Hindustan Fertilizer stand second with Rs.1058 crore deficit during 2002-03

1. Arms and Ammunition and allied items of defence equipment2. Atomic energy3. Iron and Steel 4. Heavy casting and forging of steel items 5. Heavy plant and machinery required for iron and steel production, for mining for machine

tool manufacture and such other industries as may be specified by the Central Government.

6. Heavy electrical plant including large hydraulic and steam turbines7. Coal and lignite8. Minerals oils9. Mining of iron ore, manganese ore, chrome ore, gypsum, sulphur, gold and diamond.10. Mining and processing copper, lead, zinc, tin molybdenum and wolfram11. Minerals specified in the Schedule to the Atomic Energy (Control of Production and Use)

Order 1953.12. Aircraft13. Air transport14. Rail transport15. Ship building16. Telephones and telephone cables, telegraph and wireless apparatus (excluding radio

receiving sets)17. Generation and distribution of electricity

Industries reserved for PSU’s prior to July 1991

1. Arms and Ammunition and allied items of defence equipment, defence aircraft and warship

2. Atomic Energy

3. Coal and Lignite

4. Mineral Oils

5. Mining of iron ore, manganese ore, chrome ore, gypsum, sulphur, gold and diamond

6. Mining of copper, lead, zinc, tin, molybdenum and wolfram

7. Minerals specified in the schedule to Atomic Energy (Control of production and use) Order, 1953

8. Railway Transport

Industries reserved for PSU’s since July 1991

Industries reserved for PSU’s since December 2002

• Atomic Energy

Minerals specified in schedule to atomic Energy (Control of Production and Use) Order, 1953

Railway Transport Arms and Ammunition

Navratna was the title given originally to nine Public Sector Enterprises (PSEs) identified by the Government of India in 1997 as "public sector companies that have comparative advantages", giving them greater autonomy to compete in the global market so as to "support them in their drive to become global giants"

IDENTIFICATION OF PUBLIC SECTOR ENTERPRISE AS NINE

GEMS

SAIL IOCL VSNL HPCL BPCL ONGC BHEL NTPC IPCL GAIL MTNL

Two of these namely IPCL and VSNL have since been privatized and as on July 2003 there are only 9 NAVRATNA PSEs. The profitability of these 9 ratna was Rs.15508 crore during 2001-02

The number of PSEs having Navratna status has been raised to 16,the most recent addition being Oil India Limited

In addition, the government created another category called Miniratna. Miniratnas can also enter into joint ventures, set subsidiary companies and overseas offices but with certain conditions. In 2002, there were 61 government enterprises that were awarded Miniratna status. However, at present, there are 66 government enterprises that were awarded Miniratna status.

In 2009, the government established the Maharatna status, which raises a company's investment ceiling from Rs. 1,000 crore to Rs. 5,000 crore.The Maharatna firms can now decide on investments of up to 15 per cent of their net worth in a project; the Navaratna companies could invest up to Rs 1,000 crore without explicit government approval.

Criteria The six criteria for eligibility as

Maharatna are: Having Navratna status. Listed on Indian stock exchange with

minimum prescribed public shareholding under SEBI regulations.

An average annual turnover of more than Rs. 20,000.crore during the last 3 years. Earlier it was Rs 25,000 Crore.

An average annual net worth of more than Rs. 10,000 crore during the last 3 years. Earlier it was Rs. 15,000 crore.

An average annual net profit after tax of more than Rs. 2500 crore during the last 3 years. Earlier it was Rs. 5000 crore.

Should have significant global presence/international operations.

List of Maharatna Coal India Limited Indian Oil Corporation Limited NTPC Limited Oil and Natural Gas Corporation Limited Steel Authority of India Limited

What is disinvestment?

Disinvestment means - A reduction in capital investment or Withdrawal of capital investment from a company is called disinvestment

Its totally opposite of investment

About disinvestment

Mostly govt do disinvestment on those companies which are running in loss or doesn't run properly

Govt doesn't do disinvestment in high profit making co.

Conditions

Govt must attain 51% share or stake in pse(public sector enter pries) after disinvestment for pse

Govt do disinvestment upto 20% of their capital in one time in pse

DISINVESTMENT PROGRAMMES IN PSE’S

The disinvestment process, which began in 1991-92 with the sale of minority stake in some public sector undertakings

The new policy in this regard is that the government is committed to a strong and effective public sector whose social objectives are met by its commercial functioning

The Govt. is committed to devolve full managerial and commercial autonomy to successful, profit making companies operating in a competitive environment

Generally, profit making companies will not be privatized

As per the National Common Minimum Programme (NCMP) the Government retain existing ‘Navratna’ Companies in the Public Sector

Loss making companies either sold off or closed, after all workers get their legitimate dues and compensation

The Government has approved the constitution of a National Investment Fund (NIF) comprising of proceeds from disinvestment of public sector units

The Govt. has also given in principle approval for listing of currently unlisted profitable PSEs each with a net worth in excess of Rs.200 crore, through an initial public offer (IPO)

OBJECTIVES OF DISINVESTMENT

Modernization and up gradation of PSEs Creation of new assets Generation of Employment Retiring of Public Debt To ensure that disinvestments does not

result in alienation of national assets, which through the process of disinvestments, remain where they are

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COMPANIES IN WHICH DISINVESTMENT IS DONE

BHEL BPCL CONCOR GAIL HCL SAIL NTPC NMDC VSNL MTNL

Setting up a Disinvestment Proceeds Fund

Formulating the guidelines for the disinvestments of natural asset companies

Preparing a paper on the feasibility and modalities of setting up of Asset Management company to hold, manage and dispose the residual holding of the government in the companies in which government equity has been disinvested to a strategic partner