PUBLIC SECTOR

• A public enterprise is an organization which is

(i)Owned by public authorities including central state or local authorities to an extent of 50% or more.

(ii)It is established for achievement of a defined set of public purpose.

Objective

• 1. To help in rapid growth and industrialization and create necessary infrastructure for economic development.

• 2. Promote redistribution of income & wealth • 3. Create employment opportunities• 4. Promote regional balance development • 5. Promote import substitution to save and earn

foreign exchange for country.• 6. Basic Infrastructure(Transport, Railways, Airways)

Organization of Public Sector

• Ministry ( Railways, Finance etc)

• Statutory Corporation( LIC, AIR India, IFC,RBI,ONGC,NTC etc..)

• Government Companies ( BPCL, SAIL, GAIL etc)• Central Board (Bhakra Nangal, Hira Kund ,Nagarjun

Sagar dam)

Ways/methods of formation

• Government entrepreneurship

• Statutory company

• Nationalized company

Maharatnas

• Mega public sector undertakings ONGC, SAIL, IOC and NTPC got greater financial and operational autonomy after the government accorded the Maharatna status to these firms to help them emerge as global giants.

• The coveted status empowered the boards of these firms to take investment decisions up to Rs 5,000 crore without seeking government approval. It also empowers the companies to enter into joint venture, set subsidiary companies and overseas offices without seeking government approval.

• These companies should also have annual turnover of more than Rs 25,000 crore, net profit after tax of Rs 5,000 crore and net worth of Rs 15,000 crore in the last three years.

Navratnas• The status empowered the boards of these firms to take

investment decisions up to Rs 1,000 crore without seeking government approval. It also empowers the companies to enter into joint venture, set subsidiary companies and overseas offices without seeking government approval.

• To be qualified as a Navratna, the company must obtain a score of 60 (out of 100). The score is based on six parameters which include

• Net profit to net worth, • Total manpower cost to total cost of production or cost of services, • PBDIT (Profit Before Depreciation, Interest and Taxes) to capital employed, • PBDIT to turnover, • EPS (Earning Per Share) and • Inter-sectoral performance.

Miniratnas

• The status empowered the boards of these firms to take investment decisions up to Rs 500 crore without seeking government approval. It also empowers the companies to enter into joint venture, set subsidiary companies and overseas offices but with certain conditions.

• As per criteria, the CPSEs having profit in the last three years continuously, with pre-tax profit of Rs.30 crore or more in at least one of the three years, and having positive net worth are eligible to be considered for grant of Miniratna Category

Problems faced by Public Sector Undertakings in India

• Low Productivity. Low capacity utilization and low efficiency.• Low rate of return on capital. Large number of loss making

firms. • Poor work ethics and quality of services.• Over capitalization due to substantial time and cost overruns. • Bureaucratic controls.• Most of the PSU’s were monopolies in their industries due to

tight governmental controls.

Reasons for poor performance of PSUs

• Red tapes• Risk aversion• Ineffective governance structures• Meddling by politicians• Corruption• Rampant nepotism in appointments of managers

FINANCIAL INDICATORS

The Public Sector

Financial performance of Public Sector Undertakings

• As on 31 March 2009, there were 438 central government Public Sector Undertakings (PSUs) under the audit jurisdiction of the Comptroller and Auditor General of India.

• These included 321 government companies.• 111 deemed government companies and six statutory

corporations. • This report published by NSSO deals with 392 PSUs

comprising 294 government companies, 92 deemed government companies and six statutory corporations. Forty six companies are not covered in this report. Out of them, accounts of 10 PSUs were in arrears for three years or more, two PSUs had not submitted their first accounts, 32 PSUs were defunct/under liquidation and accounts of two PSUs were not due.

Government Investments

• The accounts of 392 PSUs (348 for current year and 44 for earlier years) indicated that-

• The Government of India had invested Rs.1,61,712 crore directly in the equity capital of 300 government companies and corporations and

• Rs.94 crore in three deemed government companies.• Loans amounting to Rs.62,998 crore had also been received by the PSUs directly from the Government of India as on 31

March 2009.• Compared to the previous year, investment in equity of PSUs

by the Government of India registered a net increase of Rs.14,995 crore and loans given to them decreased by Rs.14,994 crore.

Market Capitalisation

• The market value of shares of 39 listed government companies as per prices prevailing in stock markets on 31 March 2009 stood at Rs.8,15,606.31 crore. This compared favourably with the total book value of their shares at Rs.3,51,794.67 crore.

• Market value of shares held by the Government of India and government companies in these companies stood at Rs.6,70,539.86 crore as on 31 March 2009 as compared with the book value of Rs.2,75,773.91 crore.

Central Government Public Sector Undertakings 2006-07

Particulars No. Profit/Loss(Rs. Bn)

Profit making PSUs 156 897

Loss making PSUs 59 82

No profit or No loss 2 0

Total number of PSUs 217 816

PREFORMANCE OF PSUs in 2006-07

• Share of CPSU’s is almost 11.12% of total GDP and 25% if state level and local enterprises are too included.

• 27% of total industrial output.• 1/3rd revenue of central govt. comes from the CPSU’s.• Dividend paid by CPSU is approx. 264bn in FY 2007.• 53% growth in turn over between 2004-07.• Net profit gone up 695bn to 815bn between 2006 to 07

PREFORMANCE OF PSUs in 2006-07

• 18 Navratnas contribute 15% of GDP and 47% of total income of the PSUs FY 2009.

• The net worth of all enterprises stood at Rs 4,530 bn (FY 07)

• PSUs paid a dividend of Rs 268 bn in FY07 • Account for 11% of the total merchandise exports of

the country• Number of loss making institutions decreased from

89 in FY04 to 59 in FY07

TOP 5 INDIAN PSUs

NAME OF COMPANIES NET INCOME Rs. Bn

ONGC Ltd. 167.57

NTPC Ltd. 76.56

SAIL Ltd. 75.90

IOC Ltd. 70.00

SBI 67.25

Private Sector

• The part of a nation's economy which is not controlled by the government.

or

• The private sector is that part of the economy which is run by private individuals or groups, usually as a means of enterprise for profit, and is not controlled by the state.

Growth of Private Sector

• The last 15 years witnessed a phenomenal rise of the growth of private sector in India.

• The opening up of Indian economy has led to free inflow of foreign direct investment (FDI) along with modern cutting edge technology, which propelled India's economic growth.

• Previously, the Indian market were ruled by the government enterprises but the scene in Indian market changed as soon as the markets were opened for investments.

• Some positive effect of the growth of private sector in India are as follows-

• Manufacturing registered 11.9% growth.

• The passenger vehicles sector grew by 11.61% during April-May 2007 .

• Electricity, gas & water supply performed well and recorded an impressive growth rate of 8.3% .

• Construction growth rate rose to 10.7% .

• Trade, hotels, transport and communication registered a growth rate of 12%.

• Financing, insurance, real estate and business services recorded an impressive growth rate of at 11% during the 1st quarter of this fiscal.

• Exports grew by 18.11% during the 1st quarter of 2007-2008 and the imports shoot up by 34.30% during the same period.

• The food sector is estimated to be of US$ 200 billion and it is

expected to grow to $310 billion by 2015.

Top ten private sector companies

• Reliance Industries Limited • Tata Consultancy Services (TCS)• Infosys Technologies Ltd• Wipro Limited• Bharti Tele-Ventures Limited • ITC Limited • Hindustan UniLever Limited• ICICI Bank Limited • Housing Development Finance Corp. Ltd. • TATA Steel Limited

Privatization

• Privatization of industries means opening the gates of public sector to private sector.

• It enhances the importance of private sector because private sector comes to play significant role in the economic development of the country.

• Thus, transferring of public sector industries to private sector is called privatization.

WAYS OF PRIVATIZATION

• DISINVESTMENT • CONTRACTING• LIQUIDATION • LEASING• PREMITING PRIVATE SECTOR ENTER INTO

PSU RESERVED AREA