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Day 13 – Q 1.What are the most pressing challenges facing the public sector undertakings (PSUs) in India today? Discuss. What measures have been taken by the government to meet these challenges? Examine.

1. What are the most pressing challenges facing the public sector undertakings (PSUs) in India today? Discuss. What measures have been taken by the government to meet these challenges? Examine.  

आज भारत में सार्वजनिक क्षेत्र के उपक्रमों (PSU) के सामने सबसे अधिक दबाव वाली चुनौतियाँ क्या हैं? चर्चा करें। इन चुनौतियों को पूरा करने के लिए सरकार ने क्या उपाय किए हैं? जांच करें।


The government owned corporations are termed as Public sector Undertakings (PSUs) in India. In a PSU majority (51% or more) of the paid share capital is held by central government or by any state government or partly by the central government and partly by one or more state governments. Several Public Sector Undertakings (PSUs) under the aegis of Government of India regularly provide tremendous employment opportunities. 


Challenges of PSU’s in India today:

  • Problems in Administration like Poor policy making and poor execution, Over-staffing, Very high operation costs, Lack of a realistic and proper pricing policy, Lack of vision and motivation for self-improvement, Wastage of resources or under-utilization of resources
  • Failure in its objective of Capital and Public Sector Formation, the role of public sector in collecting saving and investing them during the planning ear is very important. Moreover, during the first and second five-year plan it was 54% of the total investment. Furthermore, we see a decline to 24.6 % in the year 2010-11.
  • PSU’s were formed for creates millions of jobs to fight the obvious problem of unemployment in India. However, the number of people without employment in March 2011 was 150 lakh. In some of the public sector units there is the problem of surplus manpower which is creating drainage of resources unnecessarily leading to increase in the unit cost of production. Political considerations have also contributed towards overstaffing of unskilled workers in these units.
  • Some of the public sector enterprises, particularly some of the loss-incurring enterprises are suffering from endowment constraints as the selection of sites of these enterprises were done on political considerations rather than on rational considerations.
  • Under-utilisation of the production capacities are one of the common constraints from which almost all public sector enterprises are suffering. In 1986-87, out of the 175 public sector units 90 units had been able to utilize over 75 per cent of its capacities, 56 units achieved utilisation of capacities between 50 and 75 per cent and the rest 29 units could somehow managed to utilize under 50 per cent of its capacities.
  • Some of the public sector enterprises in India are suffering from technological gap as these enterprises could not adopt up-to-date technologies in their production system leading to high unit cost and lower yield. Enterprises like I.I.S.C.O., E.C.L. etc. are suffering from this constraint.

Government initiatives to help PSU’s

  • Privatization of PSU’s, A high level group of secretaries on disinvestment have approved India’s biggest disinvestment drive since last 20 years. Bharat Petroleum Corp Ltd (BPCL), Shipping Corp of India (SCI), THDC India and NEEPCO will be now privatized, as Govt. will sell its entire stake from these public sector companies.
  • Disinvestments, the Department of Investment and Public Asset Management (DIPAM) have initiated the process of diluting government stake in public sector undertakings (PSUs). The government increased its disinvestment target to over Rs 1 lakh crore for the current financial year in the last budget. In the interim budget 2019-20 presented in February this year, it had pegged the disinvestment target of Rs 90,000 crore.
  • Granting greater managerial autonomy to the board of PSUs could significantly boost their performance. Heavy industries and public enterprise ministry has taken a number of steps like enhancement of delegation of powers to the profit-making PSUs and setting up of the Board for Reconstruction of Public Sector Enterprises to revive the sick companies, an official release said.
  • The government’s move to consolidate 10 public sector banks into four large ones is ostensibly aimed at improving operating efficiency, governance and accountability and facilitates effective monitoring. However, the mergers will bring their own set of challenges and may not lead to value accretion for shareholders.
  • Government is considering issues of retirement age and revision of wages of the public sector employees , provide equity, in terms of salary and wages, for sick CPSEs.


Being the largest commercial enterprises in the country, PSUs provide a huge leverage to the government (their controlling shareholder) to intervene in the economy. Their intervention is either directly or indirectly to achieve the desired socio-economic objectives. PSUs play a key role in steering the national economy in the right direction.

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