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Role of Public Sector in the Upliftment of Society

Role of Public Sector in the Upliftment of Society

The public sector plays a major role in uplifting the economic condition of society in various ways.

The major role of the Public sector can be explained below:

  • Public sector & capital formation – This sector has been a major reason for the generation of capital in the Indian economy. A large amount of the capital comes from the Public sector Units in India
  • Creation of Employment opportunities – Public sector has brought about a major change in the employment sector in the country. They provide a lot of opportunities under various domains and thus helps in uplifting the Indian economy and society.
  • Development of Different Regions – Establishment of major factories and plants has boosted the socio-economic development of different regions across the country. Inhabitants of the region are impacted positively with respect to the availability of facilities like electricity, water supply, township, etc.
  • Upliftment of Research and Development – Public sector units have been investing a lot to introduce advanced technology, automated equipment and instruments. This investment would result in the overall cost of production.                            Role of Public Sector in the Upliftment of Society

Maharatna, Navratna and Miniratna status

  • Status of Maharatna, Navaratna and Miniratna is given to the Central Public Sector Companies (CPSE) in India.
  • The Department of Public Enterprises under Ministry of Heavy Industries & Public Enterprises is the nodal department for all the Central Public Sector Enterprises (CPSEs).
  • It makes policies and guidelines for the performance evaluation and improvement of the PSUs/ CPSEs.

Eligibility Criteria


  • Having Navratna status.
  • Listed on Indian stock exchange with minimum prescribed public shareholding under SEBI regulations.
  • Average annual turnover of more than Rs. 25,000 crore, during the last 3 years.
  • Average annual net worth of more than Rs. 15,000 crore, during the last 3 years.
  • Average annual net profit after tax of more than Rs. 5,000 crore, during the last 3 years.
  • Should have significant global presence/international operations.


  • A CPSE which falls under the Miniratna (Category – I and Schedule ‘A’ CPSEs), has obtained rating of ‘very good’ or ‘excellent’ in 3 of the last 5 years.
  • A CPSE which has composite score of 60 or above in the 6 selected performance parameters, namely;
  • Net profit to net worth
  • Earnings per share
  • Profit before interest and taxes to turnover
  • Profit before depreciation, interest and taxes to capital employed
  • Manpower cost to total cost of production/services
  • Inter-Sectoral performance


  • Those CPSEs which fulfill these two criteria are eligible to be considered for grant of Miniratna status.
  • The CPSEs which have made profits in the last 3 years continuously
  • The CPSEs which have positive net worth.
  • As of 2019, there are 10 Maharatnas, 14 Navratnas and 73 Miniratnas.
  • There are nearly 300 CPSEs (central public sector enterprises) in total.

Challenges of PSU’s in India today:

  • 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.
  • 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
  • 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.
  • 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.
  • 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

  • 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.
  • 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.
  • 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.
  • 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.
  • 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.                                Role of Public Sector in the Upliftment of Society



Indian Economy

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