Updated March 8, 2023
PSU (Public Sector Undertakings)
Public Sector Undertaking is the full form of PSU. Public Sector Undertakings(PSU) are State-Owned Institutions established and owned by the Government of India or the State Governments of India. A PSU is an enterprise in which the Central Government or one or more State Governments individually or jointly control the management or have the power to appoint a majority of the directors. PSU enterprises are an important part of the Indian economy and include public utilities and companies that provide services that benefit society.
The main motivation for raising public sector awareness is to launch commercial projects, and these projects focus on nation-building and improving the national economy. In a PSU, the state or federal government purchases the majority, or at least a portion, of the capital.
History of PSU
After independence, India suffered for a long time from exploitation, wide income disparity, unbalanced regional economic development, widespread unemployment, and other serious socio-economic and financial problems. In addition, a weak industrial base, underinvestment, lack of infrastructure, lack of human resources, or backward technology weakened India’s position.
Hence, the understanding of the public sector was seen as a development strategy for independence and steady economic progress. Therefore, the country follows a fixed economic development policy in which PSUs can play an important role. The public sector has been crucial to the nation’s economic development as new regulations have been implemented over the years.
In 1951, the Government of India had five power entities. The number of such public institutions will have increased to 365 by March 2021. All state-owned businesses now have greater financial freedom.
Types of PSU
Public Sector Undertakings can be divided into three parts:
#1 Central Public-Sector Enterprises (CPEs)
Companies headed by the union government or other CPSEs with a capital stake of 51% or more are called CPEs. The example of CPEs are as follows:
- Bharat Petroleum Corporation Ltd
- Airports Authority of India
- BHEL Electrical Machines Ltd
#2 Public Sector Banks (PSBs)
Banks headed by the union government or of other PSB with a capital stake of 51% or more are called PSB. The PSBs come under Non-Strategic CPEs. The example of PSBs are as follows:
- Punjab National Bank
- State Bank of India
- Central Bank of India
#3 State-Level Public Enterprises (SLPs)
Companies that are headed by the state government or others PSBs having a capital stake of 51% or more are called SLP. The SLPs also come under the Non-Strategic CPEs. The example of SLPs are as follows:
- Gas Authority of India
- Life Insurance Corporation of India
- State Trading Corporation
Objectives of PSUs
After having an idea about the full form of PSU and its various facets, let’s see its objectives. The objectives of PSU are as follows:
- It promotes rapid economic development with an emphasis on infrastructure development and expansion.
- It also aims to generate financial resources for economic development.
- It promotes balanced regional growth.
- It also promotes and develops small-scale and ancillary industries in India.
- It also accelerates export promotion.
Roles of PSUs in the Development of the Indian Economy
The public sector plays an important role in improving socioeconomic conditions in various ways. The main part of the public sector are as follows:
- Capital Formation: PSUs have been the main cause of capital formation in the Indian economy. A lot of money comes from government institutions in India.
- Creating Employment Opportunities: The public sector has brought about major changes in the public employment sector. They offer many opportunities in various fields, thereby helping to improve the economy and society of India.
- Development of Different Regions: The construction of larger factories has contributed to social and economic development in various regions. The presence of settlements, water, power, and other amenities benefits the locals.
Challenges Faced by PSUs
The challenges faced by PSUs are as follows:
- Lack of Autonomy: PSUs are generally not allowed to operate as autonomous units. This led to delayed decision-making, resulting in lost business opportunities that could have been more useful.
- Lack of Professional Expertise: The administrative officials who direct the affairs of the PSUS generally need to gain business experience and expertise in the relevant sector of bureaucracy. There is a greater influence of bureaucracy.
- Bureaucratic Delays: Public institutions suffer from bureaucratic delays due to red tape, poor planning, and procedural delays.
- Costing: The majority of the operations led by PSU are for the public’s welfare, so if it offers services at subsidized prices, it is hard to earn profit.
Conclusion – Full Form of PSU
After independence, the emergence of public sector corporations served as one of the main pillars of economic growth and development pillars. They have helped in the economic development of the country despite the challenges. The government should take more steps to ensure the stability of the PSU. This article has helped you understand the full form of PSU and the various facets related to it.
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