Cabinet Clears Policy on PSU Privatization

January 28, 2021

The Union Cabinet has cleared the policy on the privatization of public sector undertakings (PSUs). The details regarding the policy will be announced in the upcoming Union Budget that will be presented on February 1, 2021.

About the Policy

  • The policy will present a road map for the presence of government-owned entities in strategic and non-strategic sectors.
  • This policy was the part of the Aatmanirbhar Bharat package that was announced by the Finance Minister in May 2020.
  • It was announced as a coherent policy wherein all the sectors would be opened for private sector participation.
  • The government had also announced to limit the presence of PSUs to one to four in strategic sectors.
  • The government wanted to privatize, merge or bring the remaining companies under a holding company.
  • After this policy will come into force, the government will completely exit from the companies in non-strategic sectors.
  • The timing of the privatization of non-strategic sector companies will be decided on a case-by-case basis.

Strategic sectors

The Department of Investment and Public Asset Management had classified 18 sectors as strategic sectors. It includes- fertilisers, telecom, power, banking, defense, and insurance. These sectors have been categorized as the mining & exploration, manufacturing & processing and services.

Pubic Sector Undertaking (PSU)

The state-owned enterprise is called a Public Sector Undertaking (PSU) or a Public Sector Enterprise in India. The PSU is owned by the union Government or one of the state or territorial governments. It can also be owned by both in parts. The majority of the stock of the company in a PSU owned by the government. PSUs are of two types- central public sector enterprises (CPSUs, CPSEs) or state level public enterprises (SLPEs). PSUs are administered by the Ministry of Heavy Industries and Public Enterprises.

Number of PSUs in India

Till the year 1951, there were just 5 enterprises in the public sector. Over the time the number has increased. As of March 2019, the number has increased to 348.

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