Public sector enterprises strengthening the economy

SATISH SINGH

India has become the 5th largest economy in the world and is fast moving towards becoming the 4th largest economy in the world. At the time of independence, India's Gross Domestic Product (GDP) was Rs.2.7 lakh crore, which increased to Rs.41.74 lakh crore in the second quarter of the financial year 2023-24 and in achieving this remarkable achievement Mini Ratna, Navratna and Maharatna companies along with, public sector banks have played an active, positive, and important role.

In 1947, the infrastructure of the country was very weak, industries like steel, cement, aviation, shipping, rail, transport like car, truck, bus etc., were backward, there was lack of technology, farming was being done in the traditional way, farmers did not pay special attention towards the allied activities of agriculture & service sector was in the process of development. Sectors like roads, electricity, health, education etc. were also lagging. In fact, a long slavery had weakened the country's economy. In this case, important parameters of development were needed to be strengthened.

Before independence, the country had many private companies, but they were busy in their own development. Expected development of many important sectors in the country was not achieved. There were some areas which were extremely backward, such as infrastructure and basic facilities like education, health, roads, electricity, water, housing etc. In such a situation, a need was felt to strengthen these areas. Since the private sector was not taking corrective initiatives in the matter. Therefore, the government formulated five-year plans and established public sector undertakings to realize the concept of inclusive development in the country within a given time frame.

In this light, taking further action, Mini Ratna, Nav Ratna and Maharatna companies were established in the country and to nurture their financial needs, accelerate economic activities, realize the concept of financial inclusion, make the common people self-reliant and contribute to the development of the country. Private banks were nationalized to strengthen the economy.

At the time of independence, about 1100 small and big private banks were functioning in the country, but their objective was only to earn profits. For this reason, to earn profits and strengthen the economy while fulfilling social concerns, State Bank of India was nationalized on 1 July 1955, while other banks were nationalized in 1969 and 1980. In 2017, there were 27 government banks in the country, whose number came down to 12 in April 2020 after consolidation.

Banks, Corporates, Infrastructure like, Solar Energy, Wind Energy, Agro Processing, Rail Factories, Railway Lines, Airports, Ports etc., Micro, Small and Medium Industries, Agriculture, and allied sectors like, Animal Husbandry, Dairy, Handicrafts, Agro based Industries are working to provide financing to provide basic facilities like schools, roads, electricity, water etc. in rural areas. Banks can play the role of facilitator by connecting villagers to banks, empowering women, transferring money directly into the accounts of beneficiaries of Direct Benefit Transfer (DBT) or government schemes, giving villagers access to the national & world market by promoting digital transactions, etc.

As of January 2023, there were 12 Maharatna and 13 Navratna companies and 62 Miniratna companies in India. Being financially strong and profitable companies, Miniratna, Navratna and Maharatna companies are listed in the stock market. The earnings per share, net capital, net profit etc. of these companies are better than many private stalwart companies and their borrowing level is also less.

Public sector units are classified as Central Public Sector Enterprises (CPSEs), Public Sector Banks (PSBs) and State Level Public Enterprises. CPSEs are regulated by the Ministry of Heavy Industries and Public Enterprises and the Department of Public Enterprises (DPE) acts as the nodal department for all Central Public Sector Enterprises CPSEs. DPE also formulates policies regarding CPSEs, which mainly relate to improving the performance of CPSEs, their continuous evaluation, their financial autonomy, personnel management etc.

In the financial year 1996-97, Navratna status was given to those public sector companies which were already classified as Mini Ratna companies and their performance was continuously improving and the government felt that if given special rights to their promotors and financial autonomy, their performance can increase further & they may become Maharatna Companies.

Bharat Electronics Limited, Container Corporation of India Limited, Engineers India Limited, Hindustan Aeronautics Limited, Mahanagar Telephone Nigam Limited, National Aluminum Company Limited, NBCC (India) Limited, NMDC Limited, NLC India Limited, Oil India Limited, Rashtriya Ispat Nigam Ltd., Rail Vikas Nigam Ltd., Shipping Corporation of India Ltd. etc. are Navratna companies in the country.

Due to the implementation of appropriate policies by the government, further improvement in the performance of Navratna companies was soon recorded. Meanwhile, the government came up with the Maharatna scheme on 4 February 2010 and Navratna companies meeting the parameters like profits, availability of adequate capital, low debt, liquidity, financial autonomy etc. were given the status of Maharatna company.

At present Bharat Heavy Electricals Limited (BHEL), Bharat Petroleum Corporation Limited (BPCL), Coal India Limited (CIL), Gas Authority of India Limited (GAIL), Hindustan Petroleum Corporation Limited (HPCL), Indian Oil Corporation Limited (IOCL), National Thermal Power Corporation (NTPC), Oil and Natural Gas Corporation (ONGC), Power Grid Corporation of India, Steel Authority of India Limited (SAIL), Power Finance Corporation and Rural Electrification Corporation Limited (REC) are the 12 Maharatna companies.

Maharatna companies have freedom in choosing their investment option. They can invest up to 15 percent of their total assets in a project. The investment limit of these companies is Rs.5,000 crore, because their operating costs are high. Having a broad scope of business and financial autonomy helps these companies to grow globally and compete with global players.

Harvey Industry, energy, like gas, crude oil, coal, renewable energy, steel, cement, mining etc. play an important role in ensuring the development of any country, but these sectors cannot develop automatically. To strengthen these sectors, investment, technical assistance, and skilled workers are required. Generally, the private sector does not come forward to strengthen the infrastructure, because investment in this sector is made for a long time, due to which the capital also remains stuck for a long period. Therefore, the government formed public sector undertakings to strengthen the infrastructure of the country.

Today Miniratna, Navratna, Maharatna companies and public sector banks are working to provide employment directly and indirectly. Also, due to these, economic activities are accelerating in the country, private sector is being helped to grow, infrastructure is getting strengthened, common people are getting access to basic facilities, development is gaining momentum. etc.

(Views are personal. Email: singhsatish@sbi.co.in)