Role of Public Sector

Undertaking
In
Nations
Building
 Public Sector Undertakings
The government-owned corporations
are termed as Public Sector Undertakings (PSUs) in India

A pubic sector enterprise may be defined as

any commercial or industrial undertaking
owned and managed by the government with a
view to maximise social welfare and uphold
the public interest.
 Public Sector Undertakings

In a PSU majority (51% or more) of the

paid up share capital is held
by central government or
by any state government or
partly by the central governments and
partly by one or more state governments.
 Public Sector Undertakings
Maximise social welfare
Objective
and ensure balanced economic
development.
Ownership Owned by Government.

Management Managed by Government.

Raised from Government

Capital sometimes through Public Issues

Area of operation Operates in basic and

public utility sectors.
 Evolution of Public Sector
Undertakings
Post Independence, India was grappling with grave
socio-economic problems, such as inequalities in
income and low levels of employment, regional
imbalances in economic development and lack of
trained manpower, weak industrial base, inadequate
investments and infrastructure facilities, etc.

Hence, the roadmap for Public Sector was developed as

an instrument for self-reliant economic growth. The
country adopted the planned economic development
polices, which envisaged the development of PSUs.
 Evolution of Public Sector Undertakings

Initially, the public sector was confined to core and

strategic industries. The second phase witnessed
nationalization of industries, takeover of sick
units from the private sector, and entry of the
public sector into new fields like manufacturing
consumer goods, consultancy, contracting and
transportation etc.
 Evolution of Public Sector Undertakings

The Industrial Policy Resolution 1948 outlined the

importance of the economy and its continuous
growth in production and equitable distribution.
In this process, the policy envisaged active
engagement of the State in development of
industries.
 Evolution of Public Sector Undertakings

The Industrial Policy Resolution 1956 classified industries into three

categories with respect to the role played by the State

The first category (Schedule A) included industries whose future

development would be the exclusive responsibility of the State

The second (Schedule B) category included Enterprises whose

initiatives of development would principally be driven by the State but
private participation would also be allowed to supplement the efforts of
the State And,

The third category included the remaining industries, which were left
to the private sector.
 Evolution of Public Sector Undertakings

In 1969, the government nationalized 14 major banks.

The Industrial Licensing Policy 1970 placed certain restrictions on

undertakings belonging to large industrial houses, defined on the
basis of assets exceeding Rs 350 mn.

In 1973, the definition of large industrial houses was adopted in

conformity with that of the Monopolies and Restrictive Trade
Practices Act (MRTP) 1969 and included companies whose assets
exceeded Rs 200 mn.

The Statement on Industrial Policy in July 1991 was also significant.

It brought in fundamental changes in the MRTP Act as well. The
statement revised the priority of the public sector.
Classification
Classification of Public Sector Undertakings

Public Sector Undertakings (PSUs) can be

classified as

Public Sector Enterprises (PSEs),

Central Public Sector Enterprises (CPSEs) and
Public Sector Banks (PSBs).
 The Central Public Sector Enterprises (CPSEs) are also
classified into 'strategic' and 'non-strategic'. Areas of
strategic CPSEs are:

Arms & Ammunition and the allied items of defence

equipments, defence air-crafts and warships
'strategic'

Atomic Energy (except in the areas related to the

operation of nuclear power and applications of
radiation and radio-isotopes to agriculture, medicine
and non-strategic industries)
Railways transport.

All other CPSEs are considered as non-strategic.

 Status
Maharatna
Navratna
Miniratna
for Public Sector Undertakings
The status of Maharatna, Navratna,
Miniratna to CPSEs is conferred by the
Department of Public Enterprises - to
various Public Sector Undertakings.

These prestigious titles provide them

greater autonomy to compete in the global
market.
 Maharatna
A company qualifying for the Maharatna - status should have an
average annual turnover of Rs 20,000 crore during the last three
years against Rs 25,000 crore prescribed earlier. The average
annual net worth of the company should be Rs 10,000 crore.

The Maharatna status empowers mega CPSEs to expand their

operations and emerge as global giants. The coveted status
empowers the boards of firms to take investment decisions up
to Rs 5,000 crore as against the present Rs 1,000 crore limit
without seeking government approval. The Maharatna firms
would now be free to decide on investments up to 15% of their
net worth in a project, limited to an absolute ceiling of Rs 5,000
crore.
 Navratna
The Central Public Sector Enterprises (CPSEs) fulfilling
the following criteria are eligible to be considered for
grant of Navaratna status:
Having Schedule 'A' and Miniratna Category-1 status.
Having at least three 'Excellent' or 'Very Good'
Memorandum of Understanding (MoU) ratings during
the last five years.
The Navratna status empowers PSEs to invest up to Rs. 1000 crore or
15% of their net worth on a single project without seeking government
approval. In a year, these companies can spend up to 30% of their net
worth not exceeding Rs. 1000 cr. They also enjoy the freedom to enter
joint ventures, form alliances and float subsidiaries abroad.
 Miniratna
For Miniratna category I status, the CPSE should have made profit
in the last three years continuously, the pre-tax profit should have
been Rs. 30 crores or more in at least one of the three years and
should have a positive net worth. For category II, the CPSE should
have made profit for the last three years continuously and should
have a positive net worth.
Miniratnas can enter into joint ventures, set subsidiary companies
and overseas offices but with certain conditions. This designation
applies to PSEs that have made profits continuously for the last
three years or earned a net profit of Rs. 30 crore or more in one of
the three years.
Miniratna Category-II CPSEs
Category II miniratnas have autonomy to incurring the capital
expenditure without government approval up to Rs. 300 crore or
up to 50% of their net worth whichever is lower.
FORMS OF ORGANISATION
FORMS OF ORGANISATION OF PUBLIC ENTERPRISES
DEPARTMENTAL
UNDERTAKINGS
 FEATURES OF DEPARTMENTAL
UNDERTAKINGS
The main features of departmental undertakings are as follows:
(a) It is established by the government and its overall control rests
with the minister.
(b) It is a part of the government and is managed like any other
government department.
(c) It is financed through government funds.
(d) It is subject to budgetary, accounting and audit control.
(e) Its policy is laid down by the government and it is accountable
to the legislature.
 MERITS OF
DEPARTMENTAL UNDERTAKINGS

The following are the merits of departmental

undertakings:-
(a)Fulfillment of Social Objectives:
(b)Responsible to Legislature:
(c)Control Over Economic Activities:
(d)Contribution to Government Revenue:
(e)Little Scope for Misuse of Funds:
 LIMITATIONS OF
DEPARTMENTAL UNDERTAKINGS

Departmental undertakings suffer from the following

limitations:
(a)The Influence of Bureaucracy:
(b)Excessive Parliamentary Control:
(c)Lack of Professional Expertise:
(d)Lack of Flexibility:
(e)Inefficient Functioning:
 STATUTORY
CORPORATIONS
 FEATURES OF STATUTORY
CORPORATIONS
The main features of Statutory Corporations are as follows:

(a) It is incorporated under a special Act of Parliament or State Legislative

Assembly.
(b) It is an autonomous body and is free from government control in respect of its
internal management. However, it is accountable to parliament and state
legislature.
(c) It has a separate legal existence. Its capital is wholly provided by the government.
(d) It is managed by Board of Directors, which is composed of individuals who are
trained and experienced in business management. The members of the board of
Directors are nominated by the government.
(e) It is supposed to be self sufficient in financial matters. However, in case of
necessity it may take loan and/or seek assistance from the government.
(f) The employees of these enterprises are recruited as per their own requirement by
following the terms and conditions of recruitment decided by the Board.
 MERITS OF STATUTORY
CORPORATIONS

Statutory Corporation as a form of organisation for

public enterprises has certain advantages
that can be summarised as follows:
(a) Expert Management:
(b) Internal Autonomy:
(c) Responsible to Parliament:
(d) Flexibility:
(e) Promotion of National Interests:
(f) Easy to Raise Funds:
 LIMITATIONS OF STATUTORY
CORPORATIONS

Having studied the merits of statutory corporations we may now

look to its limitations also.
The following limitations are observed in statutory corporations.
(a) Government Interference:

(b) Rigidity:

(c) Ignoring Commercial Approach:

GOVERNMENT
COMPANIES
 FEATURES OF GOVERNMENT
COMPANIES
The main features of Government companies are as follows:
(a) It is registered under the Companies Act, 1956.
(b) It has a separate legal entity. It can sue and be sued, and can acquire property
in its own name.
(c) The annual reports of the government companies are required to be
presented in parliament.
(d) The capital is wholly or partially provided by the government. In case of
partially owned company the capital is provided both by the government and
private investors. But in such a case the central or state government must own
at least 51% shares of the company.
(e) It is managed by the Board of Directors. All the Directors or the majority of
Directors are appointed by the government, depending upon the extent of
private participation.
(f) Its accounting and audit practices are more like those of private enterprises
and its auditors are Chartered Accountants appointed by the government.
(g) Its employees are not civil servants. It regulates its personnel policies
according to its articles of associations.
 MERITS OF GOVERNMENT
COMPANIES

The merits of government company form of

organising a public enterprise are as follows:
(a)Simple Procedure of Establishment:

(b)Efficient Working on Business Lines:

(c)Efficient Management:

(d)Healthy Competition:
LIMITATIONS OF GOVERNMENT
COMPANIES
The government companies suffer from the
following limitations:
(a) Lack of Initiative:

(b) Lack of Business Experience:

(c) Change in Policies and Management:

 Role of Public Sector Undertakings
Public Sector Undertakings (PSUs) have laid a strong
foundation for the industrial development of the
country. The public sector is less concerned with
making profits. Hence, they play a key role in nation
building activities, which take the economy in the right
direction.
PSUs provide leverage to the Government (their
controlling shareholder) to intervene in the economy
directly or indirectly to achieve the desired socio-
economic objectives and maximize long-term goals.
 Role of Public Sector Undertakings

As agriculture is the backbone of Indian economy,

Public Sector Banks (PSBs) play a crucial role in
pushing the agricultural economy on to the
progressive pathway and helping develop rural
India. Moreover, PSUs play a substantial role in
the rural development by providing basic
infrastructural services to citizens.
 Empowerment of Public Sector
Undertakings
The Government provides Public Sector
Enterprises (PSEs/PSUs) the necessary
flexibility and autonomy to operate effectively in
a competitive environment. The Boards of
Navratna and Miniratna companies are entrusted
with more powers in order to facilitate further
improvement in their performance.
 Empowerment of Public Sector Undertakings

The government has also implemented revised salaries

for executives of PSEs/PSUs. Moreover, some
innovative measures such as Performance Related Pay
have been introduced to make them more efficient.
These incentives for the employees have been linked to
individual, group as well as company performance.
For further strengthening, the government is also
encouraging the listing of Public Sector Enterprises on
the stock markets.
 Governance of Public Sector
Undertakings
The Department of Public Enterprises - acts as a nodal
agency for all Public Sector Enterprises (PSEs).
The important roles and tasks of the Department are:
General policy relating to Public Sector.
Matters relating to issue of Presidential Directives and
guidelines to Public Sector Enterprises.
Formulation of policy guidelines pertaining to Public
Sector Enterprises in areas like performance
improvement and evaluation, financial management,
personnel management, board structures, wage
settlement, training, industrial relation, vigilance,
performance appraisal, etc.
 Governance of Public Sector Undertakings

Matters relating to reservation of posts in the

public sector enterprises for certain classes of
citizens.
All matters relating to Memorandum of
Understanding between the Public Sector
Enterprises and the administrative
Ministries/Departments.
Matters relating to delegation of powers to Board
of Directors.
 History and Formation
of Coal India Limited
With dawn of the Indian independence a greater
need for coal production was felt in the First Five
Year Plan. In 1951 the Working Party for the coal
Industry was set up which included representatives
of coal industry, labour unions and government
which suggested the amalgamation of small and
fragmented producing units. Thus the idea for a
nationalized unified coal sector was born. Integrated
overall planning in coal mining is a post-
independence phenomenon. National Coal
Development Corporation was formed with 11
collieries with the task of exploring new coalfields
and expediting development of new coal mines.
 Factors to Nationalization of
Coal Industry in India

Nationalization of coal industry in India in the

early seventies was a fall out of two related events.
In the first instance it was the oil price shock,
which led the country to take up a close scrutiny
of its energy options. A Fuel Policy Committee set
up for this purpose identified coal as the primary
source of commercial energy.
 Factors to Nationalization of
Coal Industry in India

Secondly, the much needed investment needed

for growth of this sector was not forthcoming
with coal mining largely in the hands of private
sector. The objectives of Nationalization as
conceived by late Mohan Kumaramangalam
were; Conservation of the scarce coal resource,
particularly coking coal, of the country by

1. Halting wasteful, selective and slaughter

mining.

2. Planned development of available coal

resources.
 Factors to Nationalization of
Coal Industry in India

3. Improvement in safety standards.

4. Ensuring adequate investment for optimal

utilization consistent with growth needs.

5. Improving the quality of life of the work force.

Moreover the coal mining which hitherto was with private

miners suffered with their lack of interest in scientific
methods, unhealthy mining practices etc. The living
conditions of miners under private owners were sub-
standard.
 Formation of Coal India Limited

With the Government's national energy policy the

near total national control of coal mines in India
took place in two stages in 1970s.

The Coking Coal Mines (Emergency Provisions) Act

1971 was promulgated by Government on 16
October 1971 under which except the captive mines
of IISCO, TISCO, and DVC, the Government of
India took over the management of all 226 coking
coal mines and nationalised them on 1 May, 1972.
Bharat Coking Coal Limited was thus born.
 Formation of Coal India Limited

Further by promulgation of Coal Mines (Taking over

of Management) Ordinance 1973 on 31 January
1973 the Central Government took over the
management of all 711 non-coking coal mines. In
the next phase of nationalization these mines were
nationalized with effect from 1 May 1973 and a
public sector company named Coal Mines
Authority Limited (CMAL) was formed to manage
these non coking mines.

A formal holding company in the form of Coal India

Limited was formed in November 1975 to manage
both the companies.
 BRIEF HISTORY OF COAL INDUSTRY
1774 First coal mine started in Raniganj Coalfield
1956 Formation of National Coal Development Corporation (NCDC).

01-05-1972 Nationalisation of Coking Coal Mines & formation of BCCL.

01-05-1973 Nationalisation of Non-Coking Coal Mines & formation of Coal Mines
Authority Limited (CMAL).

01-11-1975 Formation of COAL INDIA LIMITED

with 5 subsidiaries BCCL, CCL, WCL, ECL & CMPDIL.
28-11-1985 NCL carved out of CCL & SECL carved out of WCL.
03-04-1992 MCL formed out of SECL
01-01-2000 Deregulation of Coal pricing & distribution.
2007 CIL & 5 subsidiaries (NCL, SECL, MCL, CCL & WCL) was accorded
MINI-RATNA Cat-I.

29-05-2009 CMPDIL was accorded MINI-RATNA Cat-II status.

24-10-2008 CIL was accorded NAV-RATNA status.
11-04-2011 CIL was accorded MAHA-RATNA status.
 Corporate Social Responsibility
(CSR) efforts By Coal India Ltd.
As part of its Corporate Social Responsibility (CSR)
efforts, Coal India Limited and its subsidiary companies
regularly undertake various community development
activities in and around the coalfield areas for the
benefit of the local people.
Works done under Community Development
Programme are as under:-

Installation/Repairing of Hand Pumps.

Digging/renovation of Wells/Ponds/Dam etc.
Water Supply through pipelines.
Construction/Renovation and repair of Community
Centre/building.
 Corporate Social Responsibility
(CSR) efforts

Construction/repair of Roads/Culverts.
Construction/repair of school building.
Organising Medical Camps.
Organising Sports and cultural activities.
Misc works.
 Coal India Scholarship Scheme
(Revised-2011)

Coal India Scholarship Scheme (Revised 2011) for Below

Poverty line Students (BPL students) pursuing study in
IITs, NITs and other Central/State Govt. owned
Engineering and Medical Colleges.

Coal India Scholarship Scheme (Revised 2011) for wards of

Land Oustees/Displaced Persons pursuing study in IITs,
NITs and other Central/State Govt. owned Engineering
and Medical Colleges.
Western Coalfields Ltd.
LAVIES PAID TO EXCHEQUER
ADVANCE TA PAID
ANNUAL TURN OVER
Profit before Tax
Earnings per share
Welfare expenses
How the Rupee is spent
Sales Realizations
Sundry Debtors
Net Worth
 WELFARE MEASURES AND
SOCIAL AMEMITIES :
Group Gratuity Scheme :

The Group Gratuity Scheme is in vogue with effect from 10th

March, 2003.
The actuarial liability as on 31/ 03/2011 is Rs. 1,535.03 crores.
The trust has earned an interest amounting to Rs. 135.90
crores in the year 2010-11 @ 9.60%.
During the financial year 2010-11 LIC reimbursed Rs.177.19
crore towards Gratuity and paid Rs.5.81 Crores towards life
cover to nominees of deceased employees.
 WELFARE MEASURES AND SOCIAL AMEMITIES :

Medical Services :
Family Welfare:
Other Medical camps under C.S.R.:
Corporate Social Responsibility :
Sustainable development for society,
Within a radius of 15 Kms from every unit /
project / area / Head quarter.
 WELFARE MEASURES AND SOCIAL AMEMITIES :

Action Plan includes Scope under

Education CSR
Water Supply
Health care
Environment
Social Empowerment
Infrastructure for Villages
Sports & Cluture
Generation of Employment
Setting up co-operative Society
Grant /donation/financial assistance
 WELFARE MEASURES AND SOCIAL AMEMITIES :

Action Plan includes Scope under CSR

Heritage sites
Empowerment of women
Relief of victim of natural calamities
Disaster Management
Supply of Old clothes to Poor Villagers
Development of smokeless fuel out of coal
Adoption of Village.
 WELFARE MEASURES AND SOCIAL AMEMITIES :

Allocation of fund in CSR

The allocation of fund for CSR is based on 5 %
of retain earnings of previous year subject to
minimum Rs 5/- per tonne of Coal Production
in previous year.
CSR Budget for 2010-11 was Rs. 2286.75 Lakhs
 WELFARE MEASURES AND SOCIAL AMEMITIES :

Pension
Computerization of Process of Pension Claim :
Settlement of PF and Pension in the month of
superannuation under 'Mission Biswas' :
Pension Helpline :

Submission of VV Statement for the year 2010-11 :

 Environmental Awareness
Environment Week and World Environment
Day were observed in our Company at HQ,
Area Levels and Project Levels.
 Activities on
Environment Week Celebration
A brief of activities undertaken during the week - long
celebration were as follows:-
i) Pledge on Environment Protection as per "UN- Slogan"
taken by all employees both at Corporate (HQ) and at
all Areas.
ii) Organizing various competitions among wards of
employees viz. Drawing, Slogan, Prasna Manch(Quiz
on Environment) etc.
iii) Organising talk on Environment by Outside Experts
iv) Plantation & distribution of plants Awareness on
environment through Rallies