Short Note On PSU's Type, ETF,PSB,Category ,disinvestment,privatisation

1. PUBLIC SECTOR IN INDIA
 ADHISH KUMAR SINHA
 APARNA S S
 GODAVARI SAI SURESH
 PRANEETH SAI KUMAR
 RONICA RAVINDER SINGH
 SOVAN KUNDU
Prin LN Welingkar Institute Of Management Development & Research , Bangalore

2. • Refers to part of the economy concerned with providing various
government services
• 51% or more of the paid up share capital is help by central
government or by any state government.
WHAT IS A PUBLIC SECTOR

3. • At the time of independence, India was backward and
underdeveloped – basically an agrarian economy with
weak industrial base, high rate of unemployment, low
level of savings and investment and near absence of
infrastructural facilities.
• Indian economy needed a big push. This push could
not come from the private sector because of the lack
of funds and their inability to take risk with large long-
gestation investments.
• As such, government intervention through public
sector was necessary for self-reliant economic
growth.
PUBLIC SECTOR:BACKGROUND

4. • 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.
• 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.
PUBLIC SECTOR:BACKGROUND

5. • To promote rapid economic development through creation and
expansion of infrastructure
• To generate financial resources for development
• To promote redistribution of income and wealth
• To create employment opportunities
• To promote balanced regional growth
• To encourage the development of small-scale and ancillary industries,
and
• To promote exports on the one side and import substitution, on the
other.
OBJECTIVES

6. • 1. Fillings of Gaps: At the time of independence, there existed serious
gaps in the industrial structure of the country, particularly in the fields
of heavy industries such as steel heavy, machine tools, exploration an
refining of oil, heavy electrical and equipment, chemicals and
fertilizers, defense equipment, etc.
• 2. Employment: Public sector has created millions of jobs to tackle
the unemployment problem in the country. Public sector accounts for
about two-thirds of the total employment in the organised industrial
sector in India.
Contribution of PSUs

7. • 3. Social Justice : Public enterprises have contributed towards the
achievement of constitutional objectives. They have been helpful in
reducing the concentration of economic power in private hands, in
curbing anti-social monopolies, in accelerating public control over the
national economy.
• 4. Development of Ancillary industries: In order to encourage the
development of small scale and medium-sized industries in the
country, the Government of India has launched a national
programme. Public sector ha contributed to this programme by
fostering the growth of ancillary industries and satellite planets.

8. • 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 defense
equipment's, defense air-crafts and warships
• Atomic Energy.
• Railways transport.
• All other CPSEs are considered as non-strategic.
Categories of PSUs

9. • Public Sector Enterprises having objects to promote
commerce, art, science, religion, charity or any other useful purpose
and not having any profit motive can be registered as non-profit
company under section 25 of the Companies Act, 1956.
• Such companies are also called as the Non-profit or 'No Profit - No
Loss' companies.

10. • Public Sector Banks (PSBs) are banks where a majority stake (i.e.
more than 50%) is held by a government. The shares of these banks
are listed on stock exchanges. There are a total of 21 PSBs in India.
• The objectives behind nationalisation where:
1. To break the ownership and control of banks by a few business
families,
2. To prevent the concentration of wealth and economic power,
3. To mobilize savings from masses from all parts of the country,
4. To cater to the needs of the priority sectors.....

11. “GDP” IMPACT & PERFORMANCE
Economic
development
and
industrialisation
Employment
Workforce:
productivity
challenges
Foreign
exchange
earnings
Investments in
modern forms of
IT
Turnover of more
than USD 1
Trillion by 2020

12. GOVERNMENT-OWNED
GOVERNMENT INTERFERENCE
LACK OF TRANSPARENCY AND ORDERLY
FUNCTIONING
CORPORATE GOVERNANCE
ACCOUNTABILITY OF “PSU”

13. STATICALSTATISTICAL TALKS
GROWTH OF “CPSE’s”

14. STATISTICAL TALKS
SHARE OF ‘CPSE’s” IN INDIAN GDP
• As reflected in the figure alongside, the
turnover of CPSEs have increased from Rs.
7.4 lakh crores in FY 2005 to an estimated
Rs.12.6 lakh crores in FY 2009 registering a
CAGR of 14.1% during the FY 2005-09
period. Further, the growth in CPSEs has
been in line with the overall GDP3 growth of
the country, recording a CAGR of 14.5%
during the same period
 Consequently, in terms of turnover, the
contribution of CPSEs to the GDP has ranged
between 22%- 23% during the period

15. STATISTICAL TALKS
Over the years, CPSEs have contributed
significantly to the Central exchequer by way of
payment of taxes (direct and
indirect), duties, dividend payment and interest
on Government loans. As evident from the
chart alongside, the total contribution by the
CPSEs has increased from Rs. 1.1 lakh crores in
FY 2005 to an estimated Rs. 1.5 lakh crores in
FY 2009 registering a CAGR of 8% during the FY
2005-09 period. However, there has been a YoY
decline in contribution by 8.5% in FY 2009
primarily on account of reduction in
contribution towards customs and excise duty

16. During the initial years and even during the
nineties, a large number of CPSEs were
dependent on
budgetary support extended by the Central
Government. However, the number of CPSEs in
this category has gradually decreased over the
years. The chart alongside shows Government
budgetary support to CPSEs during the FY 2005-
09 period.
STATISTICAL TALKS

17. DOMINANT “PSU”

18. India Top 10 Revenue Generation Wise

19. PSE
CPSE
PSB
PUBLIC
SECTOR
UNDERTAKING
CLASSIFICATION
STATUS OF PUBLIC SECTOR
UNDERTAKING
MINIRATNA
NAVRATNA
MAHARATRNA

20. Framework

21. Example
Maharatna
• Indian Oil Corporation Limited
• NTPC Limited
Navratna
• Hindustan Petroleum Corporation Limited
• Mahanagar Telephone Nigam Limited
Miniratna
Category
• Airports Authority of India
• Antrix Corporation Limited

22. Benefits
1. Balanced growth: By establishing public sector enterprises, a country can develop its economy
in all regions. Thus there is a balanced growth. These enterprises can be developed on economic,
social and regional basis.
2.Facilities for economic development: Profits of
public enterprises can be used by the state for
financing the schemes of economic development.
3.Greater public welfare: Private enterprises are
for increasing profit but public enterprises do not
work for making profit for the owner but they work
to help the national economy as a whole.
4.Equal distribution of wealth: With the
help of public sector there is possibility for
the Government to reduce inequalities of
income and wealth among the people

23. Political interference:
Due to undue influence of politicians, the
public sectors cannot function smoothly
and effectively. It hampers the efficient
conduct of operations.
Slow growth:
Public enterprises have little scope for
expansion and modernisation as they take
a long period to establish and the return on
investment is also less.
Poor management:
Due to excess interference by the
Government and political parties, the
public enterprises cannot be managed on
sound lines or as per the plans laid out.
Further the financing of public sector is
fully in the hands of the
Government, which restricts the scope for
development.
Lack of flexibility:
There is a lack of flexibility in public
enterprises. This is due to slow decision
making habit of the state. Implementation
of the decision also takes a long time in
public enterprises.
Lack of initiation and efficiency:
Lack of profit motive leads to inefficiency
and slow working. Therefore decision
making is not so quick in public sector like
in private enterprises. Public Enterprises
are managed like Government offices, thus
efficiency cannot be seen in public
enterprises.
Limitation

24. Disinvestment
Disinvestment can be defined as the action of an
organization (or government) selling or liquidating an
asset or subsidiary. It is also referred to as ‘divestment”.
Example:-
1. Maruti Udyog
2. SAIL
3. Indian Airlines
4. Indian Oil
5. BALCO

25. Objectives of Disinvestment
Reduce financial burden
on government.
Improve public finance.
To maintain competition
and market discipline.
To encourage wider share
of ownership.

26. Disinvestment Types
Minority
Disinvestment
• Andrew
Yule & Co.
Ltd.
Majority
Disinvestment
• NTPC Ltd
Completely
Disinvestment
• 18 hotel
properties
of ITDC
Example
Example
Example

27. • Improves corporate governance & CSR
• Enhanced corporate governance with the induction of independent
directors
• Infrastructure, education, healthcare, and law and order
development.
Benefits of Disinvestment…

28. • Privatization implies a change in ownership, resulting in a change in
management. The privatization of public sector enterprises will occur
only when govt. sells more than 51% of its ownership to private
entrepreneurs.
• Disinvestment on the other hand, has a much wider connotation as it
could either involve dilution of govt. stake to a level that result in a
transfer of management or could also be limited to such a level as
would permit govt. to retain control over the organization.
• Disinvestment beyond 50% involves transfer of management, where
as disinvestment below 50% would result in the govt. continuing to
have a major say in the undertaking .
Privatization and Disinvestment

29. The decision regarding disinvestment or liquidation
viewed in the light of following criteria:
Whether the objectives of the company are achieved.
whether there is decrease in number of beneficiaries .
 Whether serving the national interest will be affected because of
disinvestment
 Whether private sector can efficiently operate and manage the
undertaking.
 Whether the original rate of return targeted could not be possible to
achieve.
Criteria for Disinvestment

30. • In Private Sector, the decision making process is quick and decisions
are linked with the competitive market changes.
• The disinvestment process would bring in better corporate
governance, exposure to competitive, corporate
responsibility, improvement in work environment etc.
• The market participation in capital of PSUs through stock exchanges
would enable the market to discover the latent worth of PSUs.
• The Loss making PSUs can be successfully revived by asking the
strategic partner to infuse fresh capital and exercising excellent
management control over sick PSUs
Merits of Disinvestment

31. • Selling of profit-making and dividend paying PSU would result in loss
of regular source of income to the government.
• There would be chances of ‘asset stripping’ by the strategic partner.
Most of the PSUs have valuable assets in the shape of plant and
machinery, land and buildings etc.
• The Government’s Policy or disinvestment includes the disposal of
both profit making, as well potentially viable PSUs.
Demerits of Disinvestment

32. • Citizens have every right to own part of the shares of Central Public
Sector Enterprises.
• Central Public Sector Enterprises are the wealth of the Nation and
this wealth should rest in the hands of the people.
• While pursuing disinvestment, the majority shareholding of at least
51% and management control of the Central Public Sector Enterprises
to be retained by the Government.
Policy on Disinvestment

33. • Government's stakes in CPSEs would squeeze this important source of
revenue for the Government.
• Thus essentially implying that the real beneficiaries would not be the
ordinary retail investor but institutional investors.
• in the case of disinvestment, future streams of income from dividends
are forgone against a one-time receipt from the sale of stakes
• Employees of PSUs would lose jobs
Arguments against Disinvestment

34. • Unfavorable market conditions
• Offers made by the government were not attractive for private sector
investors
• Lot of opposition on the valuation process
• No clear-cut policy on disinvestment
• Strong opposition from employee and trade unions
• Lack of transparency in the process
• Lack of political will
Why Low Disinvestment???

35. Coal India Ltd. (CIL), a CPSE, is a Navratna Company engaged in
production and marketing of coal and coal products. At present, the
paid-up equity capital of the company is Rs. 6,316.36 crore and the
Government of India holds 100% of the equity in the company. CIL is
planning to disinvestment 10%
Disinvestment of 5% paid up equity of Bharat Heavy Electrical Ltd.
Privatization of 6 airports including Delhi , Kolkata & Chennai
Some Recent Divestments & Privatization

36. Statistical talks

37. Public sector banks in India
• PSBs majority stake held by a government
• listed on stock
• 21
Emergence of public sector banks
Public sector banks before the economic liberalisation
Public sector banks in India

38. SOURCE: http://www.moneycontrol.com/stocks/top-companies-in-india/net-profit-bse/banks-public-sector.html

40. FINANCIAL PLANNING: Strategy for PSB
Identification of Customer
Mapping the requirements of customers
Organizations of products and offerings
Competent services and IT architecture
Integrated Marketing Communications
FINANCIAL PLANNING: Strategy for PSB

41. FINANCIAL PLANNING: Strategy for PSB
Identification of Customer
Mapping the requirements of customers
Organizations of products and offerings
Competent services and IT architecture
Integrated Marketing Communications
FINANCIAL PLANNING: Strategy for PSB

42. FINANCIAL PLANNING: Strategy for PSB
Identification of Customer
Mapping the requirements of customers
Organizations of products and offerings
Competent services and IT architecture
Integrated Marketing Communications
FINANCIAL PLANNING: Strategy for PSB

43. FINANCIAL PLANNING: Strategy for PSB
Identification of Customer
Mapping the requirements of customers
Organizations of products and offerings
Competent services and IT architecture
Integrated Marketing Communications
FINANCIAL PLANNING: Strategy for PSB

44. FINANCIAL PLANNING: Strategy for PSB
Identification of Customer
Mapping the requirements of customers
Organizations of products and offerings
Competent services and IT architecture
Integrated Marketing Communications
FINANCIAL PLANNING: Strategy for PSB

45. NPA (NON PERFORMING ASSET)
• Non Performing Asset means a loan or an account of borrower, which has been classified by a bank as sub-
standard, doubtful or loss asset, in accordance with the directions or guidelines relating to asset
classification issued by RBI.
• Earlier assets were declared as NPA after completion of the period for the payment of total amount of loan
and 30 days grace.
• In present scenario assets are declared as NPA if none of the installment is paid till 180 days i.e. six months in
respect of a term loan.
NPA (NON PERFORMING ASSET)

46. NPANPA (NON PERFORMING ASSET)

48. What is an ETF? Two great investment ideas brought together
ETFs
DiversifiedTradable
during the
day
Diversified
funds that trade
like stocks
Mutual FundStock
They are listed and traded like a stock on major stock exchanges globally
What is an ETF? Two great investment ideas brought together

49. Thank You . !