Psu dec

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Psu dec

  1. 1. PSU’s and Disinvestment<br />Presented By,<br />Shahane Sir<br />DivyaChabra - 07<br />HardikGor - 17 <br />Pratiktiberwal - 53<br />
  2. 2. Definition of PSU<br /><ul><li>In India, public sector undertaking (PSU) is a term used for a government-owned corporation (company in the public sector). The term is used to refer to companies in which the government (either the Union Government or state or territorial governments, or both) owned a majority (51 percent or more) of the company equity.
  3. 3. A Public Sector Undertaking is a corporation in the public sector in India, where management control of the company rests with the Government, it can be Central Government or the State Governments</li></li></ul><li>Genesis<br />The main objectives of setting up the Public Sector enterprises as stated in Industrial policy<br />Resolution of 1956 were:<br /><ul><li>To promote rapid economic development through creation and expansion of infrastructure
  4. 4. To generate financial resources for development
  5. 5. To promote redistribution of income and wealth</li></li></ul><li>Cont… <br /><ul><li>To create employment opportunities
  6. 6. To promote balanced regional growth
  7. 7. To encourage the development of small-scale and ancillary industries, and
  8. 8. To promote exports on the one side and import substitution, on the other.</li></li></ul><li>Social Objectives<br />Equitable distribution of wealth<br />Provision of essential goods and<br />Takeover of sick units<br />Political objectives<br /><ul><li>Public interest
  9. 9. National defence
  10. 10. Socialism  </li></li></ul><li>PSU companies are divided into three categories:<br />Maharatna<br />Navratna<br />Miniratna<br />
  11. 11. Maharatna<br />Govt. Conferred MAHARATNA Status on 16th Nov 2010 to 4 PSU’s<br />Allows the PSU’s to raise its Investment Ceiling from `1000 to `5000 cr.<br />Gives the PSU Autonomy to decide on investments up to 15% of their net worth in a project<br />Examples:<br />Indian Oil Corporation<br />NTPC Ltd.<br />Oil & Natural Gas Corporation<br />Steel Authority of India Ltd.<br />
  12. 12. Criteria for Maharatna Status<br />According to the criteria laid down by the Cabinet, the Maharatna status is granted to listed Navaratna central public sector companies with an average annual turnover of more than Rs 25,000 crore, net profit after tax of Rs 5,000 crore and net worth of Rs 15,000 crore during the past three year<br />
  13. 13. Navratna status<br />Navratna status gives a company enhanced financial and operational autonomy and empowers it to invest up to `1000 cr. or 15% of their net worth on a single project without seeking government approval<br />In a year, these companies can spend up to 30% of their net worth not exceeding ` 1000 cr. They will also have the freedom to enter joint ventures, form alliances and float subsidiaries abroad.<br />
  14. 14. Criteria for Navratna Status<br />Nav ratna status is conferred by Department of Public Enterprises. <br />Net profit to net worth<br />Total manpower cost to total cost of production or cost of services<br />PBDIT to capital employed<br />PBDIT to turnover<br />EPS <br />Inter-sectoral performance.<br />Additionally, a company must first be a Miniratna and have four independent directors on its board before it can be made a Navratna.<br />
  15. 15. Major Example of Navratna<br />Bharat Electronics Limited<br />Bharat Heavy Electricals Limited<br />Bharat Petroleum Corporation Limited<br />Coal India Limited<br />GAIL (India) Limited<br />Hindustan Aeronautics Limited<br />Hindustan Petroleum Corporation Limited<br />Mahanagar Telephone Nigam Limited<br />National Aluminium Company Limited<br />NMDC Limited<br />Oil India Limited<br />Power Finance Corporation Limited<br />Power Grid Corporation of India Limited<br />Rural Electrification Corporation Limited<br />Shipping Corporation of India Limited<br />
  16. 16. Investment of Government in PSU<br />
  17. 17. Performance of Public sector<br />(Rs.Crs)<br />
  18. 18. Industries reserved for PSU’s since July 1991<br />Arms and Ammunition and allied items of defence equipment, defence aircraft and warship<br />Atomic Energy<br />Coal and Lignite<br /> Mineral oil<br />Mining of iron ore, gold and diamond<br />Mining of copper, zinc, led, tin and molybdenum.<br />Minerals specified in the schedule to Atomic Energy (Control of production and use) Order, 1953<br />Railway Transport<br />
  19. 19. Top 10 PSU in India<br />IOC-20 largest company in the world, most profitable PSU, ranked in Fortune 500 lists<br />NTPC-India largest power company. contributes to 28.5% of the power to the country.<br />BPCL-3 largest company in India, listed in Fortune 500 lists<br />HPCL-operates the largest lube refinery in India<br />ONGC-5 largest company ,contributes 77% of India’s crude oil, 81% of natural gas production<br />
  20. 20. Top 10 PSU in India <br />SAIL-6 largest company in India and leading steel producer<br />BHEL-manufactures over 180 products and caters to core sector of indian economy<br />BSNL-Largest telecom industry<br />HAL-Largest public sector in aeronautical engineering<br />Bharat Dynamics Limited has made it to the top ten list due to the sheer grit and diligence that it showcases in its balance sheet and the profitability that it shows year after years<br />
  21. 21. Advantages & Disadvantages of PSU’s<br /><ul><li>Poor Project Planning
  22. 22. Over-capitalization
  23. 23. Excessive Overheads
  24. 24. Overstaffing
  25. 25. Under-utilisation of Capacity
  26. 26. Lack of a Proper Price Policy
  27. 27. Inefficient Management </li></li></ul><li>CHANGE OF STRATEGY<br /><ul><li>Deregulation of Imports
  28. 28. Foreign dept repayment crises
  29. 29. Raising of Loans from IMF
  30. 30. Reversal of Policies towards PSU’s</li></li></ul><li>Industrial Policy 1991<br />The Industrial policy of 1991 started the process of delicensing and except 18 industries, Industrial licensing was withdrawn. The market was opened up to domestic private capital and foreign capital was provided free entry up to 51% equity in high technology areas. The aim of economic liberalization was to enlarge competition and allowing new firms to enter the market. Thus the emphasis shifted from PSEs to liberalization of economy<br />
  31. 31. Meaning and Reasons for Privatization<br />Privatization is a process by which the government transfers the productive activity from the public sector to the private sector<br />Improvement in efficiency and performance<br />Fixing responsibility is easier<br />Response time incase of Private sector is less<br />Privatization leads to better services to customers<br />Remedial measures are taken early in private sector<br />
  32. 32. Evolution of Privatization Policy<br />Interim budget and budget speech 1991-92<br />Report on Rangarajan committee on disinvestment of shares<br />Disinvestment Commission Recommendations<br />Budget Speech 1998-1999<br />Strategic and Non Strategic Classification<br />Address by President to joint session of Parliament<br />National Common Minimum Program, 2004 <br />
  33. 33. Role of Private Sector<br />Dominant sector in terms of total share of companies both private and public ltd<br />Importance for development of the country<br />Extensive modern industrial sector<br />Potentialities due to personal incentive in small sector <br />
  34. 34. ROLE OF PRIVATE PUBLIC AND JOINT SECTOR IN EMPLOYMENT AND GROSS OUTPUT <br />
  35. 35. Disinvestment :<br /> Disinvestment refers to the action of the government in selling or liquidating an asset or subsidiary. In simple words, disinvestment is the withdrawal of capital from a country or corporation. <br />Some of the salient features of disinvestment are:<br />Disinvestment involves sale of only part of equity holdings held by the government to private investors.<br />Disinvestment process leads only to dilution of ownership and not transfer of full ownership. While, privatization refers to the transfer of ownership from government to private investors.<br />Disinvestment is called as ‘Partial Privatization’.<br />
  36. 36. Objectives of Disinvestment:<br />Disinvestment intended to achieve the following:<br />Releasing large amount of public resources <br />Reducing the public debt <br />Transfer of Commercial Risk <br />Releasing other tangible and intangible resources <br />Expose the privatised companies to market discipline <br />Wider distribution of wealth <br />Effect on the Capital Market<br />Increase in Economic Activity<br />
  37. 37. The main features of Government’s present Policy towards Public sector<br />Restructure and revive potentially viable PSEs.<br />Close down PSEs which cannot be revived.<br />Bring down Government equity in all Non-strategic PSEs to 26% or lower, if necessary.<br />Fully protect the interests of workers.<br />
  38. 38. The issues regarding disinvestment which are still being debated and which will remain relevant in the coming days are:<br />Which areas should not be divested.<br />Whether defence, production & services should be disinvested and to what extent it is<br />desirable in view of national security.<br />To what extent the method of divestment can be made open and transparent.<br />Out of the various methods of divestment which path will lead to fulfillment of declared<br />Should the foreign private investors be allowed to acquire controlling interest in PSEs.<br />How the social security net be instituted to train and re-employ active and able employees retiring under VRS.<br />
  39. 39. Different Approaches to Disinvestments<br />There are primarily three different approaches to disinvestments (from the sellers’ i.e. Government’s perspective)<br />Minority Disinvestment<br />Eg: Andrew Yule & Co. Ltd., CMC Ltd. etc.<br />Majority Disinvestment <br />Eg: Modern Foods to Hindustan Lever, BALCO to Sterlite, CMC to TCS etc.<br />Complete Privatisation<br /> Examples of this include 18 hotel properties of ITDC and 3 hotel <br />properties of HCI.<br />
  40. 40. Cabinet Committee on Disinvestment (CCD) <br />• Chaired by the Prime Minister<br />• Functions: <br /> To consider the advice of the Core Group of <br /> Secretaries <br /> – To decide the price band<br /> – To decide the final pricing<br /> – Intervention in case of disagreement between the recommendations<br /> To approve the three-year rolling plan and the annual programme of disinvestment every year. <br />
  41. 41. Core Group of Secretaries on Disinvestment (CGD)<br />• Headed by the Cabinet Secretary <br />• Functions: <br />– Supervises the implementation of the decisions <br /> of all strategic sales <br />– Monitors the progress of implementation of the <br /> CCD decisions. <br />– Makes recommendations to the CCD on <br /> disinvestment policy matters. <br />
  42. 42. Ministry Of Disinvestment<br />• Set up in 1999<br />• Assisted by Advisors<br />• Business Allocated to Ministry of Disinvestment<br />– All matters related to disinvestment <br />– Decisions on the recommendations of the <br /> Disinvestment Commission <br />– Implementation of disinvestment decisions <br />
  43. 43. Industrial Sickness in PSUs: <br />• To save the PSUs from sickness, the government <br /> has been sanctioning restructuring packages from <br /> time to time. <br />• As on 31.3.00 Profit & Loss A/C of 21 PSUs showed <br /> accumulated loss of 13959.57 crores. <br />Employee issues: <br />• Of the 1.6 million jobs added in the organized <br /> sector 1 million, or two thirds, were added in the <br /> private sector during the period 1991 to 2000. <br />• This indicates that the private sector has become the major source for incremental employment in the organized sector of the economy over the last decade <br />
  44. 44. Thank You<br />Thank You<br />Thank You<br />Thank You<br />Thank You<br />

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