This document discusses the public sector and ancillary development in India. It provides an overview of the forms and significance of the public sector in India, including public enterprises and economic reforms. It discusses the growth and categories of central public enterprises, targets and progress of disinvestment. It also covers ancillary development and the role of public enterprises in promoting small industrial units and clusters through subsidiaries, joint ventures and memorandums of understanding.
2. 2
Coverage
Public Sector : Forms, Significance
Public Enterprises : Growth & Economic Reforms
Public Enterprise L Categories
Disinvestment: Disinvestment : Targets &
Realisation
Ancillary Development
Small Industrial Units & Industrial Clusters: Size
and significance
Public Enterprises: Subsidiaries, Joint-ventures,
Memorandum of understanding: Examples
Challenges for PEs & Ancillary Units
3. Public Sector
Also known as State Sector or Government Sector
Includes all activities funded out of government budget
and in India it accounts for two-fifth of total gross
investment (or gross capital formation) and contributes
a quarter of gross domestic product (GDP)
4. Public Sector : significance
Conceived basically as an instrument of
economic development,
to ensure law and order and protection of
individual property, in particular in
developing economies, since attainment
of political independence.
acquired a prominent place and has
witnessed phenomenal growth over the
years.
5. Public Sector : Significance contd.
To regulate private entrepreneur’s
tendency to make monopolistic profits;
eliminate social, economic and regional
inequalities; investment in socially
profitable ventures,
to speed up the rate of economic growth
and technological development, so as to
achieve self-sufficiency and self-reliance;
to become main instrument of
entrepreneurial activity; 5
6. Public Sector : Forms
a). Ministry/ Departmental Form
Headed by a Minister/Accountable to Parliament
b). Unincorporated enterprises, like railways & postal
dept.. operating as ‘commercial departments’,
Principle of Commercialisation, Limited Access Project or
c). Incorporated enterprises (termed as public
enterprises) set-up under the Company Act or other
enactments
Public Enterprise: CPEs & SPEs
7. Public Sector : Forms
contd.
Government administrative departments : cover
activities relating to fiscal, general administrative,
community and economic services.
Commercial departments: are controlled by public
authorities, are engaged in production of goods and
services,
Principle of ‘commercialisation’ to charge for their goods and
services and are in the nature of ‘limited access projects’;
railways, postal services, dairy and milk supply units, ordnance
factories, state electricity boards, water and sewerage works are
some of the examples.
Public enterprises: Incorporated enterprises
include government companies wherein government holds 51
percent or more of equity, these include BHEL, ONGC, BEL, MTNL,
SAIL, IOC, OIL
8. Public Sector : Forms contd.
Over the years a tendency, world wise, to
transform government administrative
departments to commercial departments or to
incorporated enterprises with an objective to
grant autonomy;
Separation of telecom from postal and
setting-up of MTNL, VSNL, BSNL; or
conversion of Indian Airlines or Air India,
statutory corporations under the Civil Aviation
Act to joint stock companies under the Indian
companies are some examples.
9. Public Sector in India: Policy & Reforms
Industrial Policy Resolution 1956: Public sector had
primary responsibility for setting-up of new
industrial undertakings & all industries of basic &
strategic importance or of public service were to be
set-up in public sector
Industrial Policy 1991-- an era of economic reforms:
abolished monopoly of any sector except for
industries related to security & of strategic
importance. Reservation for small scale sector
10. Public Sector in India: Policy &
Reforms contd.
Five Year Plans assigned strategic Role
to Public Sector
“….serves a twofold purpose. It helps to remove
certain basic deficiencies in the economic structure
and at the same time it reduces the scope for
accumulation of wealth and large incomes in private
hands. As the relative share of the public sector
increases, its role in economic growth will become
even more strategic and the state will be in a still
stronger position to determine the character and
functioning of the economy as a whole”.
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11. 11
Economic Reforms: Features
Industrial Policy Reforms: Licensing abolished
for all projects except for a short list of industries
List of areas reserves for public sector pruned to
eight industries from 17 as per Industrial Policy
1956
Allowing existing units to expand or produce any
article without requiring additional investment
12. 12
Economic Reforms : Features
Contd.
Economic Reforms 1991 to Integrate with
Global Economy to:
Reduce Extent of Govt. Control over
various aspects of Domestic Economy
Increase Role of Private Sector
Open up economy to trade & foreign
investment
To unshackle the economy from the
cobwebs of unnecessary bureaucratic
controls
13. 13
Economic Reforms: Features
contd
Public Sector Reforms: List of industries
reserved for public sector has been pruned.
Public Enterprises (PEs) to run on
commercial principles; Given Autonomy-
Maha-ratnas, Nav-ratnas; Mini-ratnas.
Privatization & disinvestment of PEs to raise
resources & to introduce market forces
Investment plans of PEs to be funded from
their reserves or capital market
14. 14
Public Sector : Forms
Administrative Depts. 22%
Cover activities relating to fiscal services, general administrative services
and community services
Commercial Depts. 26%
(Postal, Railways, Electricity boards, Ordnance factories
Irrigation): Principle of Commercialisation, Limited Access
Projects
Public Enterprises 52%
(Incorporated Enterprises)
15. Public Enterprises : Objectives
to help in the rapid economic growth and industrialisation
of the country and create the necessary infrastructure for
economic development;
to earn return on investment and thus generate
resources for development, promote redistribution of
income and wealth;
to create employment opportunities;
to promote balanced regional development;
to assist the development of small-scale and ancillary
industries and
to promote import substitutions, save and earn foreign
exchange for the economy 15
19. Central Public Enterprises Performance (Rs.Crore)
2012 -13 2009-10 2008—09
Capital Employed
(net fixed assets + working capital) 1510,373
910,120 793,240
Total Turnover
1931,499 1235,060
1271,529
Profit of Profit Making CPEs 143,559 108,435 98,488
Loss of Loss Making CPEs 28,260 15,842 14,621
Net Worth 851,245 660,245 665,686
Dividend declared 49,701 33,223 25,501
Contribution to Exchequer 162,761 139,828 151,529
Foreign Exchange Earnings 138,150 77,745 74,206
Foreign Exchange Outgo 646,262 420,415 433,332
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20. 20
Economic Reforms
Economic Reforms 1991 to Integrate with
Global Economy to:
Reduce Extent of Govt. Control over
various aspects of Domestic
Economy
Increase Role of Private Sector
Open up economy to trade & foreign
investment
21. 21
Economic Reforms: Features
Industrial Policy Reforms: Licensing
abolished except for industries
related to security & of strategic
importance. Reservation for small
scale sector
Allowing existing units to expand or
produce any article without requiring
22. 22
Economic Reforms: Features
contd
Public Sector Reforms: List of industries
reserved for public sector has been
pruned.
Public Enterprises (PEs) to run on
commercial principles; Given Autonomy-
Nav-Ratnas; Mini-ratnas.
Privatization & disinvestment of PEs to
raise resources & to introduce market
forces
Investment plans of PEs to be funded
from their reserves or capital market
23. 23
Industrial Policy 1991
Abolish Monopoly of any Sector in any Field of
Manufacture
Industrial Licensing Abolished Except in areas of
Strategic Importance
Areas for Public Sector Pruned down to Four
Public Enterprises to Run on Business Principles
Sick Enterprises to be Referred to BIFR (Bureau of
Industrial Financial Restructuring)
Professionals to be appointed on Boards-Given
more Powers/Autonomy
24. CPEs : Three Categories
With an objective to grant more autonomy
for operations & investment in a project
Maharatana:
Navaratna
Miniratna
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25. 25
CPE: Mini Ratna Status
Mini Ratna Status I:
a) Positive NW
b) Profit continuously last three years
c) PBT >= Rs. 30 crore at least in one of three
years
Mini Ratna Status II:
a) & b) above
31. Disinvestment in Central P Es
Public enterprises enjoy operational
freedom & autonomy to invest in projects
so as to compete in global market
In that process, they set-up subsidiaries,
JVs & enter into Memorandum of
understanding
To procure material parts, components &
services
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32. Ancillary Development & Public Sector
Public Enterprises Objectives include:
promotion of balanced regional development; and
assistance towards development of small-scale and ancillary industries
Company Act requires to disclose in B/S all total outstanding dues
to small scale industrial undertakings, giving their name(s) any sum
together with interest outstanding for more than thirty days.
It highlights the protection of the interest of small and ancillary units
Government guidelines relating to procurement of material and
equipment by inviting tenders,
also tend towards preference for small industrial establishment.
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33. Ancillary Development
Industrial development & setting up of big industrial units
requires units for the supply of raw material, components
and services.
Procurement of a part or raw material is usually
subcontracted and in most cases the sub-contractor is
an ancillary unit
Sub-contracting is the work of procuring the fabricated
parts and components from outside sources because of
price competitiveness and low investment. This
necessitates the development of small and ancillary
units.
As such, along with industrial units, a cluster of tiny,
small and medium industrial units come up in that region.33
34. Ancillary Development contd.
Takes the form of setting up of subsidiary units or a joint
ventures for provision of raw material or services,
Generates employments and leads to manufacturing of
parts and components,
Leads to import substitution,
Generates employment.
Examples are that automobile manufacturers world-wide procure
parts and components from outside which lead to development of
industrial clusters and these are increasingly recognized as an
effective means of industrial development and promotion of small
and medium-sized enterprises.
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35. Ancillary Development & Industrial
clusters
Industrial clusters a means of
industrial development and promotion of
small and medium-sized enterprises
In India, there are around 7000 clusters
in traditional handloom, handicrafts and
modern SME industry segments.
About 2500 unmapped rural industry
clusters in the country
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36. Small Sale Sector
In developing countries, more than 90 percent of all firms, outside
the agriculture sector, are MSMEs generate a significant portion of
GDP.
In India MSMEs account for a large share of industrial units: in
2011-12 MSME Sector enterprises numbered 447.73 lakhs
employing 1012.59 lakhs.
MSMEs’ contribution to rural development as 200.19 lakhs
working enterprises were located in rural areas, 55.34% of the
total working enterprises in MSME sector;
Urban areas 161.57 lakhs (44.66%) of the working enterprises
The sector currently produces more than 6,000 quality products,
ranging from handloom saris, carpets and soaps to pickles, auto
and machine parts targeting both domestic and international
markets.
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38. Public Enterprise: SAIL
Joint Ventures:
“SAIL RITES Bengal Wagon Industry Pvt. Ltd
The Steel Complex Limited (SCL)
Renewable Energy Purchase
Titanium Project
Strategic Alliances:
Kobe Steel Limited, Japan
Revival of Sindri Project
Hajigak Iron Ore Deposits owned by Government of Afghanistan
Memorandum of Understanding (MOU) / Commercial
Agreements entered into with various companies
Conversion Agents: SPUs and Wet Leasing Agents for TMT Bars for
Regions: Eastern, Northern, Western , Southern
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39. Public Enterprise: BHEL
Subsidiary Companies include BHEL
Electrical Machines Ltd
Joint Venture Companies:
BHEL-GE Gas Turbine Services Pvt. Ltd. (BGGTS):
NTPC – BHEL Power Projects Pvt. Ltd. (NBPPPL)
Raichur Power Corporation Ltd
Dada Dhuniwale Khandwa Power Limited
Latur Power Company Ltd
Power Plant Performance Improvement Ltd
Net-work of suppliers and traders
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40. Public Enterprise : ONGC
Subsidiaries
ONGC Videsh Limited
Mangalore Refinery and Petrochemicals
Limited
Joint Ventures
ONGC Tripura Power Company
ONGC Mangalore Petrochemicals Limited
Net-work of dealers, suppliers
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41. Public Enterprise: Coal India
Subsidiary Companies
Eastern Coalfields Limited (ECL), Sanctoria, West Bengal
Bharat Coking Coal Limited (BCCL), Dhanbad, Jharkhand
Central Coalfields Limited (CCL), Ranchi, Jharkhand
South Eastern Coalfields Limited (SECL), Bilaspur, Chattisgarh
Western Coalfields Limited (WCL), Nagpur, Maharashtra
Northern Coalfields Limited (NCL), Singrauli, Madhya Pradesh
Mahanadi Coalfields Limtied (MCL), Sambalpur, Orissa
Coal India Africana Limitada, Mozambique
The consultancy company is Central Mine Planning and Design
Institute Limited (CMPDIL), Ranchi, Jharkhand.
North Eastern Coalfields (NEC) a small coal producing unit
operating in Margherita, Assam is under direct operational control of
CIL.
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43. Enterprise: MUL an automobile
manufacturer
Sales and service network : 933 dealerships across 666 towns and cities in
has 3,060 service stations (inclusive of dealer workshops and Maruti
Authorised Service Stations) in 1,454 towns and cities throughout India
has 30 Express Service Stations on 30 National Highways across 1,436
cities in India.
Maruti Insurance
Maruti Finance
Citicorp Maruti Finance Limited is a joint venture
Maruti TrueValue
N2N Fleet Management
Maruti Accessories
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44. Ancillary Development & Public
Enterprises
To conclude, subsidiaries, joint venture
and memorandum of understanding
developed by public enterprises facilitate
procurement of material and components
highlights the important role of public
enterprises in development of ancillary
industries
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45. Ancillary Development & Public
Enterprises
However, government agencies and
public enterprises should take measures
towards policies development for
strengthening of small and medium
industrial units, public enterprise should
take responsibility to provide technical
knowhow and management guidance to
small and ancillary units as regards the
following:
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46. Public Enterprises Responsibility
towards Ancillary Development
PEs have a catalytic role as regards:
Production process/method, equipment selection and layout.
Management guidance relating to design, detailed manufacturing drawing,
tooling, jigs and quality control procedure and equipment.
Manpower planning.
Organization and procedure for production planning, progressing and
control.
Management aspects, like cost-accounting, industrial engineering, product
diversification and marketing.
Sources of financing and procedures for obtaining them
Imported raw materials and components, scarce/critical
indigenous raw materials and drawings
Tooling, jigs and fixtures to the extent that these are outside the
capability of ancillary unit.
Process quality control, training facilities for the development of
supervisory and artisan skills.
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47. Ancillary industrial units : Challenges
Have a clear mission and goals ;
Develop strong Business Association, to have dialogue
with the Government
Develop semi-private institutions such as research and
advisory centers and knowledge transfer centers
Undertake market studies useful for alliance participants
Have open mind to invest in technology and innovation
Improve the capacity of specialized input and service
providers
Undertake joint promotion of specific products in the
local, regional and international markets
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