{"id":65466,"date":"2026-01-30T16:14:53","date_gmt":"2026-01-30T10:44:53","guid":{"rendered":"https:\/\/www.nextias.com\/ca\/?p=65466"},"modified":"2026-01-30T22:13:26","modified_gmt":"2026-01-30T16:43:26","slug":"pse-transformation-india","status":"publish","type":"post","link":"https:\/\/www.nextias.com\/ca\/editorial-analysis\/30-01-2026\/pse-transformation-india","title":{"rendered":"Public Sector Enterprises in India: A Decade of Transformation"},"content":{"rendered":"\n<p><strong>Syllabus: GS3\/Economy<\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Context<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Across the world, the <strong>decline of centralised economic planning<\/strong> has reshaped the <strong>role of state-owned enterprises<\/strong>, pushing them toward <strong>efficiency, competitiveness, and innovation.<\/strong><\/li>\n\n\n\n<li><strong>India\u2019s experience<\/strong> mirrors global trends, and reflects <strong>unique domestic policy priorities<\/strong>. It needs to examine how <a href=\"https:\/\/www.nextias.com\/ca\/current-affairs\/12-01-2026\/pse-privatisation-cii\"><strong>Public-sector Enterprises (PSEs) in India<\/strong><\/a> have evolved over the past decade.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><a href=\"https:\/\/www.nextias.com\/ca\/current-affairs\/12-01-2026\/pse-privatisation-cii\"><strong>About Public Sector Enterprises (PSEs)<\/strong><\/a><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>These are <strong>government-owned corporations<\/strong> or <strong>state-owned enterprises having <\/strong>majority stake (51% or more).\n<ul class=\"wp-block-list\">\n<li>These include sectors like energy, steel, telecommunications, transportation, and finance.<\/li>\n\n\n\n<li>They are categorized into:\n<ul class=\"wp-block-list\">\n<li>Central Public Sector Enterprises (CPSEs);<\/li>\n\n\n\n<li>State Level Public Enterprises (SLPEs)<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>They are primarily overseen by the <strong>Department of Public Enterprises (DPE)<\/strong> under the <strong>Ministry of Finance.<\/strong><\/li>\n\n\n\n<li><strong>Classification of CPSEs:<\/strong>\n<ul class=\"wp-block-list\">\n<li><strong>Maharatna<\/strong>: Large, highly profitable CPSEs with significant global presence (e.g., ONGC, NTPC).<\/li>\n\n\n\n<li><strong>Navratna<\/strong>: CPSEs with operational autonomy and strong financials (e.g., BEL, HAL).<\/li>\n\n\n\n<li><strong>Miniratna<\/strong>: Smaller CPSEs with consistent profits and operational flexibility.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Why Does PSE Reforms Matter?<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Global Context<\/strong>: Globally, reforms in PSEs were driven by their <strong>outsized influence on national economies<\/strong> and the need for better service delivery.\n<ul class=\"wp-block-list\">\n<li>Measures such as stock market listings, technology upgrades and improved corporate governance became common. More recently, PSEs have taken the <strong>lead in low-carbon transitions.<\/strong><\/li>\n\n\n\n<li>According to the <strong>Organisation for Economic Co-operation and Development (OECD),<\/strong> public entities owned <strong>over 25% of 2,037 listed companies<\/strong> worldwide in 2023, accounting for <strong>nearly 12% of global market capitalisation.<\/strong><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Key Challenges Facing India\u2019s PSEs<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Technology Disruption and Digital Transformation: <\/strong>Many PSEs struggle with legacy IT systems and outdated processes; slower adoption of emerging technologies such as AI, automation, and data analytics; and cybersecurity risks due to increased digitisation;<\/li>\n\n\n\n<li><strong>Skill Gaps and Workforce Transition: <\/strong>Key issues include mismatch between existing skills and future technology needs; slow pace of re-skilling and up-skilling programs; and rigid human resource policies limiting lateral hiring.<\/li>\n\n\n\n<li><strong>Governance and Autonomy Constraints: <\/strong>Although governance has improved, challenges persist:\n<ul class=\"wp-block-list\">\n<li>Limited operational autonomy due to bureaucratic oversight;<\/li>\n\n\n\n<li>Delays in decision-making, especially in procurement and investment;<\/li>\n\n\n\n<li>Political and administrative interference in some cases;<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Capital Allocation and Return on Investment: <\/strong>Capital efficiency remains uneven while CPSEs have strong balance sheets.\n<ul class=\"wp-block-list\">\n<li>Capital expenditure decisions are sometimes policy-driven rather than commercially optimal.<\/li>\n\n\n\n<li>Return on capital employed (ROCE) in several PSEs remains below private-sector benchmarks.<\/li>\n\n\n\n<li>Underperforming assets continue to tie up capital<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Research and Development (R&amp;D) Deficit: <\/strong>Compared to global peers, Indian PSEs invest relatively less in R&amp;D.\n<ul class=\"wp-block-list\">\n<li>Limited focus on product innovation and process upgrades.<\/li>\n\n\n\n<li>Dependence on imported technology in strategic sectors.<\/li>\n\n\n\n<li>Weak collaboration with academia and startups.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Market Competition and Pricing Pressures: <\/strong>PSEs increasingly operate in competitive markets alongside private players. Challenges include:\n<ul class=\"wp-block-list\">\n<li>Price controls or social obligations in sectors like energy and transport;<\/li>\n\n\n\n<li>Lower flexibility in pricing and contracts;<\/li>\n\n\n\n<li>Rising input costs affecting margins;<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Sustainability and Climate Transition Risks: <\/strong>The global shift toward low-carbon growth poses both opportunities and risks.\n<ul class=\"wp-block-list\">\n<li>High transition costs for fossil-fuel-based PSEs;<\/li>\n\n\n\n<li>Uncertainty around future regulations and carbon pricing;<\/li>\n\n\n\n<li>Need for large investments in renewable energy and green technologies;<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Global Exposure and Geopolitical Risks: <\/strong>As Indian PSEs expand overseas, new vulnerabilities emerge:\n<ul class=\"wp-block-list\">\n<li>Exposure to geopolitical instability and sanctions;<\/li>\n\n\n\n<li>Currency and commodity price volatility;<\/li>\n\n\n\n<li>Regulatory and compliance risks in foreign jurisdictions<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>State-Level PSE Weaknesses: <\/strong>While central PSEs have improved, many state PSEs lag behind.\n<ul class=\"wp-block-list\">\n<li>Poor transparency and weak financial discipline;<\/li>\n\n\n\n<li>High dependence on state government support;<\/li>\n\n\n\n<li>Limited reform momentum;<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>India\u2019s Policy Shift: Focus on Strategic Sectors<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>New PSE Policy (2020) under Atmanirbhar Bharat:<\/strong> It classified <strong>Central Public Sector Enterprises (CPSEs) as strategic and non-strategic.<\/strong>\n<ul class=\"wp-block-list\">\n<li>The government has <strong>largely exited non-strategic sectors<\/strong>, while <strong>retaining a limited presence<\/strong> (one to four CPSEs) <strong>in strategic areas<\/strong> such as <strong>defence, energy and space<\/strong>, encouraging private participation alongside public firms.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Financial Turnaround of CPSEs: <\/strong>Over the last decade, CPSEs have <strong>moved from policy paralysis and muted growth <\/strong>to becoming major contributors to <strong>financial value creation<\/strong> and <strong>capital expenditure.<\/strong>\n<ul class=\"wp-block-list\">\n<li>The number of <strong>profit-making CPSEs<\/strong> rose from <strong>157 in FY15 to 227 in FY25, <\/strong>and <strong>loss-making CPSEs<\/strong> <strong>declined <\/strong>from 77 to 63 during the same period.<\/li>\n\n\n\n<li>Net profits of profit-making CPSEs increased 2.4 times, from Rs 1.30 lakh crore in FY15 to Rs 3.09 lakh crore in FY25.<\/li>\n\n\n\n<li>Total paid-up capital expanded from Rs 2.13 lakh crore in FY15 to Rs 6.87 lakh crore by March 2025.<\/li>\n\n\n\n<li>Net worth surged from Rs 9.85 lakh crore to Rs 22.33 lakh crore over the decade.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Contribution to the Exchequer and Markets: <\/strong>CPSEs\u2019s contribution to the central exchequer increased from \u20b92.00 lakh crore in FY15 to \u20b94.94 lakh crore in FY25.\n<ul class=\"wp-block-list\">\n<li>The <strong>combined market capitalization<\/strong> of 66 listed CPSEs touched \u20b938.57 lakh crore in March 2025, <strong>three times its level a decade earlier.<\/strong><\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Investment and Savings Engine: Non-financial CPSEs<\/strong> have played a critical role in sustaining investment demand in core sectors.\n<ul class=\"wp-block-list\">\n<li><strong>Gross capital formation<\/strong> by these enterprises has grown <strong>at nearly 12%,<\/strong> making them a net saving sector that accounts for about 10% of national savings.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Financial Sector Revival: <\/strong>Among financial CPSEs,<strong> public-sector banks<\/strong> have staged a <strong>strong comeback<\/strong> after the <strong>twin balance-sheet crisis.<\/strong>\n<ul class=\"wp-block-list\">\n<li><strong>Consolidation through mergers, improved governance and rapid technology adoption<\/strong> have transformed performance.<\/li>\n\n\n\n<li>Net profits of banks rose sharply, and key indicators such as return on assets and return on equity turned decisively positive by FY25.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Exports and Global Footprint: <\/strong>Reforms have boosted CPSE contributions to exports, particularly in <strong>defence, engineering and commodities.<\/strong>\n<ul class=\"wp-block-list\">\n<li>Defence exports reached a record \u20b923,622 crore in 2024\u201325. Indian oil PSUs now operate 45 overseas assets across 21 countries, with cumulative investments exceeding $40 billion.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Green Transition: Indian Railways<\/strong>, though <strong>not formally a PSE<\/strong>, illustrates Green Transition through <strong>large-scale electrification, renewable energy integration and trials of hydrogen-powered coaches,<\/strong> pointing towards rapid decarbonisation.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Key Recommendations for Strengthening India\u2019s PSEs<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Deepen Governance Reforms and Board Autonomy: <\/strong>Strengthen independent and professional boards with domain experts;\n<ul class=\"wp-block-list\">\n<li>Reduce excessive administrative controls and approvals;<\/li>\n\n\n\n<li>Clearly separate ownership and management functions;<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Enhance Operational and Financial Autonomy: <\/strong>Expand the scope of the Navratna and Maharatna frameworks;\n<ul class=\"wp-block-list\">\n<li>Allow greater flexibility in capital expenditure, joint ventures, and asset monetisation;<\/li>\n\n\n\n<li>Move from input-based controls to outcome-based performance monitoring;<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Strategic Capital Allocation and Portfolio Rationalisation: <\/strong>Exit or privatise non-core and chronically loss-making enterprises;\n<ul class=\"wp-block-list\">\n<li>Focus government capital on strategic sectors such as defence, energy, and infrastructure;<\/li>\n\n\n\n<li>Adopt strict return-on-capital benchmarks for new investments;<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Invest in Technology and Digital Transformation: <\/strong>Modernise legacy IT systems and operations;\n<ul class=\"wp-block-list\">\n<li>Deploy AI, automation, data analytics, and cloud technologies;<\/li>\n\n\n\n<li>Strengthen cybersecurity and digital risk management;<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Build a Future-Ready Workforce: <\/strong>Launch large-scale re-skilling and up-skilling programs;\n<ul class=\"wp-block-list\">\n<li>Introduce flexible HR policies, including lateral hiring and performance-linked pay;<\/li>\n\n\n\n<li>Encourage collaboration with startups, academia, and global firms;<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Increase R&amp;D and Innovation Ecosystems: <\/strong>Set minimum R&amp;D spending targets for strategic PSEs;\n<ul class=\"wp-block-list\">\n<li>Establish innovation labs and centres of excellence;<\/li>\n\n\n\n<li>Promote joint research with IITs, DRDO labs, and private innovators;<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Align Public Service Obligations with Financial Viability: <\/strong>Transparently compensate PSEs for non-commercial social obligations;\n<ul class=\"wp-block-list\">\n<li>Replace price controls with targeted subsidies where feasible;<\/li>\n\n\n\n<li>Use direct benefit transfers to reduce operational distortions;<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Accelerate the Green and Energy Transition: <\/strong>Develop time-bound decarbonisation roadmaps for high-emission PSEs;\n<ul class=\"wp-block-list\">\n<li>Scale investments in renewables, hydrogen, and energy storage;<\/li>\n\n\n\n<li>Use green bonds and blended finance to fund transition costs;<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Strengthen Global Expansion and Risk Management: <\/strong>Improve governance of overseas subsidiaries and joint ventures;\n<ul class=\"wp-block-list\">\n<li>Enhance geopolitical, currency, and commodity risk assessment;<\/li>\n\n\n\n<li>Build global compliance and contract management capabilities;<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Extend Reforms to State-Level PSEs: <\/strong>Introduce transparent disclosure and performance benchmarks;\n<ul class=\"wp-block-list\">\n<li>Link state financial support to reform milestones;<\/li>\n\n\n\n<li>Encourage consolidation and public\u2013private partnerships at the state level;<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-background has-fixed-layout\" style=\"background-color:#fff2cc\"><tbody><tr><td><strong>Daily Mains Practice Question<\/strong><br><strong>[Q]<\/strong> Examine the major reforms introduced to improve efficiency, governance, and the role of Public Sector Enterprises (PSEs) in India.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p><a href=\"https:\/\/indianexpress.com\/article\/opinion\/columns\/central-public-sector-enterprises-comeback-highlights-need-for-similar-reform-at-state-level-10502293\" target=\"_blank\" rel=\"noopener\">Source: IE<\/a><\/p>\n\n\n\n<div class=\"wp-block-buttons is-layout-flex wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link wp-element-button\" href=\"https:\/\/www.nextias.com\/ca\/wp-content\/uploads\/2026\/01\/Daily-Editorial-Analysis-30-01-2026.pdf\"><strong>Download PDF<\/strong><\/a><\/div>\n<\/div>\n\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<p><strong>Published on:<\/strong> 30 January, 2026<\/p>\n<p>Across the world, the decline of centralised economic planning has reshaped the role of state-owned enterprises, pushing them toward efficiency, competitiveness, and innovation.<\/p>\n","protected":false},"author":4,"featured_media":65469,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[22],"tags":[],"class_list":["post-65466","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-editorial-analysis"],"acf":[],"jetpack_featured_media_url":"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2026\/01\/Editorial-Analysis-900-600-4-1.webp","_links":{"self":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/65466","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/comments?post=65466"}],"version-history":[{"count":3,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/65466\/revisions"}],"predecessor-version":[{"id":65521,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/65466\/revisions\/65521"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media\/65469"}],"wp:attachment":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media?parent=65466"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/categories?post=65466"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/tags?post=65466"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}