[Yojana Archive] Capacity Building of PSUs

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December 2011: Aatmanirbhar Bharat


  • Training and capacity building in Public Sector Undertakings (PSUs) is an area that is gaining importance, particularly due to rapid advancements in technology and other operational methodologies.
  • To meet the training needs in the current dynamic scenario, it is imperative that there is synergising of resources and a more active exchange of technical knowledge and other related ideas among PSUs.

What are Public Sector Undertakings (PSUs)?

  • A state-owned enterprise in India is called a PSU or a public sector enterprise.
  • These companies are owned by the union government of India or one of the many state or territorial governments or both.
  • The company stock needs to be majority-owned by the government to be a PSU.
  • PSUs strictly may be classified as central public sector enterprises (CPSEs) or state level public enterprises (SLPEs).
  • CPSEs are companies in which the direct holding of the Central Government or other CPSEs is 51% or more.
  • They are administered by the Ministry of Heavy Industries and Public Enterprises.

Need for Capacity Building of PSUs

  • PSUs play a multifaceted role in India, laying a solid platform for industrial growth. These firms have contributed to economic prosperity by focusing on infrastructure development and expansion.
  • Many people have found work as a result of these businesses. PSUs want to boost exports while lowering imports.
  • Modern procedures and capacity building in the form of functional competencies, knowledge, and attitudes will encourage a culture of efficiency and competitiveness.

Issues with PSUs through years

  • Economic failure: Inefficient PSU’s were largely responsible for the macro-economic crisis faced by India during 1980’s.
  • Lack of autonomy: Lack of autonomy, political interference, nepotism & corruption has further deteriorated the situation.
  • Bureaucratic rigidities: The entire mechanism did not turn out as efficient as it ought to be, all thanks to the prevailing hierarchy and bureaucracy.
  • Revenue losses: Due to the expenditure on items such as interest payments, wages and salaries of PSU employees and subsidies, the Government is left with hardly any surplus for capital expenditure on social and physical infrastructure.
  • Lack of Competitiveness: In an era of LPG industrial competitiveness has especially assumed an important role, necessitating privatization or disinvestment of PSUs.
  • Poor performance: Despite the huge injection of funds in the past decades, the functioning of many public sector units (PSUs) has traditionally been characterized by poor management, slow decision-making procedures, lack of accountability etc.

Also in discussion: Strategic disinvestment of PSUs

The Union Cabinet has approved sale of the government’s stake to cut shareholding in select public sector firms below 51% to boost revenue collections that have been hit by slowing economy.

The following main objectives of disinvestment were outlined:

  • To reduce the financial burden on the Government.
  • To improve public finances.
  • To introduce, competition and market discipline.
  • To fund growth.
  • To encourage wider share of ownership.
  • To depoliticize non-essential services.

Why disinvestment?

  • Presently, the Government has about Rs. 2 lakh crore locked up in PSUs.
  • Disinvestment of the Government stake is, thus, far too significant. The importance of disinvestment lies in the utilization of funds for:
  1. Financing the increasing fiscal deficit
  2. Financing large-scale infrastructure development
  3. For investing in the economy to encourage spending
  4. For retiring Government debt- Almost 40-45% of the Centre’s revenue receipts go towards repaying public
  5. For social programs like health and education

Way forward for capacity building of PSUs

  • Collaborative Facilities: There is a need to bring about collaboration between training facilities of various PSUs and create a pool of shared resources. It will create cross-synergization and develop a vibrant pool of common resources to be shared.
  • Centres of Excellences: Resource training should be institutionalized and two or more training institutes should be designated as “Centres of Excellence”.
  • Geographic Clusters: Identify geographic clusters where several training institutes from separate fields are located.
  • Thematic Clusters: There are different institutes offering similar core competencies. Tie-ups between such centres could help create Thematic Centres of Excellence.
  • Ethics standards: PSUs need to be built as agents of socio-economic growth in society. Training inputs can help in developing a sense of responsibility towards nation-building.


PSUs and banks need to collaborate on capacity building, share resources, identify and strengthen the core competencies. This will optimize resource utilization and have benefits of specialization.

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