Union Government's Approach to Public Sector Undertakings (PSUs)
The Union Budget for 2025-26 provides insights into whether there has been a change in the Union government's approach towards PSUs. To understand this, it is important to analyze the numbers in a historical context.
PSUs Financial Performance in 2019-20
- Dividend from PSUs decreased sharply by 19% to ₹0.35 trillion.
- Capital outlay rose marginally by 2% to ₹8.51 trillion.
- Internal and Extra-Budgetary Resources (IEBR) increased by only 5% to ₹6.4 trillion.
- Government's budgetary support to PSUs’ capital outlay decreased by 7% to ₹2.1 trillion.
- Share of government equity and loans in PSUs’ capital outlay fell to 25%.
- Disinvestment receipts dropped by 47% to ₹0.5 trillion.
Trends from 2019-2025
- Capital outlay by PSUs showed a CAGR of less than 2%.
- PSUs’ IEBR fell by about 10%.
- Dividends transferred to the Centre increased by a CAGR of 9.5%.
- Government's contribution to PSUs’ capital outlay rose by a CAGR of 21%.
- Government's budgetary support to PSUs’ capital outlay increased to 59% by 2024-25 from 25% five years earlier.
- Disinvestment saw a decline of about 8% over the five years.
Comparison with Previous Five Years
- PSUs’ capital outlay and IEBR grew with a CAGR of 23% and 26% respectively.
- Dividend payment grew at a mere CAGR of 2%.
- Disinvestment receipts increased by a CAGR of about 9%.
- Government's equity and loans had a CAGR of 26%.
Recent Policy and Approach
- Despite the policy on strategic disinvestment announced in early 2021, actual disinvestment and privatisation were limited.
- Instances of government reinvesting in struggling PSUs instead of privatising them.
- No significant improvement in PSUs' ability to pay dividends or generate higher IEBR.
- PSUs' dependence on government budgetary support increased.
Budget for 2025-26
- Centre expects higher dividends from PSUs but marginal increase in disinvestment receipts.
- Government’s contribution to PSUs’ capital outlay by way of equity and loans will decline.
- PSUs are expected to generate higher IEBR and rely less on government budgetary support.
- No clear return to strategic disinvestment policy.
The Union Government's approach to PSUs in the 2025-26 budget remains largely unchanged, with a continued ambivalence towards aggressive disinvestment. The focus appears to be on asset monetisation rather than asset sales.
