FM Sitharaman’s ‘strategic’ sectors in which PSUs will still remain alive

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Updated: May 18, 2020 5:14:44 PM

There are three sectors -- defence manufacturing, atomic energy, and space exploration -- where public sectors’ presence is required even as the private sector can also participate.

psu, strategic sectors, public sector companies, psu mergers, defence, space, atomic energyWhile FM Sitharaman has yet not revealed the list of strategic sectors, policy experts believe defence, space exploration, atomic energy, telecom etc can be the key areas in which the government would want to keep PSUs active.

Finance Minister Nirmala Sitharaman recently announced that PSU companies will stay only in strategic sectors and the government will soon notify the list of those sectors. While FM Sitharaman has yet not revealed the list of strategic sectors, policy experts believe defence, space exploration, oil & gas, atomic energy, telecom etc can be the key areas in which the government would want to keep PSUs active. The government has also said that each of the notified strategic areas will have a maximum of four PSUs, and the remaining state-run companies would be either merged or privatised. While speculations on the strategic sector go on, discussions on the uphill task of merging a large number of PSUs have also taken a front seat.

“There are three sectors — defence manufacturing, atomic energy, and space exploration — where public sectors’ presence is required even as the private sector can also participate. But, in other sectors, there is no necessary requirement of PSU companies,” DK Srivastava, Chief Policy Advisor, EY India, told Financial Express Online. The policy of limiting the number of PSEs in one sector to a maximum of four may prove to be an uphill task since at present, there are many sectors where the number of CPSEs is quite large, he added.

Also Read: FM Sitharaman paves way for PSU mergers, privatisation; opens all sector opportunities for private cos

According to the Public Sector Enterprise Survey 2018-19, which is the latest available, there are 257 central PSEs of which 184 are profit-making enterprises. There are 43 CPSEs in technical consultancy services, 36 in the heavy and medium engineering sector, and 23 in transport and logistics.

“Telecom, oil & gas, mines & minerals, steel, defence, and financial services can be among the strategic sectors where the PSU companies will function,” Ranen Banerjee, Leader – Economic Policy, PwC, told Financial Express Online. It is not about looking from security and internal safety perspective only but it is from a strategic perspective, he added.

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Meanwhile, the government said that to minimise wasteful administrative costs, the number of enterprises in strategic sectors will ordinarily be only one to four and the others will be privatised, merged, or brought under holding companies. FM Sitharaman further added that there will be no mushrooming of public sector enterprises under the new public sector enterprise policy.

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