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.