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The Policy of the Government Towards the Public Sector Since 1991

Four major reforms were introduced by the government of India in the public sector in its new industrial policy in 1991. The main components of the Government policy are as follows:
  • Restructure and bring back potentially viable PSUs
  • Shut down PSUs, which cannot be invigorated.
  • Bring down governments equity in all non-strategic PSUs to 26 per cent or lesser, if required; and
  • ​Fully defend the interest of workers.
  1. Reduce the number of industries retained for the public sector from 17 to 8 (and then to 3):
    17 industries were reserved for the public sector in the 1956 resolution on Industrial policy. In 1991, only 8 industries were retained for the public sector, they were limited to railways, atomic energy, arms and communication, mining. In 2001, only three industries were reserved solely for the public sector. These are atomic energy, arms and rail transport. This meant that the private sector could gain access in all areas (except the three) and the public sector would have to compete with them. The public sector has played an important role in the progress of the economy. However, the private sector is also quite competent in contributing significantly to the process of building the nation. Hence, both the private sector and the public sector need to be seen as mutually complementary elements of the national sector. Private sector units also have to assume greater public responsibilities. At the same time, the public sector needs to focus on attaining more in a highly competitive industry.
  2. Disinvestment of shares of a select set of public sector undertakings: Disinvestment is the sale of the equity shares to the private sector and the public. The AIM is also quite capable of contributing substantially to the nation building process. Therefore, both the public sector and the private sector need to be viewed as mutually complementary parts of the national sector. Private sector units also have to assume greater public responsibilities. Simultaneously, the public sector needs to focus on achieving more in a highly competitive market.




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