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What Are Public Sector Undertakings?

There are a range of government-owned corporations operating in India.
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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 22 October 2014
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Public sector undertakings (PSUs) are corporations that are owned and operated by a local, state, or national government. The term itself is often used in India, referring to the range of government-owned corporations that are in operation within that country. In other areas of the world, businesses of this type may also be known as PSUs or simply referred to as companies in the public sector.

The range of public sector undertakings can include just about any type of business. It is not unusual for a government to own utility companies that supply electricity or telecommunication services to specific areas within the nation. Another common example of a company in the public sector involves mining operations, especially those that supply coal or other essentials in the production process of other PSUs owned by that same government.

In some cases, public sector undertakings are focused less on the production of goods and more on managing the delivery of those goods to the general public or commercial consumers. This means that a transportation network may be owned and operated by a government, including rail lines or even air-based courier services. A PSU may also be involved in the allocation of goods and services to other government entities, using guidelines provided by the government itself.

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Depending on exactly how public sector undertakings are structured, they may or may not be required to earn a profit each year, another factor that sets this type of business operation apart from privately held corporations. In many instances, the reason for the PSU is to help stimulate commerce among other types of businesses by providing something that encourages participation by others in the nation’s economy. For example, a postal system provides a much needed service that may or may not post a profit in any given year, while still giving individuals and businesses a means of communication that can be used to create jobs and help generate activity within the economy.

While it is not unusual for many governments to hold some interest in different kinds of businesses, one of the defining characteristics of public sector undertakings is the amount of interest that the government holds. In most cases, a company cannot truly be considered a PSU unless a government entity holds at least 51% ownership in that business. Should the government agency or entity hold less than a controlling interest in the company, it normally does not fit the pattern and is not subject to any tax or other operational regulations that specifically apply to government-owned entities.

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Melonlity
Post 1

A good example of this in the United State, I think, would be Fannie Mae and Freddie Mac -- two government sponsored entities which back the majority of mortgages in the United States. Those were created during the Great Depression as ways to create home ownership in that nation by making sure banks had money to loan to people wanting to buy houses.

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