Budgeting for India’s public sector giants
In a striking reversal of trend during the last decade, central public sector undertakings have emerged as an engine of profitability and growth for the exchequer. They have posted record-breaking earnings for the common shareholders and generated substantial dividends and royalties for the government, while preserving their reputation as a source of stable and remunerative employment for millions of Indians.
At the same time, their potential in handholding state PSUs and skilling Indian youth remains untapped. Also, now they are up against serious challenges posed by the new technologies like artificial intelligence, as well as the green transition necessitated by UN’s Sustainable Development Goals and EU’s carbon tax on exports. Budget 2026 can help harness the real potential of these recently-awakened giants and prepare them for the new challenges.
CPSU earnings have quadrupled over the last decade. In 2024-25, their total net profits exceeded Rs 5 lakh crore. The combined net income of oil companies such as Indian Oil, ONGC, BPCL and HPCL stood at Rs 1.03 lakh crore, even as a fall in oil prices dented the profits of upstream and downstream firms. As of December 31, 2025, petroleum accounted for 8.4 percent of India’s gross exports and 20.8 percent of the country’s refinery production of petroleum, oil and lubricants.
Non-oil CPSUs also registered robust profitability in 2024-25, with a net income of Rs 3.95 lakh crore. Meanwhile, PSU banks posted record profits of Rs 1.78 lakh crore. SBI’s profits alone crossed Rs 79,000 crore. Exports of the defence CPSUs reached a record high of Rs 23,622 crore in the year. Indeed, the efficiency gains are broad-based, spanning the banking, defence and infrastructure sectors.
In 2025, the Indian CPSUs’ rankings on the Fortune Global 500 were impressive. Indian Oil, ONGC and BPCL came in at the 127th, 181st and 285th positions, respectively. LIC and SBI ranked 95th and 163rd.
The PSUs’ stock market performance was equally remarkable. In 2024-25, they paid out Rs 1.33 lakh crore in dividends. At the end of calendar 2025, PSU fuel stocks accounted for 10.44 percent of the Nifty50 sector weight. These are contemporaneous signals of their cash-generating profiles and investor appetite for them. Since 2017, several core sector enterprises have been listed, creating unprecedented shareholder value and wealth for retail investors. Therefore, Bharat Coking Coal’s listing in January 2026 at about 96 percent premium was no surprise.
With a Rs 82,995-crore dividend payout to the Centre last fiscal, CPSUs contributed to the robust fiscal health of the Union. Even undertakings that were once perceived as perennially underperforming behemoths have turned the page. What is even more impressive is that these enterprises have shifted the efficiency frontier while ensuring unprecedented accessibility of their products to the masses.
For instance, as of January 1, there were 33.21 crore active domestic LPG connections. Of these, 10.42 crore were PM Ujjwala Yojana connections. To meet the demand from hitherto-neglected regions, the total length of natural gas pipelines was increased from 15,340 km in 2014 to over 24,600 km by 2023. Similarly, refining capacity has been ramped up to approximately 254 million metric tonnes per annum, positioning India as the world’s fourth-largest refiner.
The Union Budget’s continued push for capital expenditure has helped companies such as NTPC and Rail Vikas Nigam. A pivot toward renewables and the push for atmanirbharta in defence have boosted the order books of NTPC, HAL and Bharat Electronics. Through backward linkages, these measures have worked as a force multiplier for private companies and smaller enterprises.
The real boost has come from the shift in governance approach from rigid regulatory control to market-driven operations. Maharatna and Navratna firms now enjoy greater financial and operational autonomy, enabling swifter project execution and operational innovations.
The oil CPSUs have scaled up delivery in rural areas without compromising commercial viability. To improve efficiency by cutting slack, the gas and petroleum distribution systems are being used as a unified—rather than a parallel—national energy infrastructure for multiple services. As of January 1, compressed natural and bio gases were available at 7,763 retail outlets; EV charging was available at 28,711 outlets.
Indian Oil’s Panipat refinery’s initiative to generate sustainable aviation fuel from used cooking oil is an example of an undertaking repurposing its operations towards sustainability. The SBI’s digital transformation is another case in point. The bank’s YONO app, with over 74 million users, disbursed Rs 3.2 lakh crore in loans in 2024-25. Its gross non-performing asset ratio fell to 1.82 percent, an impressive record even by international standards.
These pushes toward green and digital transition are financed by cash-generating core operations without external support. These organisations have scaled up infrastructure while delivering exceptional profitability, prompting the market to re-rate them. The PSUs controlled by the state governments need to take a leaf from the CPSUs.
But from now on, CPSUs will face several challenges. Aligning their operations with India’s net-zero targets would not be easy, especially for the power, coal and oil companies, which face a difficult choice: go green or face carbon taxes on exports. Even the new free-trade agreements cannot help here.
Moreover, these economic giants need to brace for market volatility caused by geopolitical uncertainty and digital disruption. To sustain the momentum, they will have to focus on strategic investment in digital technology and clean energy along the lines of the National Critical Mineral Mission. These demand modernisation of the service delivery infrastructure on a larger scale, improving efficiency. That, in turn, requires leveraging private funds and expertise to scale up and drive innovation.
Even though CPSUs are on a firmer footing today than they have been in decades, their potential in skilling the youth is yet to be harnessed. Similarly, their financial resources and expertise can be leveraged for strategic investments overseas. Fiscal incentives for public-private partnerships and financial autonomy are going to be the key to the CPSUs’ ability to deliver on these fronts. It is here that Budget 2026 can help.
(Views are personal)
Ram Singh
Director of the Delhi School of Economics and member of RBI’s Monetary Policy Committee