Why and how Indian PSUs led by SBI turned from fiscal liabilities to revenue assets

For decades, Indian Public Sector Undertakings (PSUs) were perceived as underperforming behemoths weighed down by inefficiencies, political interference, and sluggish decision-making. But in a striking reversal, these state-owned enterprises have emerged as engines of profitability and growth, posting record-breaking earnings and contributing handsomely to the national exchequer.

As of FY25, total net profits for Indian PSUs have approached ₹5 lakh crore for the second consecutive year, capping off a decade in which their overall earnings have quadrupled. This transformation is no accident—it is the result of deliberate policy reforms, sector-specific momentum, improved operational discipline, and economic tailwinds.

PSUs by numbers: FY24 and FY25 financial snapshot

In FY24, 56 listed PSUs reported combined net profits of ₹5.3 lakh crore, a 44% jump over the previous year. This surge was broad-based, spanning banking, energy, defence, and infrastructure. Major contributors included:

ONGC: ₹54,705 crore

Indian Oil Corporation (IOC): ₹41,615 crore

Coal India: ₹36,942 crore

Revenue for these companies touched ₹61.2 lakh crore, and profits grew at a three-year compound annual growth rate (CAGR) of 34.5%.

In FY25, total PSU profits remained close to ₹5 lakh crore. Notably:

PSU banks collectively posted a record ₹1.78 lakh crore in profit (up 26% from FY24).

SBI alone delivered ₹79,000 crore in net income (from a ₹4,000 crore loss seven years ago).

However, a drop in oil prices dented profits for upstream and downstream oil firms. The combined net income for companies such as IOC, ONGC, BPCL, and HPCL fell from ₹1.75 lakh crore in FY24 to ₹1.03 lakh crore in FY25.

Outside the oil sector, PSU profitability remained robust, with net income increasing from ₹3.28 lakh crore to ₹3.95 lakh crore.

Dividend payouts: A measure of fiscal strength

PSU dividend payouts reflect not just profitability but also the sector’s ability to contribute to the Union government’s fiscal health:

FY24: ₹1.38 lakh crore in dividends, with ₹83,749 crore to the government

FY25: ₹1.33 lakh crore total, ₹82,995 crore to the government

These figures are particularly notable amid global economic uncertainty and the oil sector’s volatility in FY25.

What’s driving the turnaround?

Government policy and institutional reform

Policy support has been central to the PSU resurgence. Key initiatives include:

Infrastructure push: The FY25 budget prioritised capital expenditure, with PSUs like NTPC and RVNL benefiting from increased government contracts.

Autonomy and accountability: Maharatna and Navratna firms now enjoy greater decision-making powers, allowing quicker investment and project execution.

Privatisation pressure: Planned disinvestment (e.g., BPCL) and past success stories (e.g., Air India) have incentivised public enterprises to streamline operations.

Sector-specific targets: In defence, the government set a domestic production goal of ₹1.75 trillion by FY25, boosting the order books of HAL, BEL, and others.

Operational improvements and digital innovation

Efficiency gains and technology adoption are redefining how PSUs operate:

SBI’s digital transformation: Its YONO app, with over 74 million users, helped disburse ₹3.2 lakh crore in loans in FY25, driving a 17.89% year-on-year increase in operating profit.

Lower NPAs: SBI’s gross NPA ratio fell to 1.82% in FY25, reflecting improved asset quality.

Automation: Companies across sectors are deploying AI and automation to cut costs and boost productivity.

Sector-specific momentum

Each sector has its own drivers of success:

Banking: Record credit growth, better loan recovery, and digital banking adoption fuelled a ₹1.78 lakh crore profit for PSU banks in FY25.

Power: Rising demand and a pivot toward renewables benefited firms like NTPC.

Defence: India’s defence exports surged to ₹21,000 crore in FY24, opening new markets for PSU manufacturers.

Oil and gas: FY24 profits were high, but FY25 profits shrank due to global crude price volatility—underscoring the sector’s external vulnerabilities.

A growing economy

India’s GDP growth, projected at 6.5% in FY24 by the RBI, has buoyed demand for infrastructure, energy, and credit—areas where PSUs have strong footprints. The PSU index has also risen 18% in FY25, outperforming expectations and proving investor confidence in these firms.

Challenges on the horizon

Despite the positive trend, several risks could hinder PSU momentum:

Private sector competition: Agile private firms continue to capture market share in sectors like telecom, logistics, and IT.

Technological disruption: Legacy systems and bureaucratic inertia can limit PSUs’ ability to keep up with innovation.

Volatility in global markets: Commodity-linked PSUs remain exposed to price swings, as seen with oil sector earnings in FY25.

Privatisation debate: While privatisation has driven efficiency in some cases, critics argue it may undermine long-term public interest, especially in strategic sectors like energy and defence.

Looking ahead: Can PSUs sustain their revival?

The road forward for India’s PSUs will hinge on their ability to maintain reform momentum and navigate structural headwinds. Key areas of focus include:

Strategic disinvestment: Streamlining ownership without undermining public utility.

Technology investment: Modernising infrastructure, especially in banking, energy, and transport.

Public-private partnerships: Leveraging collaboration for scale and innovation.

Environmental goals: Aligning operations with India’s net-zero targets, especially for power and oil PSUs.

With continued government backing, robust governance frameworks, and smart investments, PSUs could become not just profitable but globally competitive entities in the next decade.

Comparative table: FY24 vs FY25 performance

New era for India’s state-owned enterprises

The transformation of Indian PSUs from financial laggards to drivers of national growth is no longer anecdotal—it’s backed by data, scale, and momentum. While challenges persist, particularly from market volatility and digital disruption, the sector is on stronger footing than it has been in decades.

If current trends hold, PSUs are well-positioned to not only support India’s economic ambitions but also lead strategic sectors in an evolving global landscape.