Balancing Commercial Autonomy and Government Control in Indian Public Sector Undertakings: A Legal Analysis of Corporate Governance Reforms

Public Sector Undertakings (PSUs) occupy a unique position within India’s constitutional and economic framework. Conceived as instruments of socio-economic transformation after independence, PSUs were expected to combine commercial efficiency with public accountability. However, their dual character as corporate entities incorporated under company law and as “State” instrumentalities under Article 12 of the Constitution has created persistent tensions between managerial autonomy and governmental control. This paper examines the constitutional, statutory, and regulatory framework governing Indian PSUs and analyses how judicial interpretation, corporate governance reforms, and market-oriented restructuring have attempted to reconcile these competing objectives. Through an examination of landmark judicial decisions, committee-based governance reforms, and the interaction between the Companies Act, 2013 and SEBI regulations, the paper argues that Indian PSU governance remains constrained by constitutional accountability despite significant liberalization efforts. While reforms have improved transparency and professionalism, excessive governmental interference and regulatory overlap continue to undermine commercial flexibility. The paper concludes by proposing a balanced governance framework that preserves public accountability while enabling PSUs to compete effectively in liberalized markets.