The Industrial Policy 1991 towards the public sector is explained below:

a. The Industrial Policy Resolution was introduced in 1956 in which 17 industries were reserved for the public sector. In 1991, only 8 industries were reserved for the public sector.These were defense, atomic energy, railways,mining, arms, and ammunition. The private sector could enter any areas except these above-mentioned ones.

b. Disinvestments of PSE’s was undertaken in 1991. It means the sale of equity shares to the private sector/public. Its aim was to raise resources and encourages the participation of the public and workers in the ownership of these enterprises.

c. The reconstruction of sick public sector units is taken up by BIFR-Board for Industrial and Financial Reconstruction. It was established in January 1987 and began to function from 15th May 1987. BIFR decided whether the sick PSU's should be shut down or revived.

d. A memorandum of understanding or MOU was signed between the particular public sector unit and their administration. The PSUs were given clear cut targets and operational autonomy to achieve those targets.