Public Enterprise in Less Developed Countries

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The enterprises in public sector are set up with the main aim of protectingpublic interest. Profit earning comes next.

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Besides the difference in the objective, the enterprises in both these sectors also differ inmany other aspects. In this section let us know the differences between the enterprises ofpublic sector and private sector. Basis of difference Private sector enterprises Public sector enterprises1. Objective Maximisation of profit.

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Maximise social welfareand ensure balanced economicdevelopment. Ownership Owned by individuals. Owned by Government.

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Management Managed by owner and Managed by Government. Capital Raised by owners Raised from Governmentthrough loans, private funds and sometimessources and public issues.

What are Public Enterprises ? - Origin and Importance

Area of operation Operates in all areas Operates in basic andwith adequate return public utility sectors. What is meant by public sector? State whether the following statements are true or false and correct the statements ifneeded. Departmental Undertaking form of organisation is primarily used for provision of essentialservices such as railways, postal services, broadcasting etc. Such organisations functionunder the overall control of a ministry of the Government and are financed and controlledin the same way as any other government department.

This form is considered suitable foractivities where the government desires to have control over them in view of the publicinterest. Statutory Corporation or public corporation refers to a corporate body created by theParliament or State Legislature by a special Act which define its powers, functions andpattern of management. Statutory corporation is also known as public corporation. Itscapital is wholly provided by the government. Government Company refers to the company in which 51 percent or more of the paidup capital is held by the government.

It is registered under the Companies Act and is fullygoverned by the provisions of the Act. Most business units owned and managed bygovernment fall in this category. A departmentalundertaking is organised, managed and financed by the Government. It is controlled by aspecific department of the government. Each such department is headed by a minister. Allpolicy matters and other important decisions are taken by the controlling ministry. TheParliament lays down the general policy for such undertakings. As such it can fulfill its social and economic objectives.

For example,opening of post offices in far off places, broadcasting and telecasting programmes,which may lead to the social, economic and intellectual development of the people arethe social objectives that the departmental undertakings try to fulfill. As such they cannot take any step, which may harm theinterest of any particular group of public.

Public Enterprise

These undertakings are responsible to thepublic through the parliament. This leads to increase in government income. Similarly, if there is deficiency, it is to be met by the government. For instance, governmentpermission is required for each expenditure, observance of government decisionsregarding appointment and promotion of the employees and so on.

Because of thesereasons important decisions get delayed, employees cannot be given instant promotionor punishment. On account of these reasons some difficulties come in the way ofworking of departmental undertakings. This is also because questionsare repeatedly asked in the parliament about the working of the undertaking. Hence, these undertakings are not managed in a professional mannerand suffer from deficiency leading to excessive drainage of public funds.

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  5. But departmental undertakings lackflexibility because its policies cannot be changed instantly. It may be noted that departmental form of organisation for public enterprises is on its wayto oblivion. Most undertakings such as those providing telephone, electricity services arenow being converted into government companies, e.

    List any three services that are being taken care of by Departmental Undertakings. Identify the following and categorise them into Departmental Undertakings, StatutoryCorporations and Government Companies. Identify the Merits and Limitations of the departmental undertakings. Put their numberin the boxes given below. Merits LimitationsWe have just discussed Departmental undertakings. Now we shall study about the secondcategory of Public Enterprises, namely Statutory Corporation or Public Corporation.

    Itsmanagement pattern, its powers and functions, the area of activity, rules and regulationsfor its employees and its relationship with government departments, etc. It may be noted thatmore than one corporation can also be established under the same Act. However, it is accountable to parliament and state legislature.

    Its capital is wholly provided by the government.

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    The members of the board of Directors arenominated by the government. These enterprises are run on business principles under the guidance ofexpert and experienced Directors.

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    Decisions can be taken promptly without anyhindrance. Their activities are watched by the press and the public. As such they have to maintaina high level of efficiency and accountability. This helps in ensuring good performanceand operational results. The government is authorised to give policy directions to the statutorycorporations under the provisions of the Acts governing them.

    The following limitations are observed in statutory corporations. In reality,there is excessive government interference in most of the matters. This results in several impediments in business of the corporations torespond to the changing conditions and take bold decisions. Hence, they suffer fromignorance of commercial principles in managing their affairs. Rectify the errors if any in the following sentences and write the correct sentence inthe specified space.

    These companies are registered under Indian Companies Act, and follow all thoserules and regulations as are applicable to any other registered company. The Governmentof India has organised and registered a number of its undertakings as government companiesfor ensuring managerial autonomy, operational efficiency and provide competition to privatesector. It can sue and be sued, and can acquire property in itsown name. In case of partiallyowned company the capital is provided both by the government and private investors.

    All the Directors or the majority of Directorsare appointed by the government, depending upon the extent of private participation. It regulates its personnel policies according to itsarticles of associations. It can be formed simply by following the procedure laiddown by the Companies Act. It is fully independent in financial and administrative matters.

    As a result, they lack initiative in taking right decisions at theright time. Moreover, some directors may not take real interest in business for fear ofpublic criticism. So, in most cases, they failto achieve the required efficiency levels. Frequent changeof rules, policies and procedures leads to an unhealthy situation of the businessenterprises. Merits Limitations8. Legal Status No separate entity Separate entity to Separate corporatedistinct from the sue and be sued existenceGovernment3. Capital Provided out of Provided wholly by Part of it may be providedbudgetary appropriation the Government by private entrepreneurs4. Management Government official from Board of Directors Board of Directors maythe Ministry concerned include privateindividuals5.

    Autonomy No autonomy. Works as No governmental Some freedom froma part and parcel interference in day- governmentalof government to-day affairs interference7. Suitability Defence, public utilities Heavy industries and All types of industrial andservice providing commercial enterprisesenterprises withlong gestationperiod. There is mixedeconomy in our country and the private as well as the public sector contribute to thedevelopment of our economy. However, there are only some selected areas in which thegovernment establishes its enterprises for a balanced development of the economy andpromote public welfare.

    There are several areas where huge investment of capital isnecessary but the margin of profit is either meager or it can be obtained only after a longperiod as in case of generation and supply of electricity, machine building, construction ofdams, etc. The private businessmen hesitate to establish their enterprises in these areas butthey cannot be neglected in public interest.

    Public Enterprise in Less Developed Countries Public Enterprise in Less Developed Countries
    Public Enterprise in Less Developed Countries Public Enterprise in Less Developed Countries
    Public Enterprise in Less Developed Countries Public Enterprise in Less Developed Countries
    Public Enterprise in Less Developed Countries Public Enterprise in Less Developed Countries
    Public Enterprise in Less Developed Countries Public Enterprise in Less Developed Countries
    Public Enterprise in Less Developed Countries Public Enterprise in Less Developed Countries
    Public Enterprise in Less Developed Countries Public Enterprise in Less Developed Countries

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