Public Sector Enterprise & Performance

Public Sector Enterprise & Performance

Public sector enterprises are contributing a large number of resources to the central government in the form of corporate taxes and custom duties. Public sector enterprises also help to develop a suitable base for the rapid development of industrialization. 

Public Sector Enterprises

Public sector Enterprises are government-owned enterprises or government-owned corporations. The establishment of public sector enterprises is partly or wholly owned by the government which includes railways, banks, defence undertakings, posts, etc. 

The officers or the workers who work for these public sector enterprises and their subsidiaries are called gazetted officers. 

Need of Public Sector Enterprises

Public sector enterprises are needed because of the following reasons:

• In order to maintain sustained growth in productivity
• To enhance employment opportunities
• To achieve the sufficient utilization of human resources
• To transform the country into a major partner and player in the global arena
• To take out the economy of the country from the vicious circle of poverty
• To open the economy of the country to interact with the rest of the world

Managing Performance in the Public Sector

Public sector performance is managed and controlled by the central, state and local government. The performance of public sector enterprises is judged by net profit or loss annually.

Public Sector Enterprises in India

There were just about 5 enterprises in the public sector in India in 1951 but in March 2021 this was increased to 365 which includes 7 new defence PSUs. These enterprises represented a total investment of about ₹16.41 lakh crore.

In March 2011, the share of cumulative investment stood at Rs. 6,66,848 crore which shows an increase of 14.8% over the period of 2009 & 2010. During the years 2010 & 2011, the share of manufacturing in the gross block was about 27.8%. The share of mining, electricity, and services was 23.0%, 25.2% and 23.3% respectively. 

The net profit of 158 profit-making public sectors stood at Rs. 1,13,770 crore in 2010-11. The net loss of 62 loss-making enterprises stood at Rs. 21,693 crore during the same period.

Types of Public Sector Organizations

There are three main types of public sector organizations which are:

Departmental Undertakings 

Departmental undertakings organizations are the most ancient forms of public sector enterprises. They are also known as the department of the government. These enterprises depend on the government and the ministry to control the work. The companies that are the departmental organizations include railways, post-service, telephone service, and others. The central government and the state government have full control over the working of this public sector organization. The revenue generated by these enterprises is controlled by the government and has access to the revenue. Apart from that, the annual budget of the government is financed by these departmental undertakings. The most important thing about this public enterprise is that the formation of a departmental undertaking is pretty easy and does not require any registration. The accountability of these organizations is very high and is controlled directly by parliament.

Public or Statutory Corporation

Public and statutory corporations are other types of public sector enterprises that are formed by the parliament’s special action or state or central legislatures. The public sector is financed by the government. The legislature decides its objectives, powers, limitations and other rights. Public or statutory corporations are Indian airlines, State Bank of India, Oil & Natural Gas Corporation, etc.

The statutory corporation is a separate legal entity. It also includes automatic incorporation which deals with the passing of an act in the parliament. The state and the central government decide the operations of these corporations.

Government Companies 

Government companies are the types of public sector enterprises in which the state and the central government holds a minimum of 51% share. Government companies follow the provisions of the companies act which are established by the government. The Government companies are Hindustan machine tools, state trading corporations, and many others.

Benefits of Public Sector Enterprises

Public sector enterprises are very beneficial for the economic development of the country. Other important benefits of public sector enterprises are as follows:

Economic Development

The economic development of the country mainly depends upon industrial development. Large & basic industries such as iron & steel, mining, shipping, etc. are mainly required for supplying raw materials to small industries. High capital is required for the establishment of such types of industries. The capital which is required by these industries is easily & readily made available by the public sector. It is not possible for the private sector to run these industries.

Regional Development

The private sector usually neglects backward areas of the country. But public sector enterprises set up their smaller units in the backward areas of the country. This helps to remove the regional imbalance & brings regional development.

Employment

Public sector enterprises that are operating in India need a lot of manpower & labour. This helps to provide employment to unlimited individuals according to their experience, education, and capabilities.

Service Motive

The main motive of working in public sector enterprises is to provide public utility services to large sections of societies irrespective of profit.

Monopoly

Public sector enterprises are purely governmental oriented. These sectors do not face any type of competition from any private sector industries. The public sector is working on the basis of monopoly, semi-monopoly and oligopoly.

Sound Infrastructure

Good infrastructure is needed for the rapid industrial development in a country. Infrastructural industries require a large amount of capital for railways, construction of roads, electricity & many such industries. Private sector companies do not have such huge capital but the public sector enterprises can easily afford high capital to provide all infrastructural facilities.

Modal Employer

Public sector enterprises are very much concerned with their employees. They take proper care of their employees and provide good wages, job security, proper working conditions, training and welfare facilities.

Protection to Sick Industries

Public sector enterprises also help sick industries to prevent the closing down of their units. They take up all their responsibilities and prevent many people from getting unemployed. Not only this, they help to prevent unnecessary locking of capital, land, building, machinery, etc.

Government Control

The public sector is fully controlled and managed by the Board of Directors or other officers appointed by the government.

Economies of Operation

Due to its large scale production of public sector enterprises, they enjoy economies of large scale operation.