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PUBLIC SECTOR MANAGMENT

PUBLIC ENTERPRISES: MEANING,

NATURE, AND TYPES
Meaning of Public Enterprises
Public enterprises refer to organizations or businesses that are owned, managed, and operated by the
government, either at the central, state, or local level. These enterprises are established to provide
essential goods and services to the public, promote economic development, create employment, and
control certain sectors of the economy.
The primary goal of public enterprises is not just to earn profit, but to serve the public interest, maintain
social welfare, and achieve national objectives. They are financed primarily through government funds
and the revenue generated from their operations.
Nature of Public Enterprises
1. Ownership and Control: Public enterprises are fully or partly owned by the government.
This ownership allows the government to have complete or partial control over the
enterprise's operations and decision-making.
2. Public Service Objective: Unlike private businesses which prioritize profit, public
enterprises aim to provide public goods, such as utilities, infrastructure, healthcare,
education, and other essential services, often at subsidized rates.
3. Government Control: Public enterprises are subject to governmental regulation, and their
operations are aligned with the policies set by the government. They are accountable to the
public and the government, and their performance is evaluated through various reports and
audits.
4. Social Welfare: These enterprises focus on welfare over commercial profitability. The
government’s role includes providing essential services to underserved regions, ensuring
equitable development, and stabilizing prices in essential commodities.
5. Financial Backing: They are primarily funded by government capital or through public
borrowings. These enterprises are often not subject to market risks like private enterprises,
as their objectives are broader than merely making a profit.
6. Non-profit Orientation: The motive of public enterprises is generally not profit
maximization but service delivery and welfare, although they may still generate revenue.
Types of Public Enterprises
Public enterprises can be classified based on different criteria such as their role, ownership, and method
of operation. The main types are:
7. Public Sector Undertakings (PSUs)
These are enterprises where the government holds a majority stake and exercises control
over the operations. PSUs can be further divided into:
 Central PSUs: These are owned and operated by the central government (e.g.,
Indian Oil Corporation, Bharat Heavy Electricals Limited).
 State PSUs: These are owned by state governments (e.g., Maharashtra State Road
Transport Corporation).
8. Departmental Undertakings
These are enterprises directly managed by the government through its departments. They
are not incorporated as separate legal entities and are fully controlled by the government.
Examples include postal services, Indian Railways, and government hospitals.
9. Statutory Corporations
These public enterprises are created by special Acts of Parliament or state legislatures, and
they operate under a legal framework. They are autonomous in decision-making, but the
government is still involved in certain aspects, such as finance. Examples include:
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 Life Insurance Corporation of India (LIC)
 Reserve Bank of India (RBI)
 Food Corporation of India (FCI)
10.Government Companies
A government company is one where at least 51% of the shares are held by the
government, whether central or state. These companies are established under the
Companies Act, 1956 (now Companies Act, 2013). They enjoy the benefits of a private
corporation in terms of operational flexibility but are owned and controlled by the
government. Examples include:
 Oil and Natural Gas Corporation (ONGC)
 National Thermal Power Corporation (NTPC)
11.Joint Sector Enterprises
These enterprises are jointly owned and operated by both the government and private
partners. The government typically holds a significant stake but allows private entities to
participate in the management and operations. This form of enterprise is meant to leverage
the expertise of the private sector while ensuring public welfare. Examples include:
 Bharat Sanchar Nigam Limited (BSNL)
 Maruti Suzuki India Limited (before privatization)
Autonomous BodiesThese are specialized public enterprises set up to manage specific services and
functions. They operate independently but are financed by the government. Examples include:
 National Institute of Fashion Technology (NIFT)
 Indian Council of Medical Research (ICMR)
1. Conclusion
Public enterprises play a crucial role in achieving national development objectives, such as
economic stability, public welfare, infrastructure development, and social justice. They differ from
private enterprises due to their public ownership, service orientation, and government control.
Their structure and operations vary based on the type, but their common goal remains to serve
the public while supporting the broader economic and social policies of the
governmenIntroduction
Public enterprises are government-owned and managed organizations established to achieve socio-
economic objectives. They play a vital role in the development of a nation by ensuring balanced regional
development, providing essential services, and promoting self-reliance in

critical industries.

Growth of Public Enterprises

1. Pre-Independence Era (Colonial Period)
 Public enterprises were limited and primarily focused on strategic sectors like
railways, postal services, and defense production.
 The colonial government prioritized infrastructure for resource extraction and
exports.
2. Post-Independence Era
 Initial Phase (1947–1960s):
 Public enterprises became key to economic planning under the mixed economy
model.
 They focused on infrastructure development, industrialization, and bridging
regional disparities.
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 Examples: Steel plants (Bhilai, Rourkela), ONGC, and State Electricity Boards.
 Expansion Phase (1970s–1980s):
 Diversification into heavy industries, transport, and energy sectors.
 Maharatna and Navratna companies emerged as significant contributors to
economic growth.
 Employment generation and technology transfer were prioritized.
 Reforms Era (1990s–Present):
 Economic liberalization led to restructuring and privatization.
 Focus shifted to profit-making, efficiency, and global competitiveness.
 Public-Private Partnerships (PPPs) emerged as a preferred model for
infrastructure development.

Environment of Public Enterprises

3. Economic Environment
 Operate under government control and are influenced by national economic policies.
 They contribute to GDP, employment, and foreign exchange earnings.
4. Political Environment
 Policy decisions, budget allocations, and political stability directly impact their
operations.
 Public enterprises often act as tools for implementing welfare schemes.
5. Legal and Regulatory Environment
 Governed by acts, policies, and regulations specific to industries (e.g., SEBI for listed
companies, environmental laws).
6. Social Environment
 Address socio-economic disparities by providing affordable services and employment
opportunities in backward areas.
 Often subjected to scrutiny for corruption or inefficiencies.
7. Technological Environment
 Need to adapt to technological advancements to remain competitive.
 Investments in R&D are often limited compared to private enterprises.
8. Global Environment
 Compete with multinational corporations due to globalization.
 Strategic alliances and adoption of global best practices are vital for survival.

Challenges
 Bureaucratic inefficiencies and lack of autonomy.
 Financial losses in certain sectors due to over-dependence on subsidies.
 Resistance to privatization and disinvestment.

Conclusion
Public enterprises have played a significant role in shaping the economic landscape of nations. While
they face challenges in adapting to a competitive global economy, their contribution to infrastructure,
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employment, and social welfare underscores their continued relevance. Reforms aimed at improving
efficiency and governance are essential for their sustained growth.

1. Rationale for Government Policy Towards Public Enterprises

1. Economic Development
 Accelerate industrialization and infrastructure development, particularly in capital-
intensive sectors like steel, energy, and transportation.
 Support the development of backward regions to ensure balanced growth.
2. Market Failures
 Address monopolies, externalities, and the undersupply of public goods like
transportation, healthcare, and education.
 Ensure the provision of essential services that private enterprises might neglect due
to low profitability.
3. Employment Generation
 Provide large-scale employment opportunities, particularly in regions with
underdeveloped private sectors.
4. Revenue Generation
 Serve as a source of revenue for the government through dividends, taxes, and fees.
5. Strategic Sectors
 Maintain government control over critical industries like defense, energy, and
telecommunications to safeguard national interests.
6. Self-Reliance
 Reduce dependence on foreign goods and services by promoting indigenous
industries and technology.
 Boost exports through government-led industrial ventures.
7. Welfare Orientation
 Serve social objectives like poverty alleviation, rural development, and equitable
distribution of wealth.

Objectives of Government Policy Towards Public Enterprises

8. Economic Growth
 Enhance the contribution of public enterprises to GDP by focusing on sectors with
long-term economic benefits.
 Promote industrial diversification and technological advancement.
9. Social Justice
 Bridge regional disparities by investing in underdeveloped areas.
 Provide affordable goods and services to the public, such as power, transportation,
and healthcare.
10.Improved Efficiency
 Introduce reforms like disinvestment, privatization, and public-private partnerships
(PPPs) to enhance operational efficiency.
 Encourage competition and reduce bureaucratic inefficiencies.
11.Global Competitiveness
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 Encourage public enterprises to adopt international standards and expand into global
markets.
 Promote innovation and research & development (R&D).
12.Environmental Sustainability
 Ensure that public enterprises adhere to environmental norms and adopt sustainable
practices in their operations.
13.Revenue Maximization
 Generate steady income for the government to finance welfare programs and reduce
fiscal deficits.
14.Employee Welfare
 Protect workers' rights and provide better wages, working conditions, and job
security.

Key Policy Measures

15.Nationalization (1950s–1970s)
 Focus on state control over key sectors like banking, insurance, and heavy industries.
16.Economic Liberalization (1991 Onwards)
 Shift towards privatization, disinvestment, and promoting private-sector participation.
 Emphasis on reducing financial burdens on the government while improving
efficiency.
17.Disinvestment and Privatization
 Sale of government shares in public enterprises to enhance accountability and
efficiency.
 Use of proceeds for infrastructure development and welfare programs.
18.Public-Private Partnerships (PPPs)
 Collaboration with private entities for infrastructure development and service
delivery.

Conclusion
Government policy towards public enterprises has evolved to balance economic growth, social welfare,
and financial efficiency. While public enterprises remain critical for strategic and social objectives,
policies are increasingly focused on improving their competitiveness and reducing the fiscal burden on
the state. A robust and adaptive approach is essential to align public enterprises with the changing
needs of the economy and society.