MBA 1st Year Public Enterprises Study Material Notes
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Meaning of Public Enterprises
Public enterprises are the enterprises that are owned, managed, and controlled by Central State or Local Government. Public enterprises are known as government enterprises, state enterprises, and government industries also.
The term public enterprise has been defined as under:
‘State enterprise or business denotes an undertaking which is controlled and operated by the government as its sole owner or major shareholder’
The term public enterprise usually refers to government ownership and active operation of agencies engaged in supplying the public with goods and services which alternatively might be supplied by private enterprise operations.
Some characteristics of public enterprises are as follows:
- These are government enterprises.
- These are owned, managed, and controlled by government-central, state, or local.
- These enterprises produce various goods and services.
Importance or Need of Public Enterprises in India
Important advantages of public enterprises in India are as follows:
1. Better Allocation of Resources: Productive resources are allocated in the most rational manner under the public system. The resources are directed in the directions in which they are most wanted.
2. Social Justice: Public enterprises ensure serialization and come weaponizes to ensure social justice and efforts are made by these enterprises to satisfy all possible home is distributed equally Weeds. Inequalities of Income are reduced to the minimum and national income is distributed equally. (MBA 1st Year Public Enterprises Study Material Notes)
3. To Check the Concentration concentration of Economic Power Public enterprises check the concentration of Economic power in the hands of only a few people. All the efforts are made to divide in a just and equitable manner.
4. Economic Stability Public enterprises work under the guidance of a central government. These enterprises minimize the occurrence of trade cycles. It prevents the imbalance between demand planning authority and supply and creates economic stability.
5. Infrastructural Development: Public enterprises help in the development of infrastructure, necessary for the development of a country. All the facilities like water power, transportation, communication, banking, etc. are developed by public enterprises
5. Necessary for Planned Economic Developments India has adopted the path of planned economic development Public enterprises have been assigned a great responsibility in the process of economic development.
6. Ability to Make Huge Investment: Public enterprises are necessary for the development of basic, heavy, and capital-intensive industries. The fact is that public enterprises are necessary for all the Gelds of the economy in which the private entrepreneurs do not take interest. (MBA 1st Year Public Enterprises Study Material Notes)
7. A Check on Private Sector Monopolies: A great rationale for the development of public sector enterprises in India is that these enterprises keep a check on private sector monopolies. (MBA 1st Year Public Enterprises Study Material Notes)
Problems of Public Enterprises
Important problems of public enterprises may be summarised as follows:
- The problem of Organisational Structure: According to Dr. Nav Gopal Das, “Most important problem of the public sector is that of the organization and management or how should these industries be organized and managed so that national welfare may be promoted without sacrificing efficiency and economy.
There are four types of organizations and management of public enterprises in India and the government has not yet decided on a certain policy on this issue. (MBA 1st Year Public Enterprises Study Material Notes)
(a) Departmental organization.
(b) Public corporation
(c) Government company.
(d) Mixed ownership corporation.
- Management and Administration: (a) Generally IAS and IPS officers are deputed on the key posts of these enterprises, who are not necessarily so efficient to run the enterprise.
(b) Direct or indirect interference of politicians creates disturbances.
(c) These enterprises do not enjoy full autonomy and independence.
(d) The problem of inefficiency, irresponsibility, and red-tapism is also there.
(e) Policies of different public enterprises differ from each other.
- Project and Planning: There is an unnecessary gap between the planning and implementation of projects in these enterprises. Actual implementation gets very late and this increases the cost.
- Financial Problems: (a) Responsibility for providing adequate finance rests with the government which is provided through budget and plans, so public enterprises often suffer from a shortage of funds.
(b) Financial structure of these enterprises is not balanced.
(c) There is no effective control on income and expenditure.
- Audit Problems: Public enterprises are audited by the internal auditor and the final audit is performed by the controller and auditor general of audit and accounts however, some investigations are performed by the parliamentary committee.
- Control and Public Accountability: (a) Public enterprises involve the investment of public funds. Accountability towards parliament reduces autonomy, (MBA 1st Year Public Enterprises Study Material Notes)
(b) Undue influence of political leaders is there.
(c) Several committees and commissions are appointed at different times to enquire about different issues.
- The problem of Technical Collaboration: A number of public enterprises are established with foreign collaboration. These enterprises are dominated by foreign technicians and experts. Therefore, Indian technicians and experts do not get the proper opportunities for development. (MBA 1st Year Public Enterprises Study Material Notes)
- Personal Problems: (a) Employees are appointed by the public services commission. So often posts remain vacant for a long time. (MBA 1st Year Public Enterprises Study Material Notes)
(b) Generally there is a labor surplus.
(c) There is a common lack of efficiency, enthusiasm, and responsibility among employees.
- Other Problems: (a) Location is related to regional priority rather than on economic lines.
(b) These enterprises are found by legal and administrative formalities and often suffer from general sickness.
Suggestions for Improving the Performance of Public Enterprise
The suggestions given by committees and commissions may be summarised as follows:
1. To the form of Organisation: (a) For the public utilities and defiance industries, public corporations should be preferred.
(b) For business and industrial enterprises, a government company or public corporation should be set-up
(C) For joint venture enterprises, a government company should be formed.
(d) For the project of national importance, boards should be set up.
(e) For core sectors, a central corporation should be set up and all the units of the core sector should work under the guidance and control of the corporation. (MBA 1st Year Public Enterprises Study Material Notes)
2. To Management and Administration: (a) No politician or Bo administrative officer should be appointed for these enterprises.
(b) All concerned parties should be given representation in board justification for any of the directors.
(c) An advisory Committee consisting of experts in production, finance, account, marketing, etc. should be appointed in every on the needs of distributive enterprise to advise the board of directors.
(d) Complete autonomy should be granted.
3. To Project and Planning: (a) All the aspects of feasibility should be duly considered before finalizing a plan.
(b) Techniques of forecasting and budgeting should be used while preparing project reports.
(c) Directives of the planning commission should be followed while finalizing a report.
4. To Financial Management: (a) There should be a well-defined plan regarding capital structure and resources.
(b) Capital structure and debt-equity ratio should be in an appropriate proportion.
(c) Responsibility centers should be established regarding income and expenses.
5. Personal Suggestions: (a) There should be a well-defined and clear personal policy
(b) All the employees and managers should be appointed on the basis of their ability and experience.
(c) Techniques of time, motion and fatigue study should be used while drafting policies.
(d) Wages policy should be determined in the most appropriate manner.
6. Auditing Suggestion: (a) 4 or 5 audit boards should be constituted to conduct the audit of licensed enterprises.
(b) Duties, rights, and responsibilities of all the boards should be clearly defined.
(c) All the boards should submit their report to the controller general of audit and accounts.
(d) Experts in the financing, accounting, and auditing should be appointed m audit de
7. Other Suggestions: (a) A price board should be set up to determine the prices of products license enterprises.
(b) First service and then profit policy should be adopted.
(c) Research and development should be emphasized.
(d) Decision to continue or discontinue loss-making public enterprises should be taken by the bureau of public enterprises.
(e) Prices of the products should be determined in a manner such that these enterprises do not suffer loss.
8. Suggestions to Holding Companies: A holding company should be set up for every public sector such as iron and steel, coal, petroleum, etc. All the companies and corporations working in one ctor should be brought under a holding company. There should be a memorandum of understanding tween the government and the holding company.