Public Sector Enterprises

The Industrial Policy Resolution of 1956 gave the public sector a strategic role in the Indian economy.
Public enterprises or public sector refers to that sector which is owned and
managed by the central government or the state government or a body set up
by the government to direct the undertaking in the public interest.

Forms or Types of Public Enterprises:


i. Departmental undertakings : Railways, Defence, etc
ii. Statutory Corporations : LIC, the Indian Airlines Corporations, etc
iii. Government Companies : Heavy Electricals Ltd, HMT Ltd, etc
iv. Holding Company : Steel Authority of India Ltd.

Objectives of Public Sector:

1.To promote rapid economic development through creation and expansion of Infrastructure
2.To generate financial resources for development
3.To create employment opportunities
4.To promote redistribution of wealth and income
5.To promote balanced regional growth
6.To promote exports and import substitution
7.To encourage SSIs

Role of Public Sector in Indian Economy:

•Capital Formation
•Development of Infrastructure
•Development of Defence Industries
•Development of Basic and Key industries:
•Iron and steel, cement, etc
•Development of Power projects
•Development of Banking and Insurance
•Balanced Regional development
•Balanced Economic Growth
•Strong Industrial Base
•Economies Of Scale
•Removal of Regional Disparities
•Import Substitution
•Export Promotion
•Expansion of Employment Opportunities
•Source of Revenue to the Government
•Saving in Foreign Exchange
•Better Allocation and Utilisation of Resources
•Diversity of Projects

Problems and Shortcomings of the Public Sector:

1.Mounting Losses
2.Price Policy of Public Enterprises
3.Delay in Completion of the Projects
4.Increase in Costs of Construction
5.Poitical factors influence decision about Location
6.Over-Capitalization
7.Under-Utilization of Capacity
8.Unfavourable Input-output Ratio
9.Use of Manpower Resources in excess of actual requirements
10.Faulty Planning and Controls
11.Inefficient Management
12.Labour Problem resulting in Strikes and Lockouts
13.Higher Capital Intensity -- Low Employment Generation
14.Shortage of Raw materials and Power

Remedies / Measures to be taken for the Performance of Public Sector:

1.Reduction in Unproductive Expenditure
2.Utilisation of Installed Capacity
3.Better Utilisation of manpower and materials
4.Proper Planning and Control
5.Improvement of Efficiency of Management
6.Suitable Price Policy
7.Making them Autonomous
8.Improvement of Industrial Relations
9.Motivation of Staff and Workers