Public and Global Enterprises

 

STATUTORY CORPORATIONS :

It is established under a special Act passed in parliament or state legislative assembly. Its objectives, powers and functions are clearly defined in the statute /Act.
Examples :- Unit Trust of India, Life Insurance Corp.

FEATURES :

  1. It is established under a special act which defines its objects, powers and functions.
  2. It has a separate legal entity.
  3. Its management is vested in a Board of directors appointed or nominated by government.
  4. It has its own staff, recruited and appointed as per the provisions of act.
  5. This type of enterprise is usually independently financed. It obtains funds by borrowing from govt. or from public or through earnings.
  6. It is not subject to same accounting & audit rules which are applicable to govt. department.

MERITS :

  1. Internal Autonomy :- It enjoys a good deal of autonomy in its day to day operations and is free from political interferance.

  2. Quick decisions :- It can take prompt decisions and quick actions as it is free from the prohibitory rules of govt.

  3. Parliamentary control :- Their performance is subject to discussion in parliament which ensures proper use of public money.

  4. Efficent Management :- Their directors and top executives are professionals and experts of different fields.

DEMERIT :

  1. In reality, there is not much operational flexibility. It suffers from lot of political interference.
  2. Usually they enjoy monopoly in their field and do not have profit motive due to which their working turns out to be in efficient.
  3. Where there is dealing with public, rampant corruption exists. Thus public corp. is suitable for undertaking requiring monopoly powers e.g. public utilities.

GOVERNMENT COMPANY :

A government company is a company in which not less than 51% of the paid up share capital is held by the central government; or state govt. or jointly by both. Examples :- Hindustan Insecticides Ltd., State Trading Corp. of India, Hindustan Cables Ltd.

FEARURE :

  1. It is registered or Incorporated under companies Act.
  2. It has a separate legal entity
  3. Management is regulated by the provision of companies Act.
  4. Employees are recruited and appointed as per the rules and regulations contained in Memorandum and Articles of association.
  5. The govt. Co. obtains it funds from govt. shareholdings and other private sharehoildings. It can also raise funds from capital market.

MERITS :

  1. It can be easily formed as per the provision of companies Act. Only an executive decision of govt. is required.
  2. It enjoys autonomy in management decisions and flexibility in day to day working.
  3. It can appoint professional managers on high salaries.

LIMITATIONS :

  1. It suffers from interference from govt. officials, ministers and politicians.
  2. It evades constitutional responsibility, which a company financed by the govt. should have, as it is not directly answerable to parliament.
  3. The board usually consists of the politicians and civil servants who are interested more in pleasing their political bosses than in efficient operation of the company.

CHANGING ROLE OF PUBLIC SECTOR :

Public sector in India was created to achieve two types of objective –

  1. To speed up the economic growth of the country and

  2. To achieve a more equitable distribution of income and wealth among people. The role and importance of public sector changed with time. Its role over a period of time can be summarized as following :-

  3. Development of Infrastructure :- At the time of independence, India suffered from acute shortage of heavy industries such as engineering, iron and steel, oil refineries, heavy machinery etc. Because of huge investment requirement and long gestation period, private sector was not willing to enter these areas. The duty of development of basic infrastructure was assigned to public sector which it discharged quite efficiently.

  4. Regional balance :- Earlier, most of the development was limited to few areas like port towns. For providing employment to the people and for accelerating the economic development of backward areas many industries were set up by public sector in those areas.

  5. Economics of scale - In certain industries (like Electric power plants, natural gas, petroleum etc) huge capital and large base are required to function economically. Such areas were taken up by public sector.

  6. Control of Monopoly and Restrictive trade Practices - These enterprises were also established to provide completion to private  sector and to check their monopolies and restrictive trade practices.

  7. Import Substitution - Public enterprises were also engaged in production of capital equipments which were earlier imported from other countries. At the same time public sector Companiess like STC and MMTC have played an important role in expanding exports of the country. Very important role was assigned to public sector but its performance was far from satisfactory which forced govt. to do  rethinking on public enterprises.

 

CBSE Business Studies Class XI ( By Mr. Kailash Gururani )
Email Id : [email protected]

Business Studies - Mr. Kailash Gururani

 

 

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