Meaning of Public Enterprises

Topics: Government, Public sector, Public ownership Pages: 8 (2455 words) Published: March 24, 2013
As state earlier, the business units owned, managed and controlled by the central, state or local government are termed as public sector enterprises or public enterprises. These are also known as public sector undertakings. A public sector enterprise may be defined as any commercial or industrial undertaking owned and managed by the government with a view to maximize social welfare and uphold the public interest. Public enterprises consist of nationalized private sector enterprises, such as, banks, Life Insurance Corporation of India and the new enterprises set up by the government such as Hindustan Machine Tools (HMT), Gas Authority of India (GAIL), State Trading Corporation (STC) etc.

Looking at the nature of the public enterprises their basic characteristics can be summarized as follows: A. State control: The public enterprises are financed, owned and managed by the government may be a central or state government. B. Rendering service: The primary objective of the establishment of public enterprises is to serve the public at large by supplying the essential goods at a reasonable price and creating employment opportunities. C. Government Ownership and Management: The public enterprises are owned and managed by the central or state government, or by the local authority. The government may either wholly own the public enterprises or the ownership may partly be with the government and partly with the private industrialists and the public. Autonomous or semi-autonomous organization: Public enterprise is an autonomous or semi-autonomous organization because some enterprises work under the direct control of the government and some organizations are established under statutes and companies act.

D. Financed from Government Funds: The public enterprises get their capital from Government Funds and the government has to make provision for their capital in its budget, they become financially independent by arranging finance for day-to-day operation.

E. Public Welfare: Public enterprises are not guided by profit motive. Their major focus is on providing the service or commodity at reasonable prices. Take the case of Indian Oil Corporation or Gas Authority of India Limited (GAIL). They provide petroleum and gas at subsidized prices to the public. F. Monopoly Enterprises: In some specific cases private sectors are not allowed and as such the public enterprises enjoy monopoly in operation. G. Public Utility Services: Public sector enterprises concentrate on providing public utility services like transport, electricity, telecommunication etc. H. Public Accountability: Public enterprises are governed by public policies formulated by the government and are accountable to the legislature. The state enterprises are liable to the general public for their performances because they are responsible for the nation. I. Excessive Formalities: The government rules and regulations force the public enterprises to observe excessive formalities in their operations. This makes the task of management very sensitive and cumbersome. J. A direct channel for use of Foreign money: Sometimes the government receive foreign assistance from industrially advanced countries for the development of industries. These advances received are spent through public enterprises.

K. Agent for implementing government plans: The public enterprises run as per the whims of the government and as such the economic policies and plans of the government are implemented through public enterprises.

By private sector, we mean, economic and social activities undertaken privately by a single individual or group of individuals. They prefer to do business in private sector basically to earn profit. On the other hand public sector refers to economic and social activities undertaken by public authorities. The...
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