Public Enterprises Essay

What are the Objectives of Public Enterprises? SOUMYA SINGH In India, public enterprises have been assigned the task of realising the objectives laid down in the Directive Principles of State Policy. Public sector as a whole seeks: (a) to gain control of the commanding heights of the economy, (b) to promote critical development in terms of social gain or strategic value rather than on consideration of profit, and (c) to provide commercial surplus with which to finance further economic development. The main objectives of public enterprises in India are as follows: 1. Economic development: Public enterprises were set up to accelerate the rate of economic growth in a planned manner. These enterprises have created a sound industrial base for rapid industrialisation of the country. They are expected to provide infrastructure facilities for promoting balanced and diversified economic structure of development. 2. Self-reliance: Another aim of public enterprises is to promote self-reliance in strategic sectors of the national economy. For this purpose, public enterprises have been set up in transportation, communication, energy, petro-chemicals, and other key and basic industries. . Development of backward Areas: Several public enterprises were established in backward areas to reduce regional imbalances in development. Balanced development of different parts of the country is necessary for social as well as strategic reasons. 4. Employment generation: Unemployment has become a serious problem in India. Public enterprises seek to offer gainful employment to millions. In order to protect jobs, several sick units in the private sector have been nationalised. 5. Economic surplus: Public enterprises seek to generate and mobilise surplus for reinvestment. These enterprises earn money and mobilise public savings for industrial development. 6. Egalitarian society: An important objective of public enterprises is to prevent concentration of economic power and growth of private monopolies. Public sector helps the Government to enforce social control on trade and industry for ensuring equitable distribution of goods and services. Public enterprises protect and promote small scale industries. 7. Consumer welfare: Public enterprises seek to protect consumers from exploitation and profiteering by ensuring supply of essential commodities at cheaper prices. They aim at stabilising prices. 8. Public utilities: Private sector is guided by profit motive. Therefore, it is reluctant to invest money in public utility services like water supply, gas, electricity, public transport. Therefore, the Government has to assume responsibility for providing such services. 9. Defence: Government has to set up public enterprises for production of defence equipment. Supply of such equipment cannot be entrusted for private sector due to the need for utmost secrecy. 10. Labour welfare: Public enterprises serve as model employers. They ensure welfare and social security of employees. Many public enterprises have developed townships, schools, college and hospitals for their workers. Role and Rationale of Public Enterprises The public sector has been playing a vital role in the economic development of the country. In fact the public sector has come to occupy such an important place in our economy that on its effective performance depends largely the achievement of the country’s economic and social goals. Public sector is considered a powerful engine of economic development and an important instrument of self-reliance. The main contributions of public enterprises to the country’s economy may be described as follows: 1. Filling of gaps: At the time of independence, there existed serious gaps in the industrial structure of the country, particularly in the field of heavy industries. Basic and key industries require huge capital investment, involve considerable risk and suffer from long gestation periods. Private sector concerns do not come forward to establish such industries. Public sector has helped to fill up these gaps. The basic infrastructure required for rapid industrialisation has been built up, through the production of strategic capital goods. The public sector has considerably widened the industrial base of the country and speeded up the pace of industrialisation. 2. Employment: Public sector has created millions of jobs to tackle the unemployment problem in the country. Public sector accounts for about two-third of the total employment in the organised industrial sector in India. By taking over many sick units, the public sector has protected the employment of millions. Public sector has also contributed a lot towards the improvement of working and living conditions of workers by serving as a model employer. 3. Balanced regional development: Private industries tend to concentrate in certain regions while other regions remain backward. Public sector undertakings have located their plants in backward and untraded parts of the country. These areas lacked basic industrial and civic facilities like electricity, water supply, township and manpower. Public enterprises have developed these facilities thereby bringing about complete transformation in the social-economic life of the people in these regions. Steel plants of Bhilai, Rourkela and Durgapur; fertilizer factory at Sindri, machine tool plants in Rajasthan, precision instruments plants in Kerala and Rajasthan, etc. are a few examples of the development of backward regions by the public sector. 4. Optimum utilisation of resources: Public enterprises make better utilisation of scarce resources of the country. They are big in size and able to enjoy the benefits of large scale operations. They help to eliminate wasteful completion and ensure full use of installed capacity. Op timum utilisation of resources results in better and cheaper production. 5. Mobilisation of surplus: The profits earned by public enterprises are reinvested for expansion and diversification. Moreover, public sector concerns like banks and financial nstitutions mobilise scattered public savings thereby helping the process of capital formation in the country. Public enterprises earn considerable foreign exchange through exports. 6. Self reliance: Public enterprises have reduced considerably the need for imports by producing new and better products within the country. These enterprises are also earning considerable amount of foreign exchange through exports. 7. Socialistic pattern of society: Public sector is an instrument for realising social objectives. Public enterprises help to check concentration of wealth and private monopolies. These enterprises can serve as powerful means of economic and social change. 8. Public welfare: Public enterprises help in the establishment of a welfare state in the country. These enterprises supply essential commodities at cheaper rates. A proper balance between demand and supply is created to protect consumers against exploitation by profit hungry businessmen. Public enterprises also protect and promote the interests of workers. Criticism of Public Enterprises [Arguments against Public Enterprises] Public enterprises are opposed on account of weaknesses in their organisation and working. These enterprises generally suffer from the following problems: 1. Delay in completion: Often a very long time is taken in the establishment and completion of public enterprises. Delay in completion leads to increase in the cost of establishment and benefits extracted from them are delayed. 2. Faulty evaluation: Public enterprises are in some cases set upon political considerations. There is no proper evaluation of demand and supply and expected costs and benefits. There are no clear cut objectives and guidelines. In the absence of proper project planning there is under- utilisation of capacity and wastage of national resources. . Heavy overhead costs: Public enterprises often spend huge amounts on providing housing and other amenities to employees. Though such investment is useful for employees but it takes away a large part of capital and the project suffers from financial difficulties. 4. Poor returns: Majority of the public enterprises in India are incurring loss. In some of them the profits earned do not yield a reasonable return on huge investment. Lack of effective financial controls, wasteful expenditure and dogmatic pricing policy result in losses 5. Inefficient management: Due to excessive centralisation of authority and lack of motivation public enterprises are managed inefficiently. High level posts are often occupied by persons lacking necessary expertise but enjoying political support. 6. Political interference: There is frequent interference from politicians and civil servants in the working of public enterprises. Such interference leaves little scope for initiative and freedom of action. Public enterprises enjoy little autonomy and flexibility of operations. 7. Labour problems: In the absence of proper manpower planning public enterprises suffer from over-staffing. Jobs are created to fulfil employment goals of the Government. Guarantee of job in these enterprises encourages trade unions to be militant in pursuing their aims. Growth of Public Enterprises in India At the time of independence, public sector in India was confined mainly to railways, communications, defence production and public utility services. Since then the growth of public enterprises has been very rapid. Now public sector consists of public utilities (e. g. , railways, post and telegraph, etc), manufacturing concerns (e. g. , BHEL, SAIL, etc. ), trading organisations (e. g. STC, MMTC, etc. ), service organisations (e. g. , NIDC, RITES, etc. ). SAIL, a Maharatna Company of Govt. of India, is the world’s leading and India’s largest steel producer with an annual turnover of around Rs. 50,348 crore (FY11-12). It operates and owns 5 integrated steel plants at Rourkela, Bhilai, Durgapur, Bokaro and Burnpur and 3 special steel plants at Salem, Durgapur and Bhadravati. As part of its global ambition the Company is implementing a massive expansion plan involving project work of building/adding new facilites with emphasis on state of the art green technology. List of Maharatna, Navratna and Miniratna CPSEs As per available information (as on February, 2013) Maharatna CPSEs Bharat Heavy Electricals Limited Coal India Limited GAIL (India) Limited Indian Oil Corporation Limited NTPC Limited Oil & Natural Gas Corporation Limited Steel Authority of India Limited Navratna CPSEs Bharat Electronics Limited Bharat Petroleum Corporation Limited Hindustan Aeronautics Limited Hindustan Petroleum Corporation Limited Mahanagar Telephone Nigam Limited National Aluminium Company Limited NMDC Limited Neyveli Lignite Corporation Limited Oil India Limited Power Finance Corporation Limited Power Grid Corporation of India Limited Rashtriya Ispat Nigam Limited Rural Electrification Corporation Limited Shipping Corporation of India Limited Miniratna Category – I CPSEs Airports Authority of India Antrix Corporation Limited Balmer Lawrie & Co. Limited Bharat Dynamics Limited BEML Limited Bharat Sanchar Nigam Limited Bridge & Roof Company (India) Limited Central Warehousing Corporation Central Coalfields Limited Chennai Petroleum Corporation Limited Cochin Shipyard Limited Container Corporation of India Limited Dredging Corporation of India Limited Engineers India Limited Ennore Port Limited Garden Reach Shipbuilders & Engineers Limited Goa Shipyard Limited Hindustan Copper Limited HLL Lifecare Limited Hindustan Newsprint Limited Hindustan Paper Corporation Limited Housing & Urban Development Corporation Limited India Tourism Development Corporation Limited Indian Railway Catering & Tourism Corporation Limited IRCON International Limited KIOCL Limited Mazagaon Dock Limited Mahanadi Coalfields Limited Manganese Ore (India) Limited Mangalore Refinery & Petrochemical Limited Mishra Dhatu Nigam Limited MMTC Limited MSTC Limited National Fertilizers Limited National Seeds Corporation Limited NHPC Limited Northern Coalfields Limited Numaligarh Refinery Limited ONGC Videsh Limited Pawan Hans Helicopters Limited Projects & Development India Limited Railtel Corporation of India Limited Rashtriya Chemicals & Fertilizers Limited RITES Limited SJVN Limited Security Printing and Minting Corporation of India Limited South Eastern Coalfields Limited State Trading Corporation of India Limited Telecommunications Consultants India Limited THDC India Limited Western Coalfields Limited WAPCOS Limited Miniratna Category-II CPSEs Bharat Pumps & Compressors Limited Broadcast Engineering Consultants (I) Limited Central Mine Planning & Design Institute Limited Ed. CIL (India) Limited Engineering Projects (India) Limited FCI Aravali Gypsum & Minerals India Limited Ferro Scrap Nigam Limited HMT (International) Limited HSCC (India) Limited India Trade Promotion Organisation Indian Medicines & Pharmaceuticals Corporation Limited M E C O N Limited National Film Development Corporation Limited National Small Industries Corporation Limited P E C Limited Rajasthan Electronics & Instruments Limited