TOPIC:PUBLIC SCTOR AND PUBLIC UTILITIES

PRESENTED TO:MRS. Kriti Mahajan

PRESENTED BY:Gurkiran Kaur (38)

Ramandeep Kaur (40)Pooja Babbar (122)

INTRODUCTION

Public enterprises have gained importance only in recent times. Earlier, the development of

industries were left to the judgement of private enterpreneurs only but consumer exploitation

by them led to new economic and political system. Government started participating in

industrial and commercial affairs. In India, the Industrial Resolutions of 1948 and 1956 have clearly defined the role of public and private

sectors.

DEFINITION “Public enterprises are autonomous and semi-autonomous

corporations and companies established, owned and controlled by the state and engaged in industrial and commercial activities.”

CHARACTERISTICS 1. Public enterprises are financed by government. They are either owned by the government or majority shares are held by the government.2. They are managed by the government under its own departments or sometimes government nominates persons to manage.

3. Public enterprises are financially independent as they are financed by government.4. Their primary aim is to provide service to society. These enterprises are started with a service motive.5. Public enterprises serve all the sections of society.

6. These are monopoly enterprises. Private enterprises are not allowed to enter that line.

7. Most of the government aid is utilise through public enterprises.8. Government policies and plans are implemented through public enterprises.

9. These are autonomous or semi-autonomous bodies.

O B J EC T I V E S1. Government enters those fields where private sector is hesitant to invest due to huge

investments.2. Government helps in all-round industrialisation by investing in those lines where private

sector is hesitant to invest due to low profit.3. It undertakes to provide various necessities at cheap rates.4. The aim of industrialisation is balanced regional growth by establishing industries in

various regions of the country.5. The existence of public sector will be a check on private sector and avoid concentration

of economic power.6. Public enterprises establishes socialistic pattern of society as means of production are

controlled by the state.7. Government has monopoly in some industries which are to be developed only in public

sectors like defence.8. State enterprises are necessary for exploiting natural resources as private sector will not

like to risk capital.9. They help the government in achieving various targets for output by implementing government policies and plans.10. State enterprises provide healthy competition to the private sector by providing goods and services at reasonable prices.

Arguments in Favour of Public Enterprises

1. Public enterprises make huge investments on providing infrastructural facilities and developing basic industries for speeding up the pace of industrialisation.2. Public sector units are set up only in those areas where demand is more but supply may be less. This will help in planned growth of all areas.3. Government prefers to set up units in backward areas so that people of those areas are able to get employment opportunities .This will help in balanced development of all areas.4. The profits earned by public sector units are re-invested for expansion and diversification purposes. While, private sector units distribute the major part o their profits.5. Public enterprises is a check on private sector and avoids concentration of economic power.6. Public sector units helps in balancing the demand and supply position by setting industries in those areas where demand is more than supply.7. Government determines production pattern by the requirements of society and not the profit earning urge. This will help in bringing a new social order.8. Government take overs private units which are running in losses and run as state enterprises.

Arguments Against Public Enterprises

1. Public enterprises takes long period for completion. This delay escalates cost estimates.2. Public enterprises are sometimes set up on political considerations and have no clear cut objectives. Faulty evaluation of projects results in their failure and wastage of national resources.3. Public enterprises spend heavy amounts on unproductive expenses.4.Public enterprises have failed to earn a fair return on investments. They are either running in losses or earning inadequate returns.5. There is frequent political interference in the working of public sector units. They try to influence the policies of such units.6. The important posts in public enterprises are occupied by those who have no business experience but have political support and leads to inefficient management.7. There is lack of manpower planning as jobs are created to fulfil employment goals of the government and not as per the needs of the organisation.8. Public enterprises faces labour problems because of more expectations of employees from government run units.

FORMS OF PUBLIC ENTERPRISES

A. DEPARTMENTAL ORGANISATION

In this form, the enterprise works as a part of government department. The finances are provided by the government and

management is in the hand of civil servants. Departmental management is suitable for public utility services and strategic

industries.

Charateristics1. These undertakings are wholly dependent on government for finances. 2. The enterprises is managed and controlled by the civil servants of the department.3. The budget of the department is passed by the parliament or by state legislature.4. The accounting and audit control applicable to other departments are applicable to state enterprises also.5.The department enjoys legal immunity.

Advantages1. Departmental form of organisation is necessary for public utility services. Strategic industries can be better managed by them.2. Government policies and plans are better implemented by the government controlled enterprises.3.Departmental undertakings are completely under government control. Thus they can be regulated in a proper way.4. Government is answerable to the legislature for the working of departmental undertakings.5. These undertakings are run on commercial lines. They provide finances to the government.6.Departmental undertakings can maintain secrecy in their working.

Disadvantages1. There is an excessive government interference in departmental organisation. They are not given freedom to decide their own policies.2. There is shortage of competent staff who have commercial knowledge. Civil servants are given control of these undertakings.3. The powers in government enterprises are centralised at the higher level. It adversely affects the efficiency of the concerns.4. There is delay in taking important decisions. Commercial enterprises cannot afford delay in taking decisions.5. No efficiency standards are set for public enterprises. They are run as government departments and not as commercial undertakings.6. There is political interference in departmental undertakings as every political party tries to manage according to its election manifesto.

B. Public corporations

Public corporations are created by a statute of a state or central government. It is a separate legal entity created for a specific purpose

CharacteristicsA public corporation is a separate legal entity created by a legislative act. It can sue or be sued without any government approval.2. These corporations are financed by the government ( atleast 51% of the shares are held by the government).3. These corporations have financial autonomy. Their budgets are not passed by legislature.4. The management of the corporation is appointed by the government.5. The motive of public corporations is to provide service to the public at a reasonable price.6. There is independent recruitment of employees in public corporations.7. Public corporations are free from government interference. They execute their independent policies.

Advantages1. Public corporations have internal freedom. Thy can devise their own policies and programmes. 2. They enjoys flexibility. The management is free to take decisions in the interest of the organisation.3. Public corporations are free from government interference. Management is free to manage these undertakings.4.These corporations utilise the services of competent persons. They are free to employ persons according to their requirements.5. These undertakings are run on commercial lines. Profits earned in these undertakings are used to finance their schemes and undertake expansion plans.6.These undertakings are accountable to the legislature for their performance.7. Public corporations provide commodities and services to the people at reasonable rates.

C. Government Company OrganisationA company owned by central or state government is called a government government company. It means any company in

which not less than 51 percent o the paid up share capital is held by the central government. Government companies are

registered both as public limited and private limited companies, but the management remains with the government in both the

cases.

Advantages1. There is a freedom and flexibility in the management of government companies.2. Government companies are run on commercial lines. They earn surpluses to finance their own expansion plans.3. Government companies provide healthy competition to the private sector by setting reasonable rates.4. These undertakings are financially autonomous. They are dependent on the government only for their initial investment.5. Government companies enter those areas where private sector do not invest and help all-round growth.6. An industrial infrastructure is provided by the government companies. They help the growth of ancilliary units.

Disadvantages1.There come slackness in the management of government companies under the garb of public service. These companies are not as efficient as units in the private sector.2. There is a lot of political interference in government companies. Every companies tries to nominate directors for its own political considerations.3. Government companies suffers form red-tapism as they are dependent on the government for taking important policy decisions.4. They have limited autonomy. They have to get permission from government departments regarding loans, capital, an managerial appointment.5. There is official domination in government companies . Civil servants arte appointed on important managerial posts of these companies.

Problems of Public Enterprises

1. The first important problem of state enterprises is the form of organisation .Before taking decision regarding the form of organisation , the nature of work to be undertaken, capital required , requirement of managerial personnel and state policy should be taken into consideration2. The other problem is of amount of managerial autonomy which should be allowed to the management. The management of these enterprises should be given reasonable autonomy to take their own decisions.3. State enterprises must present all the facts about the working as these are financed by the public money and thus public accountability is must.4. Pricing policy is the main problem in public undertakings that whether they should take profits or work on-profit no-loss basis. A sound pricing policy should aim at earning some profitt so that these units become economically viable.5. The working conditions of public sector should be made similar to that of private sector otherwise qualifies persons will join private sector instead of public sector.6. Public undertakings requires constant research and development plans to devise better method of production as their main aim is to serve the society with quality products.

PUBLIC UTILITIESUnder Public Utilities those undertakings are considered which provides necessary services to the society. These undertakings deal with supply of electricity, gas, power, transport, etc. are all covered under public utility services. The purpose of making these concerns monopoly is to serve the consumers in better way and provide services at cheaper rate.

CHARACTERISTICS OF PUBLIC UTILITIES

1. These enterprises are outcome of special legislations. These are given monopoly in a particular area .The entry other concerns is restricted to avoid exploitation .2. Public utilities are meant for serving the consumers The services are not only provided at lower rates but the supply is also constantly maintained.3. These concerns requires large investments of capital . The investments are more in field assets. Cost per unit goes on decreasing with the expansion in service.4. There is no fear of competition because of monopolistic condition .These utilities always remains in demand, so there is no business risk.5. These undertakings are generally created by special legislations of parliament and state legislatures. Special acts are necessary because special power and privileges are needed to maintain regular and efficient service.6. The primary aim of these undertakings is to help the society in getting the services at reasonable prices.7. Special franchise is given to these undertakings so that regular and satisfactory supply is maintained. Franchise is a charter of special powers, privileges an duties.

FORMS OF PUBLIC UTILITY UNDERTAKINGS• The form of these undertakings depend upon the nature

of services provided by them. The ownership of these undertakings lies in the hands of government to maintain regular supply of essential services. Main aim of these undertakings is to protect the interests of consumers . Normally these undertakings have following forms :

• 1. PUBLIC AUTHORITY• 2.PRIVATE COMPANY (operating under limited monopoly )• 3. JOINT OWNERSHIP CONCERNS• 4.PUBLIC UTILITY TRUSTS

REASONS FOR STATE OWNERSHIP OF PUBLIC UTILITIES

1. Public utility undertakings need huge investments and gestation period is longer. Private sector hesitates to block investments for a longer period without earning profits.2. Public utility undertakings provide necessities to the public at large. The aim is to provide the services at the lowest cost . The govt. enterprises don’t charge more profits on these services . The private sector, on the other hand , tries to charge higher profits, thus raising the prices of these services .3. There is a need for co-ordination among various undertakings so as to help public in getting better services . 4. There is a need for proper regulation of public utility services . The objective of these organisations is better service to the society . Govt. tries to regulate the working of public utility providers . 5. The Industrial Policy Resolution 1956 recommended that public utility services should be under state control as for as possible

ORGANISATIONS OF PUBLIC UTILITY CONCERNS

a) Departmental Undertakings : A number of undertakings are run under various govt. departments at central, state or local levels . The postage and telegraph department of central govt. provides all types of postal services. Similarly, local bodies departments of state govts. make arrangements for drinking water at various urban places through municipal committees .

b) Public Corporations : Another form of organisation of public utilities is through public corporation at central and state level. Transport corporations in Punjab are providing passenger transport facilities to the public .

c) Government Companies : There are a number of govt. companies set up to provide basic services to the people, both at central level and at state levels .

PRIVILEGES & OBLIGATIONS OF PUBLIC UTILITIES Privileges and Rights : 1. The entry into public utility services is determined by an Act of Parliament or

of a state legislature . It restricts the entry of other persons into that field .2. They have a right to use public property like streets , etc . A water supply

company may dig a road to lay down its pipes , thus disturbing the traffic .3. These undertakings are allowed to charge reasonable rates for their services

rendered for goods supplied . 4. It has the rights of a ‘eminent domain’ . Under this right they can acquire

public property for its use on payment of compensation .5. To render services subject to reasonable rules and regulations .6. To withdraw service under prescribed conditions after giving a reasonable

notice to customers.7. To frame separate set of rules and regulations which ensure them prompt

payments , like the grant of special discount , right to demand service deposits etc.

Obligations:1. It is the duty of public utility undertakings to provide services to

each and every person without any discrimination of cast and creed.

2. The services should be supplied as and when required. Certain rules and regulations should be framed to standardise the use of public utilities.

3. The services should be supplied through safest equipments.4. The services should be supplied at reasonable rates so that all

sections of society may be able to utilise them.5. To satisfy customer’s wants to the maximum extent without

attaching unreasonable conditions while serving them.6. To utilise its full capacity if the demand so warranted.7. To supply the product or service reasonably , adequately , safely

and regularly.

PRICING POLICY ASPECT OF PUBLIC

UTILITIES

1. The services can be provided at reasonable price only if the scale of operations is very large. So these undertakings will have to create more clients or more customer base. The production at large scale will help in reduction of cost per unit. These undertakings may offer lower prices of services for bigger consumption.

2. Price discrimination is the other important aspects of pricing policy of Public utility services. These services may be provided at different prices to different categories of consumers. Generally, higher rate per unit is charged from commercial and domestic consumers and lower rates from industrial customer.

3. Every person makes use of public utility services so these needs to be provided at reasonable rate. Government is supposed to provide public utility services at affordable prices. Social welfare aspect is taken into account while fixing prices of public utility services.

PROBLEMS FACED BY PUBLIC UTILITIES

1. The first problem faced by public utility undertakings is the availability of inadequate funds. Most of these concerns are

owned by the government and government is not in a position to supply required funds so the financial needs of these

concerns are not properly met .

2. The investments in public utilities are huge and return are very low. The main reason of low returns is that government

controls pricing of these services. Due to this reason these concerns are not able to generate funds for improving their

services.

3. Public utility concerns are run by bureaucrats since most of them are owned by the government. There is a lack of

professional management, red-tapism, lack of accountability in running these concern. The bureaucratic control has

adversely affected their working. 4. Some public utilities are run by municipal committees and the persons running such bodies may not have proper knowledge to run such undertakings. Thus their working is inefficient.

5. There is a gap between demand and supply of most of the public utility services. With the increase in population the

demand for public utility services is increasing but the services are not increasing accordingly.