Overview
This lecture covers types of public sector enterprises—departmental undertakings, statutory corporations, government companies, multinational companies (MNCs), joint ventures, and public-private partnerships (PPP)—with their features, advantages, and disadvantages.
Introduction to Public and Private Enterprises
- Indian economy is a mixed economy with both private (individual-owned) and public (government-owned) enterprises.
- After independence, public enterprises dominated, leading to slow growth.
- In 1991, reforms allowed privatization and globalization, inviting private and foreign enterprises.
Departmental Undertakings
- A part of the government with no separate legal entity; oldest form of public enterprise.
- Examples: Railways, Defense, Post and Telegraph.
- Operated by civil servants under a specific ministry’s control.
- Financed and controlled directly by the government; all revenue goes to the government treasury.
- Easy to form, offer effective control and optimum fund utilization, and ensure secrecy.
- Disadvantages: lack of motivation, inefficient management, red tapism, inflexibility.
Statutory Corporations (Public Corporations)
- Created by a special act of Parliament or State Legislature.
- Separate legal entity with defined powers, rules, and limitations in the act.
- Managed by a government-nominated board of directors, enjoys administrative autonomy.
- Examples: SBI, LIC, ICAI.
- Advantages: administrative autonomy, quick decisions, professional management, service motive.
- Disadvantages: autonomy often limited, lack of initiative, possible unfair practices, rigid structure.
Government Companies
- At least 51% of paid-up share capital held by central/state governments.
- Registered under Companies Act, 2013; has a separate legal entity.
- Managed by a board of directors nominated by the government.
- Can raise funds from the public and enjoy financial autonomy.
- Advantages: easy formation, independent status, efficient staff, collaboration with private enterprises.
- Disadvantages: limited real freedom, political interference, board filled with government representatives.
Multinational Companies (MNCs) / Global Enterprises
- Operate in multiple countries with branches and factories worldwide.
- Examples: Coca-Cola, Nike, L’Oréal, Microsoft.
- Features: large capital, centralized control from home country, advanced technology, aggressive marketing, product innovation, oligopolistic (dominating) market position.
- Expand market by entering new countries and often tie-up with local companies.
Joint Ventures
- Two or more firms collaborate to create a new enterprise or project.
- Benefits: pooled resources, access to new markets and technology, increased innovation, lower production costs, established brand name advantage.
Public-Private Partnership (PPP)
- Collaboration between government and private companies to deliver services or infrastructure.
- The public sector ensures service obligations; private sector brings management expertise.
- Used for high-priority projects (e.g., infrastructure like metro, airports).
- Main issue: private sector often seeks higher returns, leading to higher user costs.
Key Terms & Definitions
- Mixed Economy — An economic system with both private and public sector enterprises.
- Departmental Undertaking — Government enterprise without a separate legal identity.
- Statutory Corporation — Public corporation created by a special legislative act.
- Government Company — Company with ≥51% government ownership, registered under Companies Act.
- Multinational Company (MNC) — Company operating in multiple countries.
- Joint Venture — New enterprise formed by the collaboration of two or more firms.
- Public-Private Partnership (PPP) — Joint project between government and private sector.
Action Items / Next Steps
- Review chapter on Private, Public, and Global Enterprises from your textbook.
- Prepare notes on examples and features of each enterprise type.
- Complete any pending reading assignments for Chapter 3.