Public sectorPublic sectorPublic sectorPublic sector

Concept of Public sector

• The industry management and owned by state govt or central govt.

• The objective of setting up of industries in public sector i.e. to serve the society to serve the society besides earning profitbesides earning profit.

• In this all decisions are taken in general interest of public industry like defence, railway, post and telegram labour welfare, atomic energy are some examples of public sector.

• Public enterprises are controlled & controlled & operated by the governmentoperated by the government either solely or in association with private enterprises.

• To produce supply goods & services required by the society

• Ultimate control of public enterprises remains with the state and the state runs it with a service motto.

• It will includes all units, irrespective of risks involved and profit expected

• There is no lack in capital in public sector and business expansion is not difficult

• Public sector prevents concentration & unbalanced growth of industry.

• All activities are accountable to their respective govt. or national parliament.

• A public enterprise is seldom as efficient as private enterprise, wastage and inefficiency can seldom reduce a minimum

• The Hindustan ship yard, the Hindustan steels, Hindustan Machine tools ,Bharat Heavy Electricals Indian Telephone Industries; Indian airlines, Life Insurance Corporation of India etc are few examples of Public Sector.

Types of CorporationsTypes of Corporations

1)1) Government departments:Government departments: These enterprise are financial

organized and controlled by the government like any other government department under concern ministry .

e.g.-Railways, defense, post and telegraph dooradarshan etc.

2) Public Corporations:2) Public Corporations:• It is established by special act of

parliament with internal autonomy.

• Its 100% capital is subscribed by the state and it is owned by state.

• However minister and civil servants do not interfere in its day to day work.

• The BOD controls day to day affairs and the requirements & the organization of the corporations, but final control remains with the govt.

• E.g.: LIC of India, state power corporations, Indian airlines, State Road transport corporations etc

3) Government companies.3) Government companies.• According to company Act the

Government company is one in which the state, central or both govt held at central or both govt held at least 51% of share capital to the least 51% of share capital to the company .company .

• Eg. BHEL, Hindustan Steel Etc.

Features of public Features of public sectors:sectors:

• Social ownership:• Motive: to provide economic

equality to all.• Accountability to parliament• Power to make decisions: here

decision are made with aim of social justice and equality to public.

Advantages of public sector:Advantages of public sector:

• Huge amount of capital• Availability of resources• Reduces inequality of income• Cheaper products bcz of absence

of profit motive• Welfare of community• Capital, raw material ,power and

transport are easily available.

Demerits of public sector:Demerits of public sector:

• Delay in decisions• No incentives• Flexible price• Lack of responsibility• Misuse of finance• Political interference