Subject: Economic & Social Development
Topic: Public Sector

Ques. What do you mean by Public Sector? (Give your answer in Indian context).

Ans. In a public sector enterprise, the majority of equity shares is owned by the government directly or indirectly through governmental institutions and the government has decision making control .Public sector enterprise normally has the following forms of organisational structure

• departmental undertakings
• statutory corporations
• companies registered under the Companies Act 1956
• boards
• cooperatives

Departmental undertakings are not formed by or with the consent of the legislative authority. These are set up by the executive actions of government bodies and are charged with the duty of carrying out specially defined functions. These undertakings are not independent entities. They are subject to budgetary, audit and other controls of the government and are managed by civil servants. They are financed by annual budgets which also receives their revenues. A departmental undertaking is best suited where the main purpose of the enterprise is to collect revenue for the state and to provide public utilities and services at fair prices in larger public interest. Some examples of departmental undertakings are the Railway, Postal Department etc.

Statutory corporations are enterprises normally engaged in economic or manu-facturing activities and are set up by act of legislature. These corporations are legal entities separate from the government and also the persons who conduct their affairs. ONGC, LIC are some examples. Shares of such corporations are in the name of the government anc these are thus owned and controlled by the government. Statutory corporations enjoy extensive legal autonomy, and their rules, objectives, functions and duties are define and specified in the act. Financing statutory corporations is not part of the Budget and therefore, they can retain their revenues, and also spend as per the rules laid down by the state.

Control Boards are set up to manage government projects- for example, the river valley projects. Bhakra Management Board.

PSE can be in the form of cooperative society to support cooperative movement- Indian Farmers Fertilizer Cooperative Ltd (IFFCO), Krishi Bharati Cooperative Ltd (KRIBHCO) etc. They are registered under Multi State Cooperative Societies Act. Over 65% of the capital of the units is held by the Central Government.

Government company is one where the government owns 51% or more of the paid up capital, according to Section 617 of the Companies Act 1956.

Since the beginning of socio-economic planning after the Independence, public sector played a prominent role in India. Commanding heights of the economy were to be in the hands of the public sector — basically infrastructure and basic industries like heavy engineering, power, metals etc. PSEs dominated the Industrial Policy Statement 1948 and IP Resolution 1956. They were opted for by the Government partly as the Government wanted to steer the economy towards planning goals rapidly and also because of pragmatic compulsions like the presence of the private sector in manufacturing was negligible and they were not willing to take up the unprofitable work of investing in infrastructure.

The Objectives of the PSUs are

• To build a self reliant economy
• To prevent/reduce concentration of private economic power
• Establish sound economic infra-structure