2. Define a public sector unit and its objectives
Suggest ways to improve PSU performance
Trace the evolution of public sector or growth and
performance of P.E
Detail the extent of privatisation in India and abroad
Point out the task of disinvestment commission
Understand the meaning of small unit and explain the SME
sector
TOPICS TO BE COVERED
3. Public Sector organisations are owned and controlled by the
government (or local government). They aim to provide public
services, often free at the point of delivery eg the NHS. There
are particular goods, called ‘merit goods’ and ‘public
goods’ which cause problems for the private sector, and so
they are often better provided by the public sector.
The objective of accelerating the pace of economic
development and the political ideology which gave the public
sector a dominant role in the industrial development of the
nation led to rapid growth of the state owned enterprises
(SOEs) sector in India.
WHAT IS PUBLIC SECTOR ORGANIZATION
4. the industrial policy resolution of 1948
another six industries added further
The Industrial policy 1956
Schedule A: 17 industries
Schedule B: 12 industries (state-owned)
for the growth refer page no. 235 table 14.1
about 1100 state level PE’s
major focus on steel, coal, minerals and metals
Investment in industrial undertaking by the Central government
increased from Rs. 29 crores in five units at the commencement
of the First Five Year Plan (1951) to Rs. 1,18,492 crore at the
commencement of the Eighth Plan (1992) in 237 units. It further
increased to over two lakh crore (Rs. 201,500 crore) spread over
238 units at the commencement of the Ninth Plan (1997). At the
end of March 2007, it was about Rs. 421,089 crore in 244 units
GROWTH AND PERFORMANCE P.E
5. It secures balanced growth of industries in every region.
It facilitates for the economic development of the country because
the surplus of state enterprises are utilized for financing various
schemes for economic development.
It promotes greater public welfare because the basic objective of
state enterprises is render service or assist in the national economy
as a whole.
There is greater economy in the working of public enterprises
because of unified control and large scale operations.
The state can fill up gaps in the industrial structure of the country
through public enterprises.
The consumers are benefited in many ways through the
establishment of public enterprises.
Public enterprises have a better deal with the labourers.
These are essential for establishment of big, heavy and strategic
industries.
It reduces inequalities of income and wealth.
THE FOLLOWING ARE SOME OF THE REASONS
WHICH ARE RESPONSIBLE FOR THE GROWTH
OF PUBLIC ENTERPRISES IN INDIA:
6. THE NEW PUBLIC SECTOR POLICY
According to the industrial policy announced on
24-7-1991, the following have been set as the
priority areas for growth of public enterprises.
1. Essential infrastructure goods and services.
2. Exploration and exploitation of oil and mineral
resources.
3. Technology development and building of
manufacturing capabilities in areas which are
crucial in the long term development of the
economy where private sector investment is
inadequate.
4. Manufacture of products where strategic
considerations predominate such as defence
equipment.
7. BHEL (BHARAT HEAVY ELECTRICALS LTD.)
BPCL (BHARAT PETROLEUM CORP. LTD.)
IOCL (INDIAN OIL CORP. LTD.)
IPCL (INDIAN PETROCHEMICALS CORP. LTD)
NTPC (NATIONAL THERMAL POWER CORP. LTD.)
ONGC (OIL AND NATURAL GAS CORP. LTD.)
VSNL (VIDESH SANCHAR NIGAM LTD.)
GAIL (GAS AUTHORITY OF INDIA LTD.)
MTNL (MAHANAGAR TELEPHONE LIMITED)
SAIL (STEEL AUTHORITY OF INDIA LTD.)
BEL (BHARAT ELECTRONICS LTD.)
HAL (HINDUSTAN AERONAUTICS LTD.)
PEC (POWER FINANCE CORP.)
PUBLIC SECTOR NAV-RATHNA’S
9. (i) The managerial autonomy of public enterprises should be preserved through
greater delegation of power and by reducing the number of civil servants and
bureaucrats on their boards of directors.
(ii) A management culture different from the bureaucratic culture should be
developed to promote initiative and decision-making. Greater representation
should be given to non-official part-time directors. Now the Government of India
has decided to appoint technocrats in place of civil servants on the boards of
public enterprises.
(iii) Chief executives should be provided a tenure of 5 years and superannuate
posts should be created for understudies of chief executives.
(iv) Special training programmes should be undertaken for developing a
professional cadre of managers in the various functional areas of management.
Participative management style should be promoted. Standing Conference on
Public enterprises (SCOPE) can help in tis task.
(v) An efficient personnel management system is to be developed to improve
recruitment, selection, appraisal, promotion, job satisfaction, compensation
and industrial relations in public enterprises. Production incentives should be
introduced.
WAYS TO IMPROVE PSU’S PERFORMANCE
10. (vi) The process of project appraisal an investment decisions
should be streamlined. Detailed feasibility studies should be
made.
(vii) A drive should be launched to improve capacity Utilization and
to build up cost consciousness among public sector concerns.
(viii) Continuous monitoring of cash flows, tight control over
inventory, improvement in productivity are necessary for prudent
use of working capital. Clear-cut objectives should be laid down to
facilitate evaluation of performance.
(ix) An efficient management information system and early
warning devices are to be developed to avoid delays n taking and
implementing decisions.
(x) An effective machinery for periodic review and appraisal of
performance of pubic enterprises should be created so that their
problems are identified and remedial measures undertaken as
early as possible.
……… CONTINUED
11. PUBLIC CORPORATION
It is owned by the State.
1. It is created by a special law defining its objectives, powers
and privileges and prescribing the form of management and
its relationship with government departments.
2. It is a body corporate and can sue and be sued, enter into
contracts and acquire property in its own name.
3. Except for appropriations to provide capital or to cover
losses, it is usually independently financed; it obtains funds
by borrowing either from the government or, in some cases,
from the public and through revenues derived from the sale of
goods and services, and has the authority to use and re-use its
revenue.
4. It is ordinarily not subject to the budget, accounting and
audit laws and procedures applicable to government
departments.
5. Excluding the officers taken from government departments
on deputation, the employees of public corporations are not
civil servants, and are not governed by government regulations
in respect of conditions of service.
14. PRIVATE SECTOR
In a mixed economy, the private sector, too,
has an important role to play. Indeed, it is
because of the appreciation of the positive
role the private sector can play, and certain
limitations of the public sector, that many
socialists advocate a mixed economic system.
The private sector has been dominant in most
of the consumer goods industries. It plays an
important role in a number of capital goods
industries, too. In a number of important
industries, it functions side by side with the
public sector.
15. Privatization means transfer of ownership
and/or management of an enterprise from the
public sector to the private sector. It also means
the withdrawal of the State from an industry or
sector, partially or fully. Another dimension of
privatization is opening up of an industry that
has been reserved for the public sector to the
private sector.
16. WAYS OF PRIVATISATION
There are different ways of achieving
privatization.
One of the important ways of privatization is
divestiture, or privatization of ownership,
through the sale of equity.
Another way of privatization is contracting.
Another option for the government is to
withdraw from the provision of certain goods
and services leaving them wholly or partly to the
private sector.
Privatization may also take the form of
Privatization of management, using leases and
management contracts.
17. 1. Divestiture
2. Denationalization
3. Contracting
4. Franchising
5. Government withdrawing
6. Privatisation of management
7. Liquidation
THE IMPORTANT WAYS OF PRIVATIZATION
ARE THE FOLLOWING:
18. SINS AND PITFALLS OF
PRIVATISATION
1. Lack of Proper Strategy
2. Ambiguity of Objectives
3. Connivance
4. Wrong Timing
5. Lack of Political Consensus
6. Wrong Labour Strategies
7. Lack of Political Will
8. Poor Financial Strategies
9. Wrong Environment
10. Prevalence of Monopoly Elements
11.Problem of Cultural Change
19. The importance of developing the village and
small industries (VSI) sector has been
emphasized by all the industrial policy
resolutions and statements and a number of
protective and promotional measures have
been taken accordingly to support their
survival and to encourage their growth.
VILLAGE AND MEDIUM INDUSTRIES
20. THE VSI SECTOR
The VSI sector consists, broadly, of :
Traditional cottage and household industries
(viz., handloom, khadi and village industries,
sericulture, handicrafts and coir).
Modern small-scale industries including tiny
units and powerlooms.
21. SMALL ENTERPRISES, BIG PART
The SSI sector, as an important segment of the
Indian economy, accounts for:
• 95 per cent of the industrial units
• 40 per cent of output in the manufacturing
sector
• 35 per cent of total exports
• Employment of about 30 million people
22. OBJECTIVES
The main objectives of the development of village
and small industries have been the following.
1. To assist in the growth and widespread dispersal of
industries.
2. To increase the levels of earnings of artisans.
3. To sustain and create avenues of self-employment.
4. To ensure regular supply of goods and services
through use of local skills and resources.
5. To develop entrepreneurship in combination with
improved methods of production through
appropriate training and package of incentives.
6. To preserve craftsmanship and art heritage of the
country.
23. PROMOTIONAL MEASURES
1. Reservation of products
2. Reservation and Preference in Government
Procurement
3. Infrastructural and Institutional Support
4. Machinery on Hire Purchase
5. Marketing Assistance
6. Financial Assistance
7. Training
8. Supply of Raw Materials
9. Promotion of Ancillarisation
