Nature and Scope of Public Enterprise

• Public Enterprise


  A business organization wholly or partly owned by the state and controlled through a public authority
• Public Enterprise


  Defined as any commercial or industrial undertaking owned and managed by the state government with a view to maximize social welfare and uphold the public interest
• Characteristics of Public Enterprise

  • Business Enterprise of Government
  • Government ownership, management, and control
  • Service motive
  • Autonomy
  • Public accountability
  • Continued existence
• Business Enterprise of Government

  • Public enterprises are business enterprises established by government engaged in manufacturing, marketing, public utilities, and services
  • Government makes budget allocations to public enterprises, financed by state
• Government ownership, management, and control


  The top-level management of public enterprises is appointed by government (consists of board of directors and chief executive officer)
• Service motive


  • Generally, public enterprises have service motive
  • They also generate profit and pay tax to the government
  • They provide essential goods and services to public at reasonable price
• Autonomy


  Public enterprises enjoy autonomy or semi autonomy in operations
• Public accountability


  • Public enterprise have public accountability
  • They are also accountable to general public through government
  • The auditor general reports to the parliament about the performance of public enterprises
• Continued existence


  • Public enterprises have continued existence
  • They are created by law and can be dissolved only by law
  • Changes in shareholders, management and employees do not affect the existence of public enterprises
• Importance of Public enterprise

  • Planned Development
  • Infrastructure Development
  • Basic And Heavy Industries Development
  • Public Utilities Concerns
  • Balanced Development
  • Employment Creation
  • Government Revenue
  • Economic Growth
  • Social welfare
• Planned Development


  Most developing countries have five years development plans for economic development. Public sector programs are also implemented by public enterprise. They are important for planned development of the country
• Infrastructure Development


  Public enterprises are important to build infrastructure in the country. Infrastructure consists of transport, communication, power, irrigation, drinking water and buildings. They require huge investment and long period is required to complete them
• Basic And Heavy Industries Development


  Iron and steel, electricity, cement, fertilizer, and telecommunication are examples of basic and heavy industries. They are essential for industrialization of the country
• Public Utilities Concerns


  Public utilities consists of services like water supply, electricity, oil and gas, railways, airlines, and public transport. Government has responsibility to provide such services at reasonable price. Public enterprises are important to provide public utility services at low cost
• Balanced Development


  Government requires balanced development in all regions of the country. Private sector is not attracted to less developed regions because of low economic gain. Public enterprises are important for industrial development of backward regions
• Employment Creation


  Government has responsibility to create employment opportunities in the country. Private sector is not interested to create employment at the cost of profit. Public enterprises are important to generate employment opportunities in the country
• Government Revenue


  Public enterprises are important source of government revenue. They pay various types of taxes. Such taxes are important in government revenue. Profit generated by public enterprises can be used to fund development programs
• Economic Growth


  Public enterprises are the drivers of economic growth in the country. They develop infrastructure facilities and operate public utilities. They use modern technology for production purposes. All these aspects help in acceleration of economic growth in the country
• Social welfare


  Public enterprises provide essential goods and services at reasonable price. They also supply essential commodities such as fertilizer and food grains at subsidized price. This promotes social welfare in the country
• Public enterprises are established, owned, managed and controlled by government
• Public enterprises have autonomy or semi autonomy in functioning
• Public enterprises have service motive to promote social welfare
• Public enterprises have public accountability
• Public enterprises have separate legal entity
• Advantages of Public Enterprise

  • Charges low prices
  • Expert administrative services
  • Provide essential facilities like education, health at reduced prices
• Disadvantages of Public Enterprise

  • Don't care attitude
  • Government interference
  • Corruption and embezzlement of funds
  • Lack of competition may lead to inefficiency
  • Consumer's choice is restricted to the state if the business is monopoly
• Business Enterprise of Government 


  Public enterprises are business enterprises established by government engaged in manufacturing, marketing, public utilities, and services.
• Government makes budget allocations to public enterprises, financed by state.
• Planned Development

  Most developing countries have five years development plans for economic development. Public sector programs are also implemented by public enterprise. They are important for planned development of the country