CHAPTER: 3
Private, Public and Global Enterprises
PRIVATE SECTOR ENTERPRISES
The private sector consists of business owned by individuals or a group of individuals. The
various forms of organisation are- sole proprietorship, partnership, joint hindu family,
cooperative and joint stock company.
PUBLIC SECTOR ENTERPRISES
The public sector consists of various organizations owned and managed by central or State or
by both governments. The govt. participates in economic activity of the country through these
enterprises.
FEATURES:
1. Capital is contributed by central or state or both govts.
2. Public welfare or Service is the main objective.
3. Management & control are in the hands of govt.
4. It is accountable to the public.
.
I. DEPARTMENT UNDERTAKING
These are established as departments of the ministry and are financed, managed and
controlled by either central govt. or state govt.
Examples: Indian Railways, Post & Telegraph departments.
FEATURES
1. No Separate Entity: It has no Separate legal entity.
2. Finance: It is financed by annual budget allocation of the govt. and all its earnings go to
govt. treasury.
3. Accounting &Audit: The govt. rules relating to audit & accounting are applicable to it.
4. Staffing: Its employees are govt. employees & are recruited & appointed as per govt.
rules.
5. Accountability: These are accountable to the concerned ministry.
MERITS
1. It is more effective in achieving the objective laid down by govt. as it is under the direct
control of govt.
2. It is a source of govt. income as its revenue goes to govt. treasury.
3. It is accountable to parliament for all its actions which ensures proper utilization of funds.
4. It is suitable for activities where secrecy and strict control is required like defence
production.
, DEMERITS
1.It suffers from interference from minister and top officials in their working.
2. It lacks flexibility which is essential for smooth operation of business.
3. It suffers from red tapism in day-to-day Work.
4. These organizations are usually insensitive to consumer needs and do not provide goods
and adequate service to them.
5. Such organization are managed by civil servants and govt. officials who may not have the
necessary expertise and experience in management.
STATUTORY CORPORATIONS
It is established under a special Act passed in parliament or state legislative assembly. Its
objectives, powers and functions are clearly defined in the special Act.
Examples: Unit Trust of India, Life Insurance Corporation.
FEATURES
1. It is established under a special act which defines its objects, powers and functions.
2. It has a separate legal entity.
3. Its management is vested in a Board of directors appointed or nominated by government.
4. It has its own staff, recruited and appointed as per the provisions of act.
5. This type of enterprise is usually independently financed. It obtains funds by borrowing
from govt. or from public or through earnings.
6. It is not subject to same accounting & audit rules which are applicable to govt. department.
MERITS
1. Internal Autonomy: It enjoys a good deal of autonomy in its day-to-day operations and is
free from political interference.
2. Quick decisions: It can take prompt decisions and quick actions as it is tree from the
prohibitor rules of govt.
3. Parliamentary control: Their performance is subject to discussion in parliament which
ensures proper use of public money.
4. Efficient Management: Their directors and top executives are professionals and experts of
different fields.
DEMERITS
1. In reality, there is not much operational flexibility. It suffers from lot of political
interference.
2. Usually, they enjoy monopoly in their field and do not have profit motive due to which
their working turns out to be inefficient.
3. Where there is dealing with public, rampant corruption exists. Thus, public corporation is
suitable for undertaking requiring monopoly powers e.g., public utilities.
GOVERNMENT COMPANY
A government company is a company in which not less than 51% of the paid-up share capital
is held by the central govt. or state govt. or jointly by both.
Examples: Hindustan Insecticides Ltd., State Trading Corp. of India, Hindustan Cables Ltd.
FEATURE
1. It is registered or Incorporated under companies Act 1956.
2. It has a separate legal entity.
3. Management is regulated by the provision of companies Act.
4. Employees are recruited and appointed as per the rules and regulations contained in
Memorandum and Articles of association.
5. The govt. Co. obtains it funds from govt. shareholdings and other private shareholdings. It
can also raise funds from capital market.
Private, Public and Global Enterprises
PRIVATE SECTOR ENTERPRISES
The private sector consists of business owned by individuals or a group of individuals. The
various forms of organisation are- sole proprietorship, partnership, joint hindu family,
cooperative and joint stock company.
PUBLIC SECTOR ENTERPRISES
The public sector consists of various organizations owned and managed by central or State or
by both governments. The govt. participates in economic activity of the country through these
enterprises.
FEATURES:
1. Capital is contributed by central or state or both govts.
2. Public welfare or Service is the main objective.
3. Management & control are in the hands of govt.
4. It is accountable to the public.
.
I. DEPARTMENT UNDERTAKING
These are established as departments of the ministry and are financed, managed and
controlled by either central govt. or state govt.
Examples: Indian Railways, Post & Telegraph departments.
FEATURES
1. No Separate Entity: It has no Separate legal entity.
2. Finance: It is financed by annual budget allocation of the govt. and all its earnings go to
govt. treasury.
3. Accounting &Audit: The govt. rules relating to audit & accounting are applicable to it.
4. Staffing: Its employees are govt. employees & are recruited & appointed as per govt.
rules.
5. Accountability: These are accountable to the concerned ministry.
MERITS
1. It is more effective in achieving the objective laid down by govt. as it is under the direct
control of govt.
2. It is a source of govt. income as its revenue goes to govt. treasury.
3. It is accountable to parliament for all its actions which ensures proper utilization of funds.
4. It is suitable for activities where secrecy and strict control is required like defence
production.
, DEMERITS
1.It suffers from interference from minister and top officials in their working.
2. It lacks flexibility which is essential for smooth operation of business.
3. It suffers from red tapism in day-to-day Work.
4. These organizations are usually insensitive to consumer needs and do not provide goods
and adequate service to them.
5. Such organization are managed by civil servants and govt. officials who may not have the
necessary expertise and experience in management.
STATUTORY CORPORATIONS
It is established under a special Act passed in parliament or state legislative assembly. Its
objectives, powers and functions are clearly defined in the special Act.
Examples: Unit Trust of India, Life Insurance Corporation.
FEATURES
1. It is established under a special act which defines its objects, powers and functions.
2. It has a separate legal entity.
3. Its management is vested in a Board of directors appointed or nominated by government.
4. It has its own staff, recruited and appointed as per the provisions of act.
5. This type of enterprise is usually independently financed. It obtains funds by borrowing
from govt. or from public or through earnings.
6. It is not subject to same accounting & audit rules which are applicable to govt. department.
MERITS
1. Internal Autonomy: It enjoys a good deal of autonomy in its day-to-day operations and is
free from political interference.
2. Quick decisions: It can take prompt decisions and quick actions as it is tree from the
prohibitor rules of govt.
3. Parliamentary control: Their performance is subject to discussion in parliament which
ensures proper use of public money.
4. Efficient Management: Their directors and top executives are professionals and experts of
different fields.
DEMERITS
1. In reality, there is not much operational flexibility. It suffers from lot of political
interference.
2. Usually, they enjoy monopoly in their field and do not have profit motive due to which
their working turns out to be inefficient.
3. Where there is dealing with public, rampant corruption exists. Thus, public corporation is
suitable for undertaking requiring monopoly powers e.g., public utilities.
GOVERNMENT COMPANY
A government company is a company in which not less than 51% of the paid-up share capital
is held by the central govt. or state govt. or jointly by both.
Examples: Hindustan Insecticides Ltd., State Trading Corp. of India, Hindustan Cables Ltd.
FEATURE
1. It is registered or Incorporated under companies Act 1956.
2. It has a separate legal entity.
3. Management is regulated by the provision of companies Act.
4. Employees are recruited and appointed as per the rules and regulations contained in
Memorandum and Articles of association.
5. The govt. Co. obtains it funds from govt. shareholdings and other private shareholdings. It
can also raise funds from capital market.
