As we know the Indian economy is a mixed economy where both public and private players are allowed to participate in the development process. So, there are two types of industrial houses and complexes based on ownership:
- Public industrial houses and complex
- Private industrial houses and complex
- For example, Tata and Birla Industrial houses
Public industrial houses:
Public enterprises are owned by the public as public money is being used and public industrial houses are accountable to the public through parliament.
The public enterprise may be different forms of organization based on suitability, there are three forms:
- Departmental undertaking
- Statutory Corporation
- Government company
Departmental undertaking:
It is the most traditional form of organization where public enterprises are established under the different ministries and considered as part of the extension of ministry. Their undertaking may be under central or state government.
For example, Railway under the Railway ministry
Limitations of departmental undertaking public enterprises:
- Head of department or employees are not allowed to take independent decisions without approval from the concert ministry; which leads to delays in the decision making.
- Over bureaucratic and conservative approval unable to take advantage of business opportunities
- Political interference
- Red tape: Informal pass through proper channel and authority
Statutory Corporations;
- Example;
- RBI, SBI, LIC
- It is public enterprise made up by a special act of parliament
- Acts define power and function, rules regulation, and the relation between Employees and government departments.
- Financially independent with clear control over commercial activities.
- Head of department act by its own name
- More flexibility as compared to departmental undertaking
Limitation of the statutory corporation:
- In reality, the statutory corporation does not enjoy flexibility, there are many rules and regulations and has political interference.
- Government appoints an advisory to the corporate board that curbs corporate freedom and disagreement with the decision is referred to the government for final approval.
Government Company;
- The company was established under the company acts, 2013, and registered and governed by the provision of acts.
- Establish purely for business purposes and true spirit with private sectors.
- Government company has at least 51 % of the share held by the government.
Limitation;
- Since the government is a major shareholder provision of the company act does not have much relevance.
Changing role of Public sectors;
- At the time of independence private sectors were unwilling to invest in a project that requires heavy investment and gave no immediate return. The government feels responsible and made public enterprises that provide goods and services essential for the economy.
- Post-1990, after liberalization, privatization, and globalization; the role of the public sector was redefined and supposed to actively participate and compete in the market with private sector companies.
- Also held accountable for losses and return on investment
- If the public sector was making losses continuously, it referred to the board for industrial and financial reconstruction( BIFR) to shut down or sell or increase managerial efficiency.
Industrial Policy for public sector enterprise:
- In the 1956 resolution on industrial policy; 17 industries were reserved for the public sector
- In 1991, only 8 Industrial were reserved for the public sector from atomic energy, defense arms, communication, mining, and railways.
- In 2001, only three industries are reserved for public sectors are Atomic energy, arms, and rail transport.
- That means the private players could enter all areas except three which means public companies need to compete in all these areas.
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