CHAPTER – 3

PUBLIC, PRIVATE AND GLOBAL ENTERPRISES

LEARNING OBJECTIVES

 Concept of Public Sector & Private Sector Enterprises

 Meaning, Features, Merits & Limitations of Departmental Undertaking, Statutory

 Meaning & Features of Global Enterprises

 Meaning & Features of Public Private Partnership

MEANING OF PUBLIC SECTOR ENTERPRISES

The public sector consists of business enterprises owned and controlled by Government.

MEANING OF PRIVATE SECTOR ENTERPRISES

The private sector consists of business owned and controlled by individuals or a group of
individuals.

1. DEPARTMENTAL UNDERTAKINGS:

These enterprises are established as departments of the Ministry and are considered as
part of the Ministry itself e.g. All India Radio, Doordarshan, Railways, Post and
Telegraph etc.

FEATURES:
 1. The funding of these enterprises comes from the Govt treasury through budget
allocation of the Govt.

2. They are subject to accounting and audit control.

3. The employees of the enterprise are Govt servants.

4. They are subject to direct control of the Ministry.

5. They are accountable to the Ministry.

MERITS:

1. These ensure a high degree of public accountability.

2. Their revenue goes directly to the treasury.

3. This form is most suitable, where national security is considered.

4. These undertakings facilitate the Parliament to exercise effective control over their
operations.

LIMITATIONS:

1. They lack flexibility in their operations.

2. There is red-tapism in day-to-day operations.

3. There is a lot of political interference through the Ministry.

4. They do not provide adequate services to consumers.

2. PUBLIC CORPORATION/STATUTORY CORPORATIONS

Statutory corporations are public enterprises brought into existence by a Special Act
of the Parliament e.g. Reserve Bank of India, LIC, Air India, ONGC, SBI, etc.

FEATURES:

1. They are set up under an act of Parliament.

2. This type of organisation is wholly owned by the state.

4. The employees of these enterprises are not government or civil servants.

5. A statutory corporation is a body corporate and can sue and be sued, enter into
contract and acquire property in its own name.

MERITS:

1. They enjoy a high degree of operational flexibility.

2. Govt generally does not interfere in their financial matters.

3. They can frame their own policies and procedures.

4. The staff enjoy better salary and service condition.

LIMITATIONS:

1. All actions are subject to many rules and regulations.

2. Govt and political interference has always been there in major decisions.

3. Where there is dealing with public, corruption exists.

4. The Government has a practice of appointing advisors to the Corporation Board.

3. GOVERNMENT COMPANY:

According to the Companies Act 2013, a government company means any company
in which not less than 51% of the paid up capital is held by the Central govt or by any
State Govt or partly by Central Govt and partly by one or more State Govts. The
shares are purchased in the name of the President of India e.g. FACT, HMT, ITI,
STC, IOC, Hindustan shipyard etc.

FEATURES :

1. These are created as per the provisions of Companies Act.

3. The management of the Govt company is regulated by the Provisions of the

4. Their employees are appointed according to their own rules and regulations.

5. They obtain their funds from Govt shareholdings and other private shareholders.

6. These companies are exempted from the accounting and audit rules and procedures.

MERITS:

1. A government company can be established by fulfilling the requirements of the

2. It has a separate legal entity.

3. It enjoys autonomy in its operations.

4. These companies by providing goods and services at reasonable prices are able to
control the market

LIMITATIONS:

1. Since the Government is the only shareholder in some of the companies, the
provisions of the Companies Act does not have much relevance.

2. The management and administration rests in the hands of the government. The
main purpose of a government company, registered like other companies, is defeated.

GLOBAL ENTERPRISES (MULTI-NATIONAL CORPORATIONS [MNC]):

A company which is having its headquarters in one country and spreads its operations in
many countries is called a global enterprise e.g. Pepsi, Coca Cola, Hindustan Unilever etc.
FEATURES:

1. Huge capital resources: Global enterprises have huge capital resources. They can also
raise vast funds from different sources.
2. Foreign collaboration: Global enterprises enter into agreements with companies relating
to the sale of technologies, production of goods, use of brand names for the final products etc.

3. Advanced technology: Use of advanced technology helps the MNCs to provide world
class products and services.

4. Product innovation: The MNCs have sophisticated Research and Development

5. Marketing strategies: MNCs use aggressive marketing strategies in order to increase their
sales in a short period. They also have a reliable and up-to-date market information system.

6. Expansion of market:With vast resources and effective marketing strategy, an MNC can
easily enter international markets.

7. Centralized control: All the branches of MNCs in different countries are controlled by the
headquarters.

PUBLIC PRIVATE PARTNERSHIP:

It is a relationship among public sector and private sector for allocation and completion of
development projects. The government’s contribution to PPP is in the form of capital for
investment and transfer of assets. The private sector’s role in the partnership is to make use of
its expertise in operations, managing tasks and innovation to run the business efficiently.

FEATURES:

1. Contract with the private party to design and build public facility.

2. Facility is financed and owned by the public sector.

3. Key driver is the transfer of design and construction risk.

Example • Kundli Manesar Expressway Ltd.: In this 135 km expressway, land has been
provided by the government and surface has been laid out by the company

USEFUL LINKS

https://diksha.gov.in/play/collection/do_31307360994390835212691
https://diksha.gov.in/play/collection/do_31307360994390835212691

https://diksha.gov.in/play/collection/do_31307360994390835212691?contentId=do_3130901
410886205441231

https://diksha.gov.in/play/collection/do_31307360994390835212691?contentId=do_3130893
588761477121441

https://diksha.gov.in/play/collection/do_31307360994390835212691?contentId=do_3130712
1009707417611753

https://diksha.gov.in/play/collection/do_31307360994390835212691?contentId=do_3130893
571600465921301

https://diksha.gov.in/play/collection/do_31307360994390835212691?contentId=do_3130893
579467161601439

SELF ASSESSMENT

1. Explain the concept of public sector and private sector.

2. State the various types of organisations in the private sector.

3. What are the different kinds of organisations that come under the public sector?

4. State the meaning of public private partnership.

5. Gas Authority of India Ltd.is carrying on various projects of energy and power. Majority
of its shares are held by Government of India. It is registered under the Companies Act and
enjoy all the characteristics of a company. The company prepares its annual report and
submits to appropriate authorities.

a) Name the type of public sector enterprise referred to in the above para.

b) In whose name does government buys shares?

c) Where does such public sector enterprises submit their annual report?

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