Definition of Public Enterprises
There are so many state-controlled public enterprises, but what is a public sector enterprise? How is this beneficial for people living in the country or state? Well, today we will find the answer to these questions, but first, we will find the meaning of public sector companies.
A public enterprise is made up of autonomous or semi-autonomous enterprises controlled by the state or the national government. These companies were born to help the inhabitants of the state in their commercial and industrial activities.
Types of Public Enterprises
Here is the list of the different types of organizations that fall under the definition of public enterprise
Departmental Organization
When the public enterprise is managed by a department, it functions as one of the government departments. One of the few examples of this type of organization is telegraphs, broadcasting, etc.
The staff of these organizations is permanent and in India, they were selected based on civil service exams. In the event that the people that the organization helps with its service are not satisfied with its functioning, it is possible to file a complaint with the parliament because the organization is part of the different sections of the parliament.
Public Company
This type of company was born after the approval of a special act by the government which defines its powers, the scope of its functions, and its privileges. The three main characteristics of this type of business are: First, it is a self-managed entity. Second, it is quite massive in terms of the management of public enterprises. As a result, he can run his operations like a real business without having to worry about direct parliamentary control.
Finally, these types of businesses are capable of being financially self-sufficient; they are formed mainly with capital financing. Once the income begins to flow, the organization is allowed to spend it.
Government Company
Most of the time, these companies operate and operate like a typical limited liability company. The government owns all or part of the shares, equal to or greater than 51%. In this organization, most of the directors are appointed by the government. The company is free to sue or be sued by others. In addition, he can enter into a contract and acquire property on his own. Unlike other state-owned enterprises, it is only created when the executive decision of the government is approved. Without parliamentary approval, this society cannot be founded. In addition, the government has the right to cancel any commercial act and way of working, at any time.
Features of Public Enterprises
Currently, you know the definition of the public enterprise, let's shed some light on its features:
First, these companies are owned by the government, and all important decisions are made only after the government has approved them.
These types of enterprises become separate legal entities; they must have a common seal for their legal activities.
On the other hand, these companies operate in perpetual succession, which means that their existence cannot be hindered if their employees, managers, or even their stakeholders change over time. Society is constituted by law and only the law has the power to dissolve it.
The company is owned and indirectly financed by the people because they are the ones who elected the government, and the government manages these public enterprises.
One of the examples of public enterprises in India is the Hindustan Petroleum Corporation Limited (HPCL)
The government and private shareholders are responsible for providing funds to these enterprises.
Only employees not belonging to any delegation are considered civil servants.
One of the most significant advantages of working in a public enterprise is its flexibility, both operational and functional.
Likewise, public enterprises finance themselves to cover losses in order to raise funds for an upcoming project.
The people chosen to lead this organization are among the best in their fields. They are the best in the public service and the best in management.
Finally, these are some of the most stable companies you can find, no matter how difficult things get for other companies, these public companies will remain stable in all their dimensions.
FAQs on Public Enterprises: Structures and Characteristics
1. What is a public enterprise as per the Class 11 Commerce syllabus?
A public enterprise is an organisation that is owned, managed, and controlled either by the central government, a state government, or jointly. Unlike private businesses, its primary objective is to provide goods and services for public welfare rather than solely to maximise profits. They play a crucial role in the economic development of a nation.
2. What are the three main forms or structures of public enterprises?
The three principal forms of organising public enterprises are:
- Departmental Undertaking: This is the oldest form, managed as a department of a government ministry. Examples include Indian Railways and the Postal Department.
- Statutory Corporation (or Public Corporation): This is an autonomous body created by a Special Act of Parliament or State Legislature, which defines its powers and functions. Examples include the Life Insurance Corporation of India (LIC).
- Government Company: This is a company registered under the Companies Act, 2013, in which at least 51% of the paid-up share capital is held by the government.
3. What are the key characteristics of public enterprises?
Public enterprises have several distinct features:
- State Ownership: They are owned by the government.
- Government Control: The ultimate control lies with the government, which appoints the top management.
- Service Motive: The primary goal is public service, although they may also earn profits.
- Public Accountability: They are accountable to the public through the Parliament or State Legislature.
- Separate Legal Entity: Statutory Corporations and Government Companies have a legal identity separate from the government.
4. What is the fundamental difference between a Statutory Corporation and a Government Company?
The fundamental difference lies in their formation. A Statutory Corporation is established by a specific Special Act passed in the Parliament (e.g., the LIC Act, 1956). In contrast, a Government Company is formed by registration under the Companies Act, 2013, the same law that governs private companies, with the key distinction being that the government holds a majority stake (51% or more).
5. Can you provide some examples of different types of public enterprises in India?
Certainly. Here are some well-known examples for each type:
- Departmental Undertakings: Indian Railways, India Post, and Doordarshan.
- Statutory Corporations: Reserve Bank of India (RBI), Life Insurance Corporation of India (LIC), and Food Corporation of India (FCI).
- Government Companies: Steel Authority of India Ltd. (SAIL), Bharat Heavy Electricals Ltd. (BHEL), and Hindustan Petroleum Corporation Limited (HPCL).
6. Why does the government need to form public enterprises if the private sector exists?
The government establishes public enterprises for several strategic reasons that the private sector may not address. These include:
- Ensuring balanced regional development by setting up industries in backward areas.
- Controlling strategic sectors vital for national security and economic stability (e.g., defence, atomic energy).
- Providing essential public utility services like water, electricity, and transport at affordable rates.
- Preventing the concentration of wealth and economic power in the hands of a few private individuals.
7. How are public enterprises held accountable for their performance?
Public enterprises are accountable to the public through the Parliament or State Legislature. This accountability is maintained through several mechanisms, including:
- Parliamentary Debates: Their performance can be discussed in Parliament.
- Audit Reports: Their accounts are audited by the Comptroller and Auditor General (CAG) of India, and the report is presented to Parliament.
- Annual Reports: They must submit annual reports on their performance.
- Question Hour: Members of Parliament can ask questions regarding their functioning.
8. What are the main challenges or limitations faced by public enterprises in their functioning?
Despite their importance, public enterprises often face significant challenges, such as:
- Political Interference: Frequent interference from ruling parties and ministries can hamper operational autonomy and professional decision-making.
- Bureaucratic Hurdles: They often suffer from excessive rules and regulations (red-tapism), which can lead to delays and inefficiency.
- Lack of Motivation: Unlike the private sector, there is often a weak link between effort and reward, which can affect employee motivation and productivity.
- Difficulty in Decision Making: The need for multiple approvals from government authorities can make the decision-making process slow and rigid.
