IntroductionIntroduction

• Without public enterprise, there can be no private enterprise.

• A large part of national output goes to satisfy public wants such as defense, law & order, defense, law & order, courtscourts

• Economy is behavior of the private sector, political philosophy, social attitudes and administrative system

Role of the GovernmentRole of the Government

• Regulatory RoleRegulatory Role– Government may regulate the business activities

directly and indirectly through Import and Export duties and monetary system

– The licensing system and reservation policy regulate the entry of firms

– Regulation of mergers and acquisition, Taxes, Subsidies

Cont…Cont…

• Promotional Role Promotional Role – Infrastructure facilities such as transports, transports,

communication & finance communication & finance the Govt. assumes direct responsibility to build them

• Entrepreneurial RoleEntrepreneurial Role– The private sector is generally interested only in

those industries which require less investment and give higher returns.

– Capital goods industries requires heavy investment and give lower returns & that too long run.

Cont…Cont…

• Planner RolePlanner Role– The market economies, economic planning has

been adopted to overcome the limitation of market system

– For developing country need for economic planning due to their economic backwardness

– Task of planning to achieve the best possible use of limited resource of for economic development.

Role of Public Sector in the Indian Role of Public Sector in the Indian EconomyEconomy

• Contribution to National Product– 1950-51 8%– 1970-71 15%– 2002-03 23.6%

• Public units are metal industries, communication, petroleum industries, steel industries, fertilizer etc

Cont…Cont…• Investment

Year Unit Rs in Cr1951 8 292004 242 3,49,209

• Development of a Strong Infrastructure•Communication

•Transportation

•Power

•Education

•housing

Cont…Cont…• Strong Industrial Base– The development of basic industries and key

industries like iron and steel companies, – Development of heavy machinery, heavy

angering, heavy electrical, heavy chemicals and minerals and oil, cement and fertilizers

• Employment

• Turn Over

Cont…Cont…• Contribution of National exchequer– PSU contributed to the national exchequer

Rs.53,822 crores on an average in the form of corporate-tax, customs, excise duties

• Profits – Oil and Natural Gas Commission– National Thermal Power Corporation– Steel Authority of India– Hindustan Petroleum– Food Corporation of India and Telephone Nigam

Critical Review of the Critical Review of the Working of PSUWorking of PSU

• Unduly large size of plant• Defective Project Planning• Autonomy Vs Control• Problem of Recruitment of suitable personnel• Problem of Location• Delay in Completion of the Project and

Increase in the Costs of construction

Cont…Cont…

• Over-capitalization• Over Staffing • Underutilized Capacity• Incentive for Higher efficiency• Labour Relation• Public Accountability

Private Sector • Private sector companies increased from

1,35,551 in 1997-98 to 1,24,941 in 2006-07. total Growth of increased 86.3% in 2006-07

• Employment decreased from 68,38,000 in 1997-98 to 61,95,000 in 2006-07. however these companies share 60% employment in total generation on employment

Particulars 1990-2000 2001-2007Average rate of Growth 14% 14.2%Gross Profit 20.4% 41.6%

Problem of Private Sector• Problem of Industrial Finance– Rate of domestic saving is low– Capital Market is underdeveloped – People invested more in gold, silver and land

• Problem of Infrastructural Facilities– Inadequate supply of power– Unscheduled power cuts– Erratic power quality– High charges– Delay and informal payments requires for connection

Cont..

• Problem of Industrial Disputes– For wages, bonus, working hours, holidays,

working conditions.• Problem of Foreign Competition– Merging with WTO, withdraw from all imports

quantitative restrictions • Problem of Monopoly and Concentration

Cont..

• Problem of Industrial Sickness– Capacity in these units remain unutilized ,

underutilized, unproved technology, poor marketing, poor maintenance

• Problem of High cost– Raw material, Import goods, taxes, excise duty,

• Problem of Distortion in Production Structure– Focuses only on elite consumers