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CHAPTER 3, PRIVATE, PUBLIC AND GLOBAL ENTERPRISES, Indian economy is a mixed economy as it consists of both privately owned and government owned, business enterprises. Therefore we can classify the Indian economy into two sectors, viz, Private, Sector and Public Sector. In a capitalistic economy, the private sector is dominates, while in a, socialistic economy, the public sector is dominates. In a mixed economy, both the private sector and, public sector go hand in hand., Private Sector, Private sector enterprises are those enterprises which are owned, managed and controlled by, private individuals. Their main objective is to earn profit. The various forms of organizations in, private sector are sole proprietorship, partnership, HUF, co-operative societies and Joint stock, companies. Example:- Reliance industries, Tata steel, Federal bank,., Public Sector Enterprises, Business enterprises owned, managed and controlled by the government are called public sector, enterprises. These enterprises may either be partly or wholly owned by the Central or State, Government. Public sector enterprises are formed by the government to participate in the economic, activities of the country. The various forms of organizations in the public sector are Departmental, undertakings, statutory corporations and Government Company.

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I. Departmental undertakings, This is the oldest form of organization in the public sector. A departmental undertaking is, established either as a separate full-fledged ministry or as a sub-division of a ministry (i.e., department) of the Government. For instance, the Indian Railways are managed by the Ministry of, Railways. Post and Telegraph services are run as a department, in the Ministry of Communication, They have no separate legal existence apart from government. They are managed by civil servants, who are government employees. Department organizations are entirely owned and controlled by, the government and its working is accountable to the parliament Departmental undertakings is, headed by a minister. Government starts business in the form of departmental undertakings to run, business activities of national importance like defence, telecommunication, public distribution, system etc., , Features of Departmental undertakings, 1. Department of the Government, The departmental organization works as a department of the government. It is a part of the, Government., 2. Full government control, It is fully owned and controlled by the government and is answerable to the parliament., 3. Status of employees, Its employees are government employees. Their recruitment, appointments and conditions of, services are similar to those of government employees., 4. Government financing, The departmental undertaking is financed through annual budget appropriations by the Parliament, or the State Legislature. The revenues of the undertaking are paid into the treasury., 5. No separate legal existence, A departmental undertaking does not have an independent entity distinct from the Government., 6. Sovereign immunity, Departmental undertaking enjoys sovereign immunity. Therefore, it can't be sued without the, consent of the government., 7. No private Investment, The entire amount of capital invested in the organization is made by the government. Private parties, are never allowed to participate in the investment of such enterprise.

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Advantages or Merits of Departmental undertakings, Easy formation, It is easy to set up a departmental undertaking. The departmental undertaking is created by an, administrative decision of the Government, involving no legal formalities for its formation., Government control, Total government controls helps implementation of government policies. The departmental, undertaking is directly responsible to the Parliament or the State legislature through its overall head, i.e. the minister concerned., Public accountability, It is fully owned and controlled by the government and is answerable to the parliament. Such control, keeps the management alert., Secrecy, The departmental undertaking can maintain secrecy of important policy matters; as the Government, can withhold any information, in public interest .Where national security is concerned, this form is, most suitable., Proper use of money, The risk of misuse of the public money is relatively less due to the strict budget, accounting and, audit controls., Revenue, The revenue earned by these departments’ acts as a source of income for the government, as it goes, directly to government treasury., Lesser Burden of Tax on Public, Earnings of departmental undertaking are paid into Government treasury, resulting in lesser tax, burden on the public., , Disadvantages of Departmental undertakings, 1. Political interference, It is managed and controlled by the minister, who is the representative of a political party. The, minister has to look after the interest of his party., 2. Lack of flexibility, A departmental undertaking functions under strict parliamentary control. There is no much scope, for initiative or innovation. Flexibility is essential for smooth operation of business.

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3. Inefficient management, It is managed by civil servants or officials. These people lack business experience and professional, skill., 4. Red tapism, There is excessive centralization of control which results in red tapism. Decision are generally, delayed due to procedure and political consideration., 5. Financial dependence, A departmental undertaking has no freedom to handle its funds . All its earnings are deposited into, the government treasury., 6. Lack of competition, A departmental undertaking often enjoys monopoly in its field. Lack of competition makes them, incompetent., Suitability, This type of organization is suitable in the following cases., 1. Where utmost secrecy is required eg: defence production, atomic energy, 2. Where absolute government control over strategic industries, eg: telecommunication,, broadcasting, public utilities., 3. Where the private sector is unable to enter due to huge capital investment. Eg: ship building, air, craft manufacturing etc., 4. Where economic control is necessary eg: public distribution system, , II. Statutory Corporations or Public Corporations, Statutory corporations or public corporation is a body corporate set up under a special Act of the, parliament or state legislature. It is the Act which defines objectives, powers and functions of a, statutory corporation. It is a separate entity for legal purposes. It can conduct business in their own, name and have greater freedom in making contracts and acquiring and selling off property. It is an, autonomous body fully financed by the government A public corporation is managed by a board of, directors, appointed by the government., Eg. LIC, IFCI, SBI, ONGC, UTI, Air India, Central Warehousing Corporation, KSRTC, KSIDC, RBI

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Features of statutory corporations, 1. Formation, It is created by government under a special Act in parliament or state legislature. The Act defines its, power, duties, objectives etc., 2. Separate legal entity, It has separate existence apart from the government. It can own property, make contracts and file, suits in its own name., 3. Ownership, It is fully owned by the government., 4. Management, Its management is vested in a Board of Directors appointed by the government. However, there is, no government interference in the day to day working of the corporation., 5. Status of employees, A statutory corporation has its own staff. Their appointment, remuneration and service conditions, are decided by the corporation itself. Its employees are not government servants., 6. Financial autonomy, A public corporation has an independent financial structure. It is authorized to plough back its, earnings. It can borrow money from the public and adopt independent financial policy., 7. Public accountability, Their accounts are audited by the Comptroller & Auditor General of India (CAG). This ensures public, accountability., 8. Borrowing of funds, It has the freedom to borrow funds from the government as well as from the public., 9. Objectives, It works on profit objective and as such its activities are commercial in nature.