In India, public enterprises have been assigned the task of realising the objectives laid down in the Directive

Principles of State Policy. Public sector as a whole seeks: (a) to gain control of the commanding heights of the economy, (b) to promote critical development in terms of social gain or strategic value rather than on consideration of profit, and (c) to provide commercial surplus with which to finance further economic development. The main objectives of public enterprises in India are as follows: 1. Economic development: Public enterprises were set up to accelerate the rate of economic growth in a planned manner. These enterprises have created a sound industrial base for rapid industrialisation of the country. They are expected to provide infrastructure facilities for promot ing balanced and diversified economic structure of development. 2. Self-reliance: Another aim of public enterprises is to promote self-reliance in strategic sectors of the national economy. For this purpose, public enterprises have been set up in transpor tation, communication, energy, petro-chemicals, and other key and basic industries. 3. Development of backward Areas: Several public enterprises were established in back ward areas to reduce regional imbalances in development. Balanced development of different parts of the country is necessary for social as well as strategic reasons. 4. Employment generation: Unemployment has become a serious problem in India. Public enterprises seek to offer gainful employment to millions. In order to protect jobs, several sick units in the private sector have been nationalised. 5. Economic surplus: Public enterprises seek to generate and mobilise surplus for reinvestment. These enterprises earn money and mobilise public savings for industrial development. 6. Egalitarian society: An important objective of public enterprises is to prevent concentration of economic power and growth of private monopolies. Public sector helps the Government to enforce social control on trade and industry for ensuring equitable distribution of goods and services. Public enterprises protect and promote small scale industries. 7. Consumer welfare: Public enterprises seek to protect consumers from exploitation and profiteering by ensuring supply of essential commodities at cheaper prices. They aim at stabilising prices. 8. Public utilities:

Private sector is guided by profit motive. Therefore, it is reluctant to invest money in public utility services like water supply, gas, electricity, public transport. There fore, the Government has to assume responsibility for providing such services. 9. Defence: Government has to set up public enterprises for production of defence equip ment. Supply of such equipment cannot be entrusted for private sector due to the need for utmost secrecy. 10. Labour welfare: Public enterprises serve as model employers. They ensure welfare and social security of employees. Many public enterprises have developed townships, schools, col lege and hospitals for their workers. Role and Rationale of Public Enterprises The public sector has been playing a vital role in the economic development of the country. In fact the public sector has come to occupy such an important place in our economy that on its effective performance depends largely the achievement of the country's economic and social goals. Public sector is considered a powerful engine of economic development and an important instrument of selfreliance. The main contributions of public enterprises to the country's economy may be described as follows: 1. Filling of gaps: At the time of independence, there existed serious gaps in the industrial structure of the country, particularly in the field of heavy industries. Basic and key industries require huge capital investment, involve considerable risk and suffer from long gestation peri ods. Private sector concerns do not come forward to establish such industries. Public sector has helped to fill up these gaps. The basic infrastructure required for rapid industrialisation has been built up, through the production of strategic capital goods. The public sector has considerably widened the industrial base of the country and speeded up the pace of industrialisation. 2. Employment: Public sector has created millions of jobs to tackle the unemployment problem in the country. Public sector accounts for about two-third of the total employment in the organised industrial sector in India. By taking over many sick units, the public sector has pro tected the employment of millions. Public sector has also contributed a lot towards the improve ment of working and living conditions of workers by serving as a model employer. 3. Balanced regional development: Private industries tend to concentrate in certain regions while other regions remain backward. Public sector undertakings have located their plants in backward and untraded parts of the country.

These areas lacked basic industrial and civic facilities like electricity, water supply, township and manpower. Public enterprises have developed these facilities thereby bringing about complete transformation in the social-economic life of the people in these regions. Steel plants of Bhilai, Rourkela and Durgapur; fertilizer factory at Sindri, machine tool plants in Rajasthan, precision instruments plants in Kerala and Rajasthan, etc., are a few examples of the development of backward regions by the public sector. 4. Optimum utilisation of resources: Public enterprises make better utilisation of scarce resources of the country. They are big in size and able to enjoy the benefits of large scale operations. They help to eliminate wasteful completion and ensure full use of installed capacity. Optimum utilisation of resources results in better and cheaper production. 5. Mobilisation of surplus: The profits earned by public enterprises are reinvested for ex pansion and diversification. Moreover, public sector concerns like banks and financial institu tions mobilise scattered public savings thereby helping the process of capital formation in the country. Public enterprises earn considerable foreign exchange through exports. 6. Self reliance: Public enterprises have reduced considerably the need for imports by producing new and better products within the country. These enterprises are also earning consid erable amount of foreign exchange through exports. 7. Socialistic pattern of society: Public sector is an instrument for realising social objec tives. Public enterprises help to check concentration of wealth and private monopolies. These enterprises can serve as powerful means of economic and social change. 8. Public welfare: Public enterprises help in the establishment of a welfare state in the country. These enterprises supply essential commodities at cheaper rates. A proper balance be tween demand and supply is created to protect consumers against exploitation by profit hungry businessmen. Public enterprises also protect and promote the interests of workers. Criticism of Public Enterprises [Arguments against Public Enterprises] Public enterprises are opposed on account of weaknesses in their organisation and working. These enterprises generally suffer from the following problems: 1. Delay in completion: Often a very long time is taken in the establishment and comple tion of public enterprises. Delay in completion leads to increase in the cost of establishment and benefits extracted from them are delayed. 2. Faulty evaluation:

Public enterprises are in some cases set upon political considerations. There is no proper evaluation of demand and supply and expected costs and benefits. There are no clear cut objectives and guidelines. In the absence of proper project planning there is under- utilisation of capacity and wastage of national resources. 3. Heavy overhead costs: Public enterprises often spend huge amounts on providing hous ing and other amenities to employees. Though such investment is useful for employees but it takes away a large part of capital and the project suffers from financial difficulties. 4. Poor returns: Majority of the public enterprises in India are incurring loss. In some of them the profits earned do not yield a reasonable return on huge investment. Lack of effective financial controls, wasteful expenditure and dogmatic pricing policy result in losses 5. Inefficient management: Due to excessive centralisation of authority and lack of motiva tion public enterprises are managed inefficiently. High level posts are often occupied by persons lacking necessary expertise but enjoying political support. 6. Political interference: There is frequent interference from politicians and civil servants in the working of public enterprises. Such interference leaves little scope for initiative and free dom of action. Public enterprises enjoy little autonomy and flexibility of operations. 7. Labour problems: In the absence of proper manpower planning public enterprises suffer from over-staffing. Jobs are created to fulfil employment goals of the Government. Guarantee of job in these enterprises encourages trade unions to be militant in pursuing their aims. Growth of Public Enterprises in India At the time of independence, public sector in India was confined mainly to railways, com munications, defence production and public utility services. Since then the growth of public enterprises has been very rapid. Now public sector consists of public utilities (e.g., railways, post and telegraph, etc), manufacturing concerns (e.g., BHEL, SAIL, etc.), trading organisations (e.g., STC, MMTC, etc.), service organisations (e.g., NIDC, RITES, etc.).

Since 1948, when for the first time the importance of the public sector in the Indian economy was recognized, the public sector has experienced a phenomenal growth both in terms of number and volume of investment. The Government has made sustained efforts to break the vicious circle of poverty and undevelopment by setting up public sector enterprises or by nationalizing certain key industries. The most recent instances are the nationalization of the bigger commercial banks and that of coal mines. Role of Public Sector enterprises in India

We may enumerate below the various arguments put forth in support of the public sector in India. 1. Maximizing the rate of economic growth : Originally, the activity of the public sector enterprises was to be limited to a definite field of basic and key industries of strategic importance. There were certain fields where the private enterprise was shy to operate as they involved huge investment or risk. It was the public sector alone which could build the economic overheads such as power, transport, etc. Since then the ideological objective of capturing the "commanding heights" by the public-vector bas been duly fulfilled, it succeeded in creating the necessary infrastructural base for sustained industrial growth. It has tremendously boosted the technological capabilities. The public enterprises have firmly established the foundation for the construction of a selfgenerating, industrial economy. During the planned era, the public sector has-diversified its activities to cover a wide spectrum of industries. The public sector today has entered into the production of consumer goods such as bread, paper, watches, scooters, T.V. and transistor parts, cement, drugs,, etc. Prof. Lakdawala is of the view that the public sector should now enter the fields of distribution and rural development as well.
2. Development of capital-intensive sector :

Industrial development of a country necessitates the foundation of an infrastructure! base. This foundation is provided by the development of capital-intensive industries and the basic infrastructure. The private sector neither has the zeal nor the capacity to invest in such infrastructural programmes. From this point of view, the public sector has a magnificent record. The State has suc cessfully implemented various schemes of multi-purpose river projects,, hydroelectric projects, transport and communication, atomic power,, steel, etc. It has vastly contributed in the fields such as nuclear or steel technology, aeronautics, defense materials, shipbuilding and so on. It has laid down a good network of transport and communications.
3. Development of agriculture :

The public sector has an important role in the field of agriculture as well. The public sector assists in the manufacture of fertilizers, pesticides, insecticides and mechanical implements used in agriculture. Through the various research institutes the public sector has augmented agricultural productivity by introducing new high-yielding variety of seeds, preventing crop diseases and innovating new agricultural practices.
4. Balanced regional development :

In the pre-independence period a major problem was regional economic disparities. There were certain areas where there was a heavy concentration of industrial activity. On the other hand, there were certain backward areas which went without industries. Industrial development was highly lopsided. Thus Maharashtra, West Bengal, Gujarat and Tamil Nadu, etc., were highly developed industrially. States like Orissa, Assam, Bihar, Madhya Pradesh etc. were highly backward. Besides, industries used to be gravitated towards the metropolitan areas, rather than the smaller towns. But imbalanced economic development is as bad as underdevelopment.

Through the extension of public sector enterprises the Government desired to remove such regional imbalances. The State, consequently, participated in the industrial growth of the less developed areas by setting up public enterprises. Normally the private sector cannot be induced to start industries in the backward areas. White locating new public enterprises the claims of the relatively backward areas are given due consideration. The policy of dispersal of Industries aims at removing regional disparities. A conscious attempt has been made-in the successive five-year plans to accelerate the development of rela tively backward areas.
5. Development of ancillary industries :

Establishment of a few big public enterprises is not enough to unleash forces of industrial develop ment in an area. There are states like Bihar where in spite of lavish public sector investment, industrial development has not been satisfactory. On the other hand. States like Punjab have made a vast progress because of the development of small and ancillary units. This realization made the public sector take a close interest in the development of small and ancillary units. It is expected that the development of ancillaries would have the way for rapid industrial growth of a region and lead to balanced economic development. The number of such ancillary units was 432 in 1974-75 and the number rose to 888 in 1979-80 with purchases from them increasing from Rs. 29 crores to Rs. 120 crores. It is expected that in future, ancillary development would receive more attention from the Government.
6. Increasing employment opportunities :

The growth of the public sector has led to the expression of gainful employment opportunities. In addition to the primary effect of the public sector in creating employment opportunities, public sector investments also have a multiplier effect on other sectors of the economy. This has a beneficial effect on the total employment position. In 1963-61, the number of people employed in public enterprises was only 1.82 lakhs. This figure rose to 14.08 lakhs in 1974 75 involving an increase of 671 per cent. Similarly the total amount of salaries and wages increased from Rs. 4091 crores to Rs. 1,053 35 crores, involving an increase of 2,474.8 per cent, during the same period, In 1986-87 the number of working population in these industries stood at 22 lakhs.

7. Model employer :

Dr. R.K. Gupta has observed that in India "the State has inaugurated the era of the model employer in contrast to the employer with a feudal outlook. It has laid down guidelines for emp loyeremployee relations and for developing good and efficient personnel." The public sector has been the pacesetter in the field of labour welfare and social security. The State aims at establishing an industrial democracy which will provide a fair deal to the workers. The public enterprises have been investing liberally on matters pertaining to labour welfare and social security. Not only the wages have been sub stantially increased, conditions of service have vastly improved. For instance, wages in the coal industry have nearly trebled since nationalization and many other amenities also are being provided.

8. Preventing concentration of economic power :

Preventing private monopolies and concentration of economic power is the avowed objective of our economic policy. Nationalization is considered as an antidote for the concentration of economic power in private hands. In India the public sector enterprises have grown both in number and in strength. Today, the public sector not only occupies the commanding heights in the economy, it has also penetrated into the production of essential consumer goods. The share of the public sector in the overall industrial production, has substantially gone up. This has effectively curbed the concentration of economic power. It has created a countervailing force against the growth of larger industrial houses.
9. Export promotion :

The public sector enterprises are substantially contributing to the country's export earnings. The public sector has-built up a reputation abroad in selling plants, heavy equipment's, machine-tools and other industrial products. She has created a goodwill in the third world countries-for her consultancy services and technical know-how. Public sector exports also include consumer goods. The role of the State Trading Corporation, or the Minerals and Metals Trading Corpora tion has been quite creditable in promoting exports. Between 1968-69' and 1984-85, the percentage share of public sector enterprises in India's export trade went up from 20.05 to 38.1 per cent. Public sector exports increased from Rs. 272 crores in 1968-69 to Rs. 4,522 crores in 1984-85. In 1976-77 the public enterprises earned Rs. 2,248 crores in foreign exchange. The public enterprises thus bad a splendid performance.
10. Import substitution :

The public sector enterprises have also-succeeded in their efforts in import substitution. Today many commodi ties starting from basic drugs to highly advanced equipments are manu factured in the public sector, which previously used to be imported from abroad. In certain fields public enterprises were specially started to reduce imports from abroad, and achieve self-sufficiency. Public enter prises like Hindustan Antibiotics Ltd. or Bharat Electronics Ltd. or Hindustan Machine Tools etc., have done a remarkable job in import substitution. This has resulted in saving of precious foreign exchange. Today there is a special drive in the public enterprises to utilize indi genous materials and domestic skill.
11. Production and sales :

While taking up the production of any goods or services, the private entrepreneur is guided solely by the profit motive. To maximize profit, he even does not hesitate to exploit the consumers. Very often maximization of profit is achieved at the cost of public welfare. It is only the public sector which can produce according to special needs. Sometimes it may even sell at a price lower than its cost. The total turnover of the State-owned manufacturing enterprises and service enterprises amounted to Rs. 2,650 crores in 1969-70; Total turn over of these enterprises increased to Rs. 3644.3 crore in 1981-82. This indicates that the contribution of the public sector to the flow of goods and services in the economy was quite considerable.
12. Mobilization of resources :

The public sector undertakings have played an important role in financing the planned development of the country. They have significantly contributed to the Central Exchequer in the form of interest and various taxes, etc. Besides public enterprises show an increasing trend in the generation of internal resources. From a mere Rs. 194 crores in 1969-70 it increased to Rs. 5,068 crores in 198687. In the total capital formation of the country more than 50 percent is contributed by the public sector.
13. Research and development :

Today no country can industrially prosper without research and development. Such research is highly essential for the introduction of new goods and new technologies of production, lowering the cost of production and improving the quality of the product. In this respect the public sector is playing a crucial role. A lot of research activities are being carried on in the laboratories of the public sector undertakings. In 1576-77, the total expenditure on research and development amounted to Rs. 32.79 crores.
14. Establishment of a socialist pattern :

In India the public sector was desired to be extended rapidly so as to establish a socialist pattern of economy. There was abject misery and poverty all round prior to the adoption of planning. Through our planned effort we not only wanted rapid economic growth but also social justice. The public enterprises aim at achieving equality of opportunity and reduction of economic inequalities.

Marketing Problems of Public Enterprises

Despite their impressive role, Public enterprises in India suffer from several problems and shortcomings. Some of these are described below: 1. Poor Project Planning: Investment decisions in many public enterprises e not based upon proper evaluation of demand and supply, cost benefit analysis and technical feasibility. Lack of a precise criterion an flaws in planning have caused undue delays and inflated costs in the commissioning of projects. Sometimes, projects are launched without clearcut objectives an serious thought. Many projects in the public sector have not been finished according to the time schedule. Barauni Refinery was commissioned two years behind schedule and the Tromby fertilizer plant was delayed by three years thereby causing an increase of Rs. 13 crores in the original cost estimates. 2. Over-capitalization: Due to inefficient financial planning, lack of effective financial control and easy availability of money from the government, several public enterprises suffer from over-capitalization The Administrative Reforms Commission found that Hindustan Aeronautics, Heavy Engineering Corporation and Indian Drugs and Pharmaceuticals Ltd. Were over-capitalized. Such over-capitalization resulted in high capital-output ratio an wastage of scare capital resources. 3. Excessive Overheads: Public enterprises incur heavy expenditure on social on overheads like townships, schools, hospitals, etc. In many cases such establishment expenditure amounted to 10 percent of the total project cost. Recurring expenditure is required for the maintenance of such overhead and welfare facilities. Hindustan Steel alone incurred an outlay of Rs. 78.2 crore on townships. Such amenities may be desirable but the expenditure on them should not be unreasonably high. 4. Overstaffing: Manpower planning is not effective due to which several public enterprises like Bhilai Steel have excess manpower. Recruitment is not based on sound labour projections. On the other hand, posts of Chief Executives remain unfilled for years despite the availability of required personnel. As many as 26 public sector units were top[less on January 1, 1987.

5. Under-utilisation of Capacity: One serious problem of the public sector has been low utilisation of installed capacity. In the absence of definite targets of production, effective production planning and control, proper assessment of future needs, adequate supply of power and industrial peace, many industrial peace, many undertakings have failed to make full use of their fixed assets. The average capacity utilisation in more than 5p per cent of the public enterprises has been less than 75 per cent. There is considerable idle capacity. In some cases productivity is low on account of poor materials management or ineffective inventory control. 6. Lack of a Proper Price Policy: There is no clearcut price policy for public enterprises and the Government has not laid down guidelines for the rate of return to be earned by different undertakings. Public enterprises are expected to achieve various socioeconomic objectives and in the absence of a clear directive, pricing decisions are not always based on rational analysis. In addition to dogmatic price policy, there is lack of cost-consciousness, quality consciousness, and effective control on waste and efficiency. 7. Inefficient Management : The management of public enterprises in our country leaves much to be desired. Managerial efficiency an effectiveness have been low due to inept management, uninspiring leadership, too much centralisation, frequent transfers and lack of personal stake. Civil servants who are deputed to manage the enterprises often lack proper training an use bureaucratic practices. Political interference in day-to-day affairs, rlgid bureaucratic control and ineffective delegation of authority hamper initiative, flexibility and quick decisions. Motivations and morale of both executives and workers are low due to the lack of appropriate incentives. 8. Unsatisfactory industrial Relations: In several public enterprises relations between management and labour are far from cordial. There has been serious and frequent labour trouble in Durgapur steel. Plant, Bharat Heavy Electricals, Bhopal, and in Bangalore-based undertakings. Millions of mandays and output worth crores of rupees have been lost due to strikes and gheraos. Wage disparities have been the main cause of labour trouble in the public sector. The percentage increase in the per cent emoluments of public sector employees had been higher than the percentage increase in consumer price index. 9. Lack of Coordination: Various public enterprises are dependent on one another as the output of one enterprise is the input of another . For instance, the efficient functioning of power and steel plants depends on the production and transportation of coal which n turn is dependent upon supplies of heavy equipment machinery. Despite such interdependence, materials management and research has not been achieved. A coordination in h production programmes of different enterprises at various stages would help to reduce excess stocks and shortages of vital inputs.