PRIVATE, PUBLIC AND GLOBAL ENTERPRISES

 Private sector includes businesses owned by individuals or a group of individuals.

 Public sector includes organizations owned and managed by the government.
 Global enterprises are businesses operating in more than one country.

Since the Indian economy consists of both privately owned and government owned business
enterprises, it is known as a mixed economy.

FORMS OF ORGANIZING PUBLIC SECTOR ENTERPRISES

DEPARTMENTAL UNDERTAKINGS

 Oldest and most traditional form

 Considered departments of ministry or an extension of ministry itself
 Examples – Railways, Post

Features

 Funding from and revenue paid to Government Treasury

 Subject to accounting and audit controls applicable to other govt activities
 Employees are government servants with service conditions same as that of other
employees under govt, headed by IAS officers or civil servants (transferable)
 Considered a major subdivision of govt and is subject to direct control of ministry
 Accountable to ministry as management is directly under concerned ministry

Merits

 Facilitates Parliament to exercise effective control over operations

 High degree of public accountability
 Source of income for govt as revenue goes to treasury
 National security is ensured as it is under direct control of concerned ministry

Limitations

 No flexibility
 Employees not allowed to take independent decisions without approval, leading to delays
 Cannot take advantage of business opportunities due to bureaucrat’s over-cautious and
conservative approval over risky ventures
 Red tapism in day-to-day activities
 Political interference
 Insensitive to consumer needs

STATUTORY CORPORATIONS

 Corporate body created by legislature with defined powers and actions and is financially
independent with clear control over a specified area or particular type of activity
 It has power of govt and considerable amount of operating flexibility of private enterprises

Features
  Set up under an Act of Parliament that defines its objects, powers, and privileges
 Wholly owned by state where govt has ultimate financial responsibility and power to
appropriate profits; state should bear losses, if any
 Can sue, be sued, enter into contract, and acquire property in its name
 Independently financed by borrowings from govt or revenue from public by sale of
goods and services
 Not subject to accounting and audit procedures applicable to govt departments
 Employees are not govt servants and their service conditions are governed by provisions
of Act itself

Merits

 Independence in functioning and high degree of operational flexibility

 Govt does not usually interfere in financial matters as funding is not taken from central
budget
 Autonomous organizations, framing policies and procedures withing powers specified in Act
 It has power of the government, combined with initiative of private enterprises

Limitations

 Do not enjoy as much operational flexibility in reality

 Govt and political interference in major decisions
 Corruption
 Govt appoints advisors, curbing freedom of corporation

GOVERNMENT COMPANIES

 A company in which not less than 51% of paid-up capital is held by central/state govt
 May be formed as private limited company or public limited company
 Shares are purchased in the name of President of India
 Known as govt companies as govt is the major shareholder with management control

Features

 Created under Companies Act 2013 or any previous Company Law

 Can sue and be sued
 Can enter into contracts and acquire property in its name
 Management is regulated by provisions of Companies Act
 Employees appointed according to their own rules and regulations in MoA and AoA
 Exempted from accounting and audit procedures
 Funds obtained from govt shareholdings and private shareholders; permitted to raise funds
from capital market

Merits

 Can be established by fulfilling requirements of Indian Companies act; no other Act required
 Separate legal entity
 Autonomy in management decisions, taking actions according to business prudence
 Controls market and curb unhealthy practices by pricing reasonably priced goods & services

Limitations
  When govt is the only shareholder, provisions of Companies Act do not have much relevance
 Evades constitutional responsibility as it is not answerable directly to Parliament
 When govt is the only shareholder, management and administrations lies with govt,
defeating the entire purpose of govt companies

GLOBAL ENTERPRISES
 Huge industrial organizations that extend their industrial and marketing operations through
a network of their branches (Majority Owned Foreign Affiliates – MOFA) in several
countries
 They aim at spreading their branches all over, not maximizing profits

Features

 Huge capital resources – They possess the ability to raise funds from many sources including
banks, financial institutions, or through debentures, equity shares. They enjoy high
credibility in the market, with many willing investors.
 Foreign collaborations – They enter into agreements with Indian companies for use of brand
names, production of goods etc, Big industrial houses diversify and expand through this
collaboration by patents, resources, foreign exchange etc. But this also gives rise to growth
of monopolies and concentration of power in few hands.
 Advanced technology – They are able to reach international standard and quality
specifications due to advanced technology in production methods, leading to industrial
progress of the country as local resources and raw materials are exploited.
 Product innovation – They conduct vast qualitative research with development departments
engaged in developing new products and superior designs of existing products. This can be
afforded only by global enterprises
 Marketing strategies – With their brands already well-known in the market, aggressive
marketing strategies are used to increase sales in a short period, with effective advertising
and sales promotion techniques.
 Expansion of market territory – With a dominant position in the market, their international
image builds up and market territory expands enabling them to become international
brands.
 Centralized control – Headquarters is in the home country, exercising control over all
branches and subsidiaries. There is no interference in day-to-day operations.

PUBLIC PRIVATE PARTNERSHIP

 PPP is the relationship between public and private entities in the context of infrastructure
and other services
 Public – govt entities that contribute capital investment, social responsibility, environmental
awareness, and local knowledge
 Private – local or foreign investors or businesses with technical or financial expertise
relevant to project, managing tasks and innovation to run business efficiently
 Includes NGOs and/or community-based organizations who are directly affected by project
 Examples – power generation, water and sanitation, hospitals, school buildings