Public enterprises

State enterprise is an undertaking owned and controlled by the local or state or central government. Either whole or most of the investment is done by the government. The basic aim of a state enterprise is to provide goods and services to the public at a reasonable rate though profit earning is not excluded but their primary objective is social service. A.H. Hansen says, “Public Enterprise means state ownership and operation of industrial, agricultural, financial and commercial undertakings.”

S.S. Khera defines state enterprises as “the industrial, commercial and economic activities, carried on by the central or by a state government, and in each case either soley or in association with private enterprise, so long it is managed by self-contained management.”

“Public enterprises are autonomous or semi-autonomous corporations and companies established, owned and controlled by the state and engaged in industrial and commercial activities.” -N.N. Mallya

Characteristics of Public Enterprises:

(i) Financed by Government:

Public enterprises are financed by the government. They are either owned by the government or majority shares are held by the government. In some undertakings private investments are also allowed but the dominant role is played by the government only.

(ii) Government Management:

Public enterprises are managed by the government. In some cases government has started enterprises under its own departments. In other cases, government nominates persons to manage the undertakings. Even autonomous bodies are directly and indirectly controlled by the government departments.

(iii) Financial Independence:

Though investments in government undertakings are done by the government, they become financially independent. They are not dependent on the government for their day- to-day needs. These enterprises arrange and manage their own finances. An element of profitability is also considered while pricing their products. It has helped the enterprises to finance their growth themselves.

(iv) Public Services:

The primary aim of state enterprises is to provide service to the society. These enterprises are started with a service motive. A private entrepreneur will start a concern only if possibilities of earning profits exist but this is not the purpose of public enterprises.

(v) Useful for Various Sectors:

State enterprises do not serve a particular section of the society but they are useful for everybody. They serve all sectors of the economy.

(vi) Direct Channels for Using Foreign Money:

Most of the government to government aid is utilised through public enterprises. Financial and technical assistance received from industrially advanced countries is used in public enterprises.

(vii) Helpful in Implementing Government Plans:

Economic policies and plans of the government are implemented through public enterprises

(viii) Autonomous or Semi-autonomous Bodies:

These enterprises are autonomous or semi-autonomous bodies. In some cases they work under the control of government departments and in other cases they are established under statutes and under Companies Act.

Organization of Public Enterprises

In India, public sector enterprises have three different forms of organization:

1. Departmental Undertaking: Which is primarily used for providing essential services like railways, postal services, etc. to the general public. A Ministry of the Government controls such organizations in the same way as any other department in the government. This form of a public enterprise is apt for activities which require governmental control for the public interest.
2. Statutory or Public Corporation: The Parliament or State Legislature can create a corporate body through a Special Act which defines its functions, powers, and pattern of management. This is a Statutory or Public Corporation. In this form, the government provides the entire capital. Some examples, Life Insurance Corporation of India (LIC), State Trading Corporation, etc.
3. Government Company is a company in which the government holds at least 51 percent of the paid-up capital. A Government Company is registered under the Companies Act. Further, all the provisions of the Act are applicable to such a company. Some examples, Bharat Heavy Electricals Limited, Bharat Electronics Limited, etc.