INTRODUCTION
Prior to 1947, there was virtually no “public sector” in India. The only instances worthy of mention were the Railways, the Posts and Telegraphs, the Port Trusts, the Ordnance and Aircraft Factories and a few state managed undertakings like the Government Salt factories, Quinine factories, etc.
The idea that economic development should be promoted by the State actually managing industrial concerns did not take root in India before 1947, even though the concept of planning was very much discussed by Congress Governments in the Indian provinces as far back as 1931. However, in the post independence period, the expansion of public sector was undertaken as an integral part of the Industrial Policy 1956.
CENTRAL PUBLIC SECTOR UNDERTAKINGS:
There were 236 Central public sector undertakings excluding banks in 1996-97. The growth of investment in Central public sector undertakings has also increased. Since 1951, the number of industrial and commercial undertakings of the Central Government has increased from 5 units in 1950-51 to 236 units in 1996-97 and the Capital investment has increased from Rs. 29 crores to Rs. 2020.2 billion in 1996-97.
STATE GOVERNMENTS PUBLIC ENTERPRISES :
As on March 31, 1986, there were 636 State level Public Enterprises (SLPEs) functioning in 24 states. The investment in SLPEs as on March 31, 1986, was of the order of Rs. 10,000 crores as against. Rs. 2,860 crores, as on Mach 31, 1977.
While inclusive of State Electricity Boards and State Road Transport Corporations total investment stood at Rs. 25,000 crores in 1986, as against Rs. 9,576 crore in 1977. The average rate of growth of investment in State level enterprises during 1977-86 period was of the order of 20 percent per annum.
ORGANIZATIONALLY, THERE ARE FOUR TYPES OF PUBLIC SECTOR ENTERPRISES :
- DEPARTMENTALLY MANAGED : These are public sector enterprises that are managed by a government department or ministry. They are directly accountable to the concerned department or ministry and are primarily responsible for implementing government policies and programs.
- MANAGED BY INDEPENDENT BOARDS : These are public sector enterprises that are managed by an independent board of directors. The board of directors is responsible for the management and direction of the enterprise, while the government provides strategic direction and oversight.
- RUN AS PUBLIC CORPORATIONS : These are public sector enterprises that are run as public corporations, with their own legal identity and autonomy. They are responsible for generating their own revenue and are expected to operate as commercial entities.
- ORGANIZED AS COMPANIES : These are public sector enterprises that are organized as companies under the Companies Act. They are managed by a board of directors and operate as commercial entities, with the government being the majority shareholder.
ROLE OF PUBLIC SECTOR IN INDIA
After the attainment of independence and the advent of Planning, there has been a progressive expansion in the scope of the Public Sector. The passage of Industrial Policy Resolution of 1956 and the adoption of the Socialist Pattern of Society as our national goal, further led to deliberate enlargement of the role of public sector.
SHARE IN NATIONAL INCOME :
An important contribution to the National Income is Public Sector. During the period 1960 to 1999, the public sector has doubled its share in the national income in real terms and account for 25 percent of the total income of the economy. This is, undoubtedly, a significant change in the structure of economy in terms of the increased importance of the public sector in domestic activity.
SHARE IN CAPITAL FORMATION :
Another most important contribution of public sector in India has been in respect of capital formation. Investment in the private sector producing goods for rich people mainly should be evaluated lower than similar type of investment in the public sector which is engaged in the provision of essential infrastructural services to the economy as a whole. This is true even though the commercial profitability of the private sector is being rated high.
TABLE 1: SHARE OF PUBLIC SECTOR IN TOTAL INVESTMENT :
II Plan-54.6%
III Plan-63.7%
IV Plan-60.3%
V Plan-57.6%
VI Plan-52.9%
VII Plan-47.8%
VIII Plan-36.5%
IX Plan-33.4%
The above table shows the investment in this sector is that after having reached the peak during the third plan, the share of public sector, in total investment in each of the plans has however, been on the decline.
GROWTH OF ANCILLARY INDUSTRIES :
Public sector enterprises in India have played a significant role in promoting the growth of ancillary industries. Here are some of the ways in which public sector enterprises have contributed to the growth of ancillary industries:
- Providing managerial and technical guidance : Public sector enterprises provide managerial and technical guidance to small ancillary industries on various aspects of the production process, such as equipment selection, quality control, and supply chain management.
- Giving long-term contracts : Public sector enterprises provide long-term contracts to small ancillary industries, which provides them with a stable source of revenue and helps them to plan for the future.
- Guiding on sources of financing : Public sector enterprises guide small ancillary industries on the sources of financing available to them and the procedure for obtaining them. This helps to address the financing challenges faced by small enterprises.
- Purchasing from ancillary units : Public sector enterprises have made efforts to purchase items from ancillary units, which helps to create a market for their products and boosts their sales and revenue.
PROBLEMS IN PUBLIC SECTOR :
Even though the public sector is going in a correct path, some problems and short comings are there. The main short comings are as follows:
- HEAVY LOSSES : Many public sector enterprises in India have been running at a loss for several years, leading to a drain on government finances.
- INFLUENCE OF POLITICAL FACTORS : Political factors often influence the functioning of public sector enterprises in India, leading to decisions that may not be in the best interest of the enterprise.
- WORK DELAYS : Delays in project implementation and completion are common in public sector enterprises, leading to cost overruns and loss of revenue.
- OVER-CAPITALISATION : Many public sector enterprises in India have been over-capitalized, leading to inefficient use of resources and lower returns on investment.
- PRICING POLICY : The pricing policy of public sector enterprises in India is often influenced by political factors, leading to pricing that may not be competitive.
- USE OF MANPOWER RESOURCES : The manpower resources in public sector enterprises are often underutilized, leading to inefficiencies and higher costs.
- CONTROL OVER EMPLOYEES : The control over employees in public sector enterprises is often rigid and hierarchical, leading to lower motivation and productivity.
- INEFFICIENT MANAGEMENT : Many public sector enterprises in India suffer from inefficient management, leading to lower efficiency and productivity.
- HIGHER CAPITAL INTENSITY LEADING TO LOWER-EMPLOYMENT GENERATION : Public sector enterprises in India are often capital-intensive, leading to lower employment generation compared to the private sector.
- CAPACITY UTILISATION : Many public sector enterprises in India suffer from low capacity utilization, leading to lower efficiency and higher costs.
SUGGESTIONS TO IMPROVE THE PERFORMANCE OF PUBLIC SECTOR ENTERPRISES (PSES) :
- CONTROLLING THE COST AT EVERY LEVEL OF PUBLIC SECTOR ENTERPRISES : This involves reducing wastage and inefficiencies in the operations of public sector enterprises, and ensuring that resources are used effectively.
- INCREASE PRODUCTION : Public sector enterprises can improve their performance by increasing production levels and improving the quality of their products and services.
- REFORMS IN CAPITAL BASE : Public sector enterprises can undertake reforms to improve their capital base, such as divestment of non-core assets, attracting private investment, and improving financial management practices.
- INCREASE THE STANDARD OF PUBLIC SECTOR ENTERPRISES TO MANAGE COMPETITION FROM BOTH DOMESTIC AND FOREIGN COMPETITORS : Public sector enterprises need to improve their standards and compete effectively with domestic and foreign competitors in order to survive and thrive in the market.
- IDENTIFYING REDUNDANT MANPOWER AND DEALING WITH IT THROUGH MEANS OF RETRAINING, REDEPLOYMENT, AND ENCOURAGING SELF-EMPLOYMENT, ETC.: Public sector enterprises can improve their performance by identifying and addressing redundant manpower, by providing retraining, redeployment, or encouraging self-employment, which can improve productivity and efficiency.
CONCLUSION
In conclusion, public sector enterprises have played a significant role in the economic development of India by contributing to employment generation, infrastructure development, and meeting social and developmental objectives. However, these enterprises also face several challenges, including heavy losses, political influence, work delays, over-capitalisation, pricing policy, inefficient management, and lower capacity utilisation.
To improve the performance of public sector enterprises in India, various measures such as controlling costs, increasing production, reforming the capital base, improving standards, and identifying redundant manpower can be implemented. These steps can help public sector enterprises become more efficient, competitive, and financially viable, which will ultimately benefit the Indian economy and society as a whole.