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Public Sector
Objectives: The public sector enterprises had a multitude of objectives: To help in rapid economic growth and industrialization of the country and create the necessary infrastructure for economic development. To earn return on investment and generate resources for development To promote redistribution of income and wealth To create employment opportunities. To promote balanced regional development To assist the development of small scale industry and ancillary industries
Essential infrastructure goods and services Exploration and exploitation of oil and mineral resources. Technology development and building of manufacturing capabilities in areas crucial for the long term development of the economy. Manufacture of products where strategic considerations predominate such as defence equipment etc.
Therefore, the number of industries reserved for the public sector was reduced to 8. The list was further pruned in May 2001 and now only atomic energy and railway transport are reserved for the public sector. Now, foreign investment upto 26% is also allowed in the defence sector.
Indian Scenario.
Guidelines on Pricing Policy: A uniform price for all the public enterprises is ruled out because of the nature of goods or services they produce or provide, the production function and the market situations are not uniform. On the basis of the nature of the business, public enterprises in India can be classified into enterprises engaged in: Production of public utilities and services. Production of consumer goods. Production of basic and capital goods. Trading Business Financial enterprises.
The Administrative Reforms Commission has recommended that the following principles should be kept in view in formulating the pricing policies of public enterprises:
Public enterprises in the industrial and manufacturing field should aim at earning surpluses to make a contribution to their capital development. Public enterprises should pay their way and not run into losses In the case of public utilities and services, greater stress should be laid on output than on return on investment While determining the price structure, public enterprises should keep the level of output as near the rated capacity as possible.
Most of the public sector undertakings had been organized as Companies. Principal characteristics: 1. Government would own 51% or over of the whole of the capital stock. 2. All the directors were appointed by the Government. 3. It is a corporate body created under the Companies Act. 4. It is created by an executive decision of the Government without Parliaments specific approval. 5. Its funds are obtained from the Government and in some cases, from private shareholders and from the revenue earned through the sale of its goods and services. A predominant criticism against this form was that in most cases the Government was only a shareholder and that the way the Company was organized it diluted the accountability and audit control.
Private Sector
The Industrial Policy Resolution of 1956 made it amply clear that as an agency for planned national development, in the context of the countrys expanding economy, the private sector would have the opportunity to develop and expand. Development of the industries outside the Schedules A & B would be undertaken ordinarily through the initiative and enterprise of the private sector. It was the policy of the state to encourage development of these industries by ensuring the development of transport, power and other core services. Industrial undertakings in the private sector would need to necessarily adhere to the social and economic policies of the state. The private sector would be allowed to grow as far as it is consistent with the targets and objectives of the national plan.
With the New Industrial Policy, 1991, the role of the private sector has been considerably expanded. Now private sector corporations are allowed in all industries except two industries.