Chapter 3 Flashcards
global, public and private enterprises
What happened in 1948
- industrial policy resolution
- no of industries were reserved for public sector and the rest were given to the private through licensing
What happened in 1956
- industrial policy resolution
- certain objectives for the public sector to follow was laid down to accelerate the rate of growth
- public sector was given importance but mutual dependancy was emphasisied
What happened in 1991
- the 1991 industrial policy
- deliberately disinvested from public sector to allow more freedom in private sector
- companies outside of india were also invited invest in india therefore making global enterprises a part of the indian economy too
what economy is the indian economy
The indian economy is a mixed economy with both privately owned and government owned business
What does the private sector consist of
the private sector consists of business owned by individual or a group of individuals . sole propreitorship, joint hindu family, cooperative stores, joint stock company, partnership
What are the different types of public sector organisations
- departmental undertakings
- statutory corporation
- government companies
What does the public sector consists of
The public sector consists of various organisations owned or manged by the government these maybe owned partly or fully by a state government or central government or both. it can be a part of the ministry or come into existence by a special act of the parliament
Features of departmental undertakings (5)
- finance
- accounting system
- management
- appointment of employees
- accountability
define departmental undertakings
- oldest and most traditional form of organising pubic enterprises
- they are not independant instituitions and can be under state or central government
Features of departmental undertakings - finance
It is given from the governments treasury during the yearly allocation of budget the money earned from these organisations is also given to the governments treasury
Features of departmental undertakings - accounting system
The organisation is also subject to accounting and audit controls like any other government avtivities.
Features of departmental undertakings - management
it is subject to direct government control from the respected ministry. It is a major subdivision of a government department and is managed and controlled by it
Features of departmental undertakings - appointment of employees
- the employees will be considered as government employees
- they will be recruited through tests like UPSC under SSB - staff selection board
- They are headed by indian administrative officers (IAS) officers who are transferrable from one ministry to another
Features of departmental undertakings - accountability
- They are accountable to the ministry since they are directly under the control of the ministry
- They are also responsible to the parliament and people as they are using money from treasury which is people tax money
Merits of departmental undertakings (4)
- source of income
- suitable for national security
- answerable to parliament
- complete government control
Merits of departmental undertakings - source of income
The revenue earned by the organisations go directly to the national treasury therefore it is a income for the government
Merits of departmental undertakings - suitable for national security
It is the safest as it is directly under a ministry and is controlled and supervised by the concerned ministry
Merits of departmental undertakings - answerable to parliament
All departmental undertakings are accountible to the parliament and have a high degree of public accountability , so they have to be careful about their progress and performance
Merits of departmental undertakings - complete government control
It is completely managed, owned and controlled by the government ministry
- it facilitates the parliament to excercise effective control over their operations
De merits of departmental undertakings (6)
- lack of flexibility
- delay in decision making
- conservative approach
- red tapism
- undue government influence
- indifferent to consumer needs
De merits of departmental undertakings - lack of flexibility
- There is little scope for exercising initiative and making improvements . (ex. employees slacking)
- Departmental undertakings lack to provide flexibility which is essential .
De merits of departmental undertakings - delay in decision making
The employees are not allowed to take individual decisions and must consult the ministry everytime which causes in delay in decision making when apt prompt decisions need to be made.
De merits of departmental undertakings - conservative approach
Since it is the public tax money and the government is responsible for it, it wont take many high risk ventures which will be more profitable and be conserved in their business approaches
De merits of departmental undertakings - red tapism
- No decision is taken without going through proper channels, hierarchy.
- This might create problems in the operation of the business.
De merits of departmental undertakings - undue government influence
There will be a lot of political interference thorugh the ministry
Features of statutory corporation - accounting and audit procedures
- it is not subject to government rules in terms of accounting and audit
- Since its budget is not from the governemnt treasury
Features of statutory corporation - staffing and terms of service
- The employees here are not government employees
- Sometimes IAS officers might be taken from government departments to head these organisations
De merits of departmental undertakings - indifferent to consumer needs
These organisations tend to be insensitive to consumer needs and do not provide adequate services to them.
Features of statutory corporation - formation
It is established by a special act of the parliament that lays down the powers and rules and regulations of the corporation
Define statutory corporation
- It is a corporate with powers just like a joint stock company.
- It has a seperate legal existence set up under a special act of the parliament.
- It is managed by BOD appointed by the government .
Features of statutory corporation - ownership
- This form of organisation is wholly owned by the state/central government.
- The government also has the rights to share its profits and bear its losses.
Features of statutory corporation (6)
- formation
- ownership
- corporate existence
- financial autonomy
- accounting and audit procedures
- staffing and terms of service
Features of statutory corporation - corporate existence
- It has a seperate legal existence other than that of the government so it can sue and be sued.
Features of statutory corporation - financial autonomy
This type of instituition is independantly financed and can obtain funds by borrowing from the government.
It can chose how to use its funds too, wheather to share as dividends or keep as retained earnings
merits of statutory corporation (4)
- operational flexibility
- freedom from interference
- autonomous set up
- facilitates economic growth
merits of statutory corporation - operational flexibility
-They enjoy independance in their functioning as they are free from undesirable government influence
merits of statutory corporation - freedom from interference
Since the funds are not from the government treasury the government doesnt interfere that much in the business operations, which means the business will be more efficient with lesser interference
merits of statutory corporation - autonomous set up
They are autonomous so they can form their own policies rule and regulations as long as they are in the act defining them and they might only need approval in some cases.
merits of statutory corporation - facilitates economic growth
They facilitate economic growth as they have the support of the government and the powers and capacity of the private sector
De merits of statutory corporation (5)
- theoretical autonomy
- government interference
- undesirable practices
- delay in action
- rigid structure
De merits of statutory corporation - rigid structure
since the powers and all of the corporation are defined by he act and anything to b done beyond the act must first amend the act which is time consuming and hectic.
De merits of statutory corporation -delay in action
- Government often appoints advisors to the corporation board, this affects the freedom of the corporation.
- In case of disputes the problem is referred to government and this takes a longer time
De merits of statutory corporation - undesirable practises
officials may misuse their autonomy and indulge in activities like corruption which is against the objectives of the organisation
De merits of statutory corporation -government interference
Government and political interference is always there in case of taking a major decision or decisions regarding funds.
De merits of statutory corporation - theoretical autonomy
The freedom is only namesake but they to are subject to lots of rules and regulations, so there wont be that much operational flexibility
define government companies
- A government company is established under the companies act 2013 or any other previous companys act
- Not less than 51% shares are held by the government
- The shares are purchased in the president of indias name
features of government companies (6)
- incorporation
- separate legal entity
- management
- governed by memorandum of association
-accounting and audit procedures - finance
features of government companies - incorporation
- The government company is registered under the companies act 2013 or any other previous act
- It is formed by an executive rather than a legislative decision
features of government companies - seperate legal entity
- The company has a sepearte legal existence independant of the goernment
- It can enter into a contract acquire property sue and be sued.
features of government companies - management
- The management is regulated by the provisions of the companies act.
- It is managed by a BOD’s nominated by the government
features of government companies - governed by memorandum of association
features of government companies -accounting and audit procedures
features of government companies - finance
merits of government companies (4)
- ease of formation
- operational autonomy
- independant status
- prevents unhealthy business practices
merits of government companies - ease of formation
merits of government companies - operational autonomy
merits of government companies - independant status
merits of government companies - prevent unhealthy business practices
de merits of government companies (3)
- freedom only in name
- lack of accountability
- defeat of main purpose
de merits of government companies - freedom only in name
de merits of government companies - lack of accountability
de merits of government companies - defeat of main purpose
difference between departmental undertakings , statutory corporation and government companies - formation
departmental undertakings ;
It is created by order of the government and is attached to a particular ministry
statutory corporation ;
It is created by special act of the parliament
government companies ;
It is created with accordance to the companies act 2013
difference between departmental undertakings , statutory corporation and government companies - legal status
departmental undertakings ;
No seperate legal entity
statutory corporation ;
Seperate legal entity
government companies ;
Seperate legal entity
difference between departmental undertakings , statutory corporation and government companies - management
departmental undertakings ;
Managed by concerned officials of the ministry
statutory corporation ;
Managed by the board of directors APPOINTED by the ministry
government companies ;
manged by the board of directers NOMINATED by the government
difference between departmental undertakings , statutory corporation and government companies - finance
departmental undertakings ;
fully financed by the government by allocations during the budget planning
statutory corporation ;
Funds through borrowing from the government and the revenue from sales of goods
government companies ;
at least 51% share capital owned and contributed by the government
difference between departmental undertakings , statutory corporation and government companies - ownership
departmental undertakings ;
Wholly owned by the government
statutory corporation ;
Wholly owned by the government
government companies ;
at least 50% of shares contributed by government
difference between departmental undertakings , statutory corporation and government companies - staff
departmental undertakings ;
government employees
statutory corporation ;
not government employees
government companies ;
not government employees
difference between departmental undertakings , statutory corporation and government companies - flexibility
departmental undertakings ;
no flexibility
statutory corporation ;
considerable amount of flexibility
government companies ;
significant flexibility
difference between departmental undertakings , statutory corporation and government companies - degree of autonomy
departmental undertakings ;
no autonomy
statutory corporation ;
considerable degree of autonomy
government companies ;
significant flexibility
difference between departmental undertakings , statutory corporation and government companies - public accountability
departmental undertakings ;
Fully accountible to public and concerned ministry
statutory corporation ;
accountable to parliament
government companies ;
accountible to concerned ministry
difference between departmental undertakings , statutory corporation and government companies - examples
departmental undertakings ;
railways and post and telegraph department
statutory corporation ;
reserve bank of india and life insurance company
government companies ;
steel authority of india and bharat heavy electricals limitted
Difference between private sector enterprise and public sector enterprise - objective
private sector enterprises ;
Main motive of earning profit
public sector enterprises ;
main motive of providing services to public
Difference between private sector enterprise and public sector enterprise - ownership
private sector enterprises ;
Owned by one or more private individual or corporate bodies
public sector enterprises ;
owned by central or state governments together or individually
Difference between private sector enterprise and public sector enterprise - capital
private sector enterprises ;
By private resources and owners from their own resources
public sector enterprises ;
entire or at least 51% capital is provided by the government
Difference between private sector enterprise and public sector enterprise - management
private sector enterprises ;
managed by owners and professional managers
public sector enterprises ;
Managed by board of directors who are representatives of the government
Features of global enterprises - huge capital resources
Difference between private sector enterprise and public sector enterprise - freedom of management
private sector enterprises ;
Owners are free to do whatever they want with little interference
public sector enterprises ;
There is less freedom due to political interference
Difference between private sector enterprise and public sector enterprise - area of operations
private sector enterprises ;
Operate in areas in which steady and reasonable returns are expected
public sector enterprises ;
They work in areas with public utility services and other areas of social benefit
Difference between private sector enterprise and public sector enterprise - flexibility
private sector enterprises ;
Can easily modify their policies as per their needs
public sector enterprises ;
follows rigid policies which cannot be modified easily and requires the approval of the government for modification.
Define global enterprises or multinational companies
Features of global enterprises (7)
- huge capital resources
- foreign collaboration
- advanced technology
- product innovation
- marketing strategies
- expansion of market territory
- centralised control
Features of global enterprises - foreign collaboration
Features of global enterprises - advanced technology
Features of global enterprises - product innovation
Features of global enterprises -marketing strategy
Features of global enterprises - expansion of market territory
Features of global enterprises - centralised control
define public private partnership
features of ppp model (3)
application of ppp model
examples of pp model
strengths of ppp model - sharing of project risks
strengths of ppp model (4)
- sharing of project risks
- increased efficiency
- innovation
- better viability
strengths of ppp model - increased efficiency
strengths of ppp model - innovation
strengths of ppp model - better viability
weakness of ppp model
define joint ventures
types of contractual joint venture
types of joint ventures
types of equity based joint venture
define contractual joint venture
define equity based joint venture
important points about joint ventures
examples of joint ventures
benefit of joint ventures (6)
- inreased resources and capacity
- innovation
- access to new markets and distribution sources
- access to technology
- low cost of production
- established brand name
benefit of joint ventures -
benefit of joint ventures -
benefit of joint ventures -
benefit of joint ventures -
benefit of joint ventures -
benefit of joint ventures -
Define changing role of public sector
The different changes in public sector (10)
explain the change in public sector -
explain the change in public sector -
explain the change in public sector -
explain the change in public sector -
explain the change in public sector -
explain the change in public sector -
explain the change in public sector -
explain the change in public sector -
explain the change in public sector -
explain the change in public sector -
no of features , merits and de merits of departmental undertakings
Features: 5
Merits: 4
Demerits: 6
no of features , merits and de merits of statutory corporation
Features: 6
Merits: 4
Demerits: 5
no of features , merits and de merits of government companies
Features: 6
Merits: 4
Demerits: 3