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PUBLIC ENTERPRISE POLICY

Definition- Public enterprise is ‘an incorporated or large unincorporated enterprise in


which public authorities hold a majority of the shares and/or can exercise control over
management decisions’.

Now a day’s public sector in India is playing a vital role in the promotion of economic
development of the country. In the process of economic development, capital formation
occupies a crucial position .During the very first plan period the public sector appears to
have a made a high thrust by sharing about forty one percent of the gross capital
formation in the country.

The Role of Public Sector

1. Capital Formation:-Formation of capital is an important determinant of


Economic Growth. If the Country has to depend on the private sector alone for the
capital formation, the amount of capital is likely to fall short of the requirements.
The Public Sector, therefore, is helping in Capital formation for the country.
2. Help in Trading:-The last five decades have witnessed a growing share of the
public sector in the country’s internal as well as external trades.Infact for number
of reason; the public sector was expected to play an increasingly important role in
the matter of trade.
3. Creation of Infrastructure:-On of the obstacles in the way of economic
development of backward countries is lack of infrastructure facilities such as
transportation, communication, motive power and an efficient functioning of the
basic and the key industries. The Public sector in India has performed a vital
service in the field of Railways, Transportation, Electric Supply and
Telecommunication and So on.
4. Regulation and Control of the Economy:-In developing Economy the control
and regulation of the economy is of utmost importance. The pattern of
consumption, the pattern of investment and the allocation of resources are
required to be regulated in such a way as to fulfill the objective of the economic
planning. The Public sector in India has to certain extent; attend a position which
can be used for directing economic activities.
5. Social Aspect:-Whatever profits earned by the public sector monopolies belong
to society. Moreover, the decisions of the public sector are not guided by the
profit motive, but they are guided by the requirement of the societies.
6. Export Promotion:-Almost all the units in the public sector have kept before
themselves the needs of the export promotions right from the beging.Some public
sector enterprises have rendered a remarkable service in the field of export
promotion.
7. Rasing Internal Resource:-With the expansion of the public sector it was
expected to generate resources not only for its own expansion but also for
contributing something to the development of other priority sector.
Public Enterprise Policy:-Recent policy initiatives taken by Government.
• General Policy:-The Government’s strategies towards PSE comprises
strengthen strategic unit, privatizing non strategic unit through gradual
disinvestment. This is all about to restructure the PSE for improving their
performance.
1. Man power rationalization.
2. Formation of joint ventures.
3. Proper Governance through strengthening Boards or Management.
• Memorandum of Understanding:-In order to give greater autonomy to
the PSE and at the same time to make them accountable for achievement
of their objectives, the concept of MOU has been accepted and
implemented by the Government.
• Disinvestment:-The disinvestment of equity of the PSE was started
primarily to subject them to the discipline of market forces and make their
management more professional and result oriented. The disinvestment was
setup in august 1996 to advise the government on the extent, strategies,
methodology and timing for disinvestment in PSE.
• Autonomy:-To make PSE more efficient and competitive, the
Government has granted autonomy of varying degree to select profit
making PSE. Depending upon the degree of autonomy granted , the
selected industries are called as Navratns and Mini Ratns.
• National Renewal Fund:-The Government had constituted the national
renewal fund as special safety for workers to impart a human face to
industrial restructuring, technology up gradation and modernization.
• List of Industries Reserve for the Public Sector as per the latest
policy:-
1. Arms and ammunition and allied items of defense equipments.
2. Atomic energy.
3. Railway Transport.

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