Chapter 3: Private, Public and Global Enterprises — Notes
1. Private Sector and Public Sector
• Private Sector: Owned & managed by individuals or groups. Forms include:
• Sole proprietorship, partnership, Joint Hindu family, cooperative, companies.
• Public Sector: Owned & managed by government. Can be central/state or through ministries,
special acts. India has a mixed economy (both sectors coexist).
2. Forms of Public Sector Enterprises
• Departmental Undertakings
• Part of a government ministry, not a separate legal entity.
• Examples: Indian Railways, Post & Telegraph.
• Features: Funded from treasury, government employees, controlled by ministry.
• Merits: Accountability, control, suitable for sensitive areas.
• Limitations: Bureaucratic, inflexible, delays, political interference.
• Statutory Corporations
• Created by an Act of Parliament with defined powers & autonomy.
• Examples: LIC, Air India (before privatisation).
• Features: Independent, owns property, makes contracts, not bound by govt. audit.
• Merits: Autonomy, flexibility, initiative.
• Limitations: Political interference, corruption, slow decision-making.
• Government Companies
• Companies Act 2013: ≥51% capital held by government.
• Examples: BHEL, SAIL.
• Features: Separate legal entity, own rules, audit exempt, funds from govt. & markets.
• Merits: Easy to form, autonomy, market-oriented.
• Limitations: Limited autonomy, not fully accountable, government still controls.
3. Changing Role of Public Sector
• Initially focused on:
• Building infrastructure, heavy industries.
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• Reducing regional imbalance.
• Economies of scale.
• Preventing concentration of wealth.
• Import substitution (self-reliance).
• Post-1991 Reforms (Liberalisation, Privatisation, Globalisation)
• Reduced number of reserved industries.
• Disinvestment to raise funds & improve efficiency.
• Sick units referred to BIFR for closure/revival.
• MoU system: autonomy + accountability.
4. Global Enterprises (MNCs)
• Large corporations operating in multiple countries.
• Features:
• Huge capital resources.
• Foreign collaborations.
• Advanced technology.
• R&D and innovation.
• Aggressive marketing.
• Wide market reach & centralised control.
5. Joint Ventures
• When two or more businesses (private, government or foreign) come together for a common
purpose and mutual benefit.
• Allows businesses to pool resources and share risks & rewards.
• Reasons: Business expansion, entry into new markets (domestic or international), access to
technology, cost advantages.
Types of Joint Ventures:
• Contractual Joint Venture (CJV)
• No new entity is created.
• Only an agreement to work together, usually for specific projects or franchises.
• Both parties contribute inputs, exercise some control, and the arrangement is for a longer-term but
limited scope.
• Equity-based Joint Venture (EJV)
• A separate jointly-owned entity is formed (like a company or LLP).
• Both parties share ownership, management, capital, risks and profits.
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• Common in foreign collaborations.
Key Points for Joint Venture Agreements:
• Clearly define roles, capital, technology, intellectual property, management structure, profit sharing,
and exit clauses.
• Must adhere to legal and cultural norms of host countries.
• Necessary approvals and licenses should be obtained.
Benefits of Joint Ventures:
1. Increased resources and capacity: Combining funds and expertise allows quick growth and better
competitiveness.
2. Access to new markets & distribution networks: Especially useful when entering foreign markets
through a local partner’s established presence.
3. Access to technology: Leverages advanced production techniques, saving time and R&D costs.
4. Innovation: Collaborations often bring fresh ideas and product designs.
5. Lower cost of production: Especially when using Indian resources like skilled labour and raw
materials.
6. Established brand name: One partner benefits from the other’s reputation and market goodwill,
saving on branding efforts.
6. Public-Private Partnership (PPP)
• Collaboration between government and private sector to deliver public infrastructure and services.
• Definition: Optimal sharing of tasks, risks, and responsibilities for projects benefiting the public.
Features of PPP:
• Public partner contributes land, capital, or assets and ensures regulatory compliance.
• Private partner brings in expertise, efficiency, innovation, and project management.
• Ownership usually remains with public sector; private handles design, construction, and/or
operation.
Advantages of PPP:
• Faster completion and better quality due to private expertise.
• Reduced burden on government finances.
• Encourages innovation.
Limitations of PPP:
• Conflicts can arise over environmental or operational issues.
• Private finance may be hard to attract for less-profitable sectors.
Examples of PPP:
• Expressways (like Kundli-Manesar Expressway), airports, metro projects, water supply, hospitals.
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Keywords:
Public sector, private sector, globalisation, joint ventures, PPP, disinvestment, MoU, departmental
undertaking, statutory corporation, government company, MNC.
These expanded notes now provide more detail and examples on Joint Ventures and PPP. Let me know if
you also want a diagram or flowchart summarising the types and benefits!
