EL

W C OM E
PRIVATE, PUBLIC AND
GLOBAL ENTERPRISES

MRS. PARVEEN RASHID

Departmental Undertakings

Statutory Corporations

Government Company

Global Enterprises

Joint Ventures
Private Sector and Public Sector

The industrial policy resolution of

1948 and 1956 gave emphasis to the
state role in the spheres of industrial,
commercial and public utility services.
Before 1991, there was lot of restrictions
to the private sector. These took the
shape of licensing, limited on expansion,
reserving a good number of sectors to
the public sectors and small scale
industries etc., various complicated laws
and producers also stood in the way of
 OBJECTIVES OF PUBLIC SECTOR
ENTERPRISES

 To bring about speedy industrial development

 Todevelop certain industries which help the
growth of other industries
 Toset right the regional imbalance in the
growth of industries
 To check the growth of monopoly
 To ensure adequate supply of essential
articles at fair and reasonable prices
 FEATURES OF PUBLIC SECTOR
ENTERPRISES

 Stateownership: it is owned by the central

government or a state government olr jointly by
both
 Statecontrol : the control over management fully
rests with the government
 Statefinancing: finance is from the government.
Funds are made available either from the treasury
or appropriation through budget.
 Socio-economic activities: they are guided by the
objective of deriving social and economic benefits.
 Public accountability: they are accountable to the
 Forms of organizing public sector
enterprises

The public enterprises are organized in

different forms. Since they are oriented
differently in terms of ownership,
responsibilities and objectives.
 Departmental undertaking
 Public corporation
 Government companies
Departmental undertakings
A departmental undertaking is created by
the decision of the government. Its activities are
organized by the government headed by a minister
 It is organized and managed by a minister
 Financed t6hrough budget allocation
 Rules and procedures for staff selection,
appointment and service conditions are the same
as that of government servants.
 Budgeting, accounting and auditing are as
applicable to government departments
 It cannot be sued without previous consent of
 Advantages

 Total government control helps implementation of

government policies
 Strict audit and legislative control prevent misuse of
public funds
 Managed by responsible government servants who
keep the secrecy required in strategic and defense
industries
 Revenue from these undertaking are remitted in the
treasury.
 Disadvantages
 Political interferences mar smooth functioning
 Subject o political changes these undertaking
cannot follow a long term business policy
 Red tapism
 Over capitalization
 Lac managerial skill and efficiency
 Political consideration rather than business
considerations
 Government control inhibits purchase of raw
materials and sale of products
 Absence of competition
 SOME IMPORTANT DEPARTMENTAL
UNDERTAKING IN INDIA

 AllIndia radio  Silver refinery

 Doordarshan project, Calcutta
 Post  Diesel
and
telegraph locomotives ,
 Indian railways Varanasi
 Ordinance
 Chittaranjan
factories
locomotives ,
 Kolar gold mines,
Calcutta
 Public corporations/ statutory corporations

The defects found in the 5. Oil and natural gas

departmental system commission
made the government 6. Industrial finance
to think the creation of , corporation
public corporation or
statutory corporation, 7. State bank of India
Some important public 8. Unit trust of India
corporations are: 9. Kerala state road
1. Reserve bank of India transportation
corporation
2. The Indian airlines
corporation 10. Kerala state
industrial
3. The life insurance
 Characteristics OF Public corporations
 It is created by a special  It is not subject to
act budgeting, accounting
 Separate legal existence and audit laws of the
government
 Wholly owned by the
 It can enter into
state
contracts in its own
 Managed by board of name
directors
 A public corporation
 It has financial work primarily for
autonomy service, and profits is
 Employees are only secondary
appointed according to  direct government
the terms and
 Advantages OF Public corporations
 This autonomous body government control
 Combine the  Better salary and
advantages of both service
departmental  Talented persons in
undertaking and the the field of business
privately owned are nominated to the
companies board of directors
 Not subject to political  The primary motive of
changes service rather than
 Flexibility of operation profit provides better
 Its accountability to public service
the parliament
 Disadvantages
 Government interference in the
day to day working mars
autonomy
 Any change in the functions and
requires amendment of the act in
parliament
 Absence of competition and profit
motive leads to inefficiency
 GOVERNMENT COMPANIES

A company in which
not less than 51 % of
share capital is held by
the central government or
by any state government
or government or partly
by the central government
and partly by one or more
state government
Characteristics
 Formed by registration under companies Act
 Whole or major part of shares held by the
government and the rest by private parties
 Its own memorandum and articles of association
 It is a body corporate with separate legal
existence
 Directors appointed by government alone or
jointly by government
 Employees appointed by directors board
 Free from budgeting , accounting and audit
 Advantages
 Permits public motive on capital,
participation business lines technical
in share  No knowhow and
capital government foreign
 Easy formation control investors
by registration  Majority  Enjoys the
of
 Flexibility in directors rights,
operation appointed by immunities
government and benefits of
 Enjoys better private sector
credit facilities  Little political companies.
 Competition interference
 Disadvantages

 Chance of political interference

 Minority interest may be overlook since decisions
are taken to comply with government wishes
 Directors and staff may not take active interest
as they have no share in the profits
 In reality there is no autonomy
 No effective government control on financial
matters
 SOME IMPORTANT GOVT.
COMPANIES IN INDIA ARE

 The Hindustan The Indian oil

machine tools ltd corporation
 TheHindustan steel Fertilizers and
ltd chemicals ltd
 The Indian Bharat electronics
telephone ltd
industrial ltd  Asoka hotels ltd
 The state trading Madras refineries
corporation ltd
 The Hindustan
 Changing role of public sector

Public sector plays an important role in India’s economic

development. It has come to occupy such a predominant
position by actively performing in the achievement of country’s
economic and social goals. Service is the primary objective of
public sector enterprise .The main contributions of public
sector enterprises to Indian economy are:
1. Filling gaps in the industrial sector
2. Employment generation
3. Balanced regional development
4. Improving balance of payment position
5. Promoting and protecting small scale enterprises
and ancillary industries
6. Facilitating research and development and
 GOVERNMENT MEASURES TO PROTECTING
PUBLIC SECTOR ENTERPRISES
RESTRICTING THE ROLE OF PUBLIC SECTOR
 Essential infrastructure goods and services
 Exploration of oil and mineral resources
 Technology development in areas which require long term investment and
where private sector is hesitant to operate
 Manufacture of strategic such as defense equipment

STRENGTHENING ENTERPRISES THROUGH

‘MEMORANDUM OF UNDERSTANDING’
 Government tries to strengthen the enterprises which fall in certain
categories like
 Reserved areas of operation
 High priority areas
 Those generating reasonable profits
GOVERNMENT MEASURES TO PROTECTING
PUBLIC SECTOR ENTERPRISES ………….
 Product restructuring
Product mix of public sector will be revised to make
them concentrate on strategic, high technique and essential
infrastructure
 Privatization of public enterprises
Of late , there is a move to privatize some of the
public sector undertakings. Though the speed of
privatization initially is slow, it will gradually pick up and will
attain its desired goals.
 Revival and rehabilitation through BIFR
Highly sick public enterprises which are unlikely
to be revived will be referred to the board for industrial and
financial reconstruction (BIFR) or other specialized agencies,
 GOVERNMENT MEASURES TO PROTECTING
PUBLIC SECTOR ENTERPRISES ………….

 Professional management
The board of directors of public sector enterprises would be made more
accountable to the owner, i.e., shareholders
 Provision of national renewal fund
National relief fund (NRF) was set up to protect the interests of workers
in the public sector. Its functions consist of retraining, redeployment and
counseling. Provision is made to help the workers who retire voluntarily or
are made surplus.
 Financial restructuring
To procure amounts of funds and to encourage greater public
participation, government would offer a part of its holding to mutual funds,
financial institutions, workers and the general public.
PRIVATE COMPANIES
 GLOBAL ENTERPRISES (MULTINATIONAL
COMPANIES)

Multinational company means a company that has

business operations in many countries. In other words,
it is a company which allocates its resources beyond
national frontiers but is nationally based in terms of
ownership and top management. Basically they are
international giant sized companied with production
location in more than one country. It may design a
product or service with an eye on global market.
It is known by different names_
transnational corporation, global enterprise, and world
enterprise, global giant or international enterprise.
 Features OF GLOBAL ENTERPRISES
 Giant size : The assets turnover of several multinational
companies is pretty large
 Centralized control : since the headquarters of a MNC is in
the home country, it can exercise better control over the
operations of its branches.
 International operations : It has production, marketing and
other facilities in various countries. It works through a
network of subsidiaries, branches and affiliates in host
countries it owns and controls huge amount worth of assets
in foreign countries.
 Oligopoly power : Multinational companies are oligopolistic in
nature. Due to vast resources at their disposal and giant size,
they occupy a predominant position in the market. Through
takeovers, they become great economic powers.
 Features OF GLOBAL
ENTERPRISES …..
 Sophisticated technology:

Use of advanced technology at its command can

provide world class products and services.
 Professional management:
The management of an MNC is highly
professionalized. It employees professionally trained
personnel to handle huge funds, advanced technology
and international business operations.
 International markets:
With vast resources and super marketing expertise,
a multinational company can have easy access to
international markets.
 JOINT VENTURES (JV)
This is a very common mode of entering
into international business. Joint venture
means starting a firm which is jointly owned by
the two or more otherwise independent firms.
 A joint venture comes into in three major
types:
 Foreign investors buying an interest in a local
firm.
 Local firm acquiring an interest in an existing
foreign firm
 Formation OF JOINT
VENTURES
Formalities
 Joint venture company will be a public or a private limited company
 Place of registered office of the joint venture company
 Propose a name of the joint venture company and check its availability
from the registrar of companies (ROC) where the re4gistrered office of
the company is to situated and the company is to be incorporated
 Choose their subscribed to the memorandum of association which will
obviously include the partners to the joint venture and their nominees
 Prepare the memorandum and articles of association in consultation with
the joint venture partners, get them printed and suitably stamped , and
submitted the same with required documents
 On receipt of certificate of incorporation , the new company may start
business
 Formation OF JOINT VENTURES…………
 Articles
To avoided contradictions the articles of
association should contain the stipulations mentioned
in the joint venture agreement and clearly delineate
the rights and obligations of the partners.
 Non- resident partner
In case of the partners of the joint venture
company is a non-resident, approval of reserve bank
of India (RBI) will be required for acquiring shares of
the company and establishing place of business in
India
Benefits OF JOINT VENTURES
 Access to markets:
 JVs can have increased access to customers
 Distribution network:
 They can also take advantage of the
established distribution channels
 Capacity:
 JV partners can reap the benefits of increased
capacity in terms of production as well as
economies of scale and scope.
 Staff:
 JV can share staff enable ling partners to
 Benefits OF JOINT
VENTURES………
 Purchasing:

Vast resources available at their disposal JV

partners may be able to collectively benefits from
favorable conditions while making purchases
 Technology/ intellectual property:
As with other resources JV partners can share
technology. A JV may also enable increasing
research and the development of new innovate
ideas.
 Finance:

Firms pool their resources for mutual benefit.

This eliminates the need to borrow funds or go in