ROUTLEDGE LIBRARY EDITIONS:

PUBLIC ENTERPRISE AND

PRIVATIZATION

Volume 8

THE NATURE OF PUBLIC

ENTERPRISE
THE NATURE OF PUBLIC
ENTERPRISE

Edited by
V.V. RAMANADHAM

i~ ~~o~!~~n~~~up
LONDON AND NEW YORK
First published in 1984 by Croom Helm
This edition first published in 2019
by Routledge
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© 1984 V.V. Ramanadham
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The Nature of
Public Enterprise

Edited by
V.V. RAMANADHAM

CROOM HELM
London & Sydney
© 1984 V.V. Ramanadham
Croom Helm Ltd, Provident House, Burrell Row,
Beckenham, Kent BR3 lAT
Croom Helm Australia Pty Ltd, GPO Box 5097,
Sydney, NSW 2001, Australia
Croom Helm, 51 Washington Street,
Dover, New Hampshire, 03820 USA

British Library Cataloguing in Publication Data

Ramanadham, V.V.
The nature of public enterprise.
1. Developing countries- Government business
enterprises
I. Title
338.6'2'091 724
ISBN 0-7099-2262-0

Printed and bound in Great Britain

CONTENTS

Preface
List of Tables
List of Figures
List of Appendices

Part I

The Concept of Public Enterprise

Chapter 1 Introduction 3

Chapter 2 The 'Public' Concept 5

Chapter 3 The 'Enterprise' Concept 21
Chapter 4 Synthesis between the 'Public'
and the 'Enterprise' Concepts 31

Chapter 5 Taxonomy and the Concept of

Public Enterprise 43
Chapter 6 The Definitional Issue 61

Part II

Public Enterprise in Developing Countries

Introduction 75

Chapter 7 The Development Perspective 77

Chapter 8 The Genesis of Public Enterprise 87

Chapter 9 Monopoly Elements 99

Chapter 10 Sectoral Coverage 109

Chapter 11 The Financial Performance 119
Chapter 12 The Real Costs of Public Enterprise 141
Chapter 13 The Impact on the Public Exchequer 147
Chapter 14 The Concept of Comparative Advantage 165
Chapter 15 Classification of Developing
Countries 179
Part III
Decentralisation of Public Enter12rise Control
Chapter 16 The Theme 193
Chapter 17 Independent Commissions 199
Chapter 18 Consumer Councils 219
Chapter 19 Techniques of Enterprise
Organisation 227
A. The Holding Company System 227
R. Policy Councils 232
C. Enterprise Boards 233
Chapter 20 The Market 239
Chapter 21 Conclusion 245
Appendices 249
Index 295
To my father V. Seshayya Sastry, who
instilled in me intellectual curiosity
PREFACE

This book is comprised of three studies. The first

deals with what is to be expected of a public enter-
prise by virtue of its conceptual significance. One
may contrast with it what actually obtains and devise
policy measures to bridge any gap between concept and
practice.
The second study explores the distinctive prob-
lems of public enterprise in developing countries.
It ends with the plea that governments of mixed
economies should evaluate the comparative advantage
that individual public enterprises possess as units
of organisation today in their circumstantial con-
text and proceed with any structural changes that
the evaluations suggest.
The third is a study of an important aspect of
governmental relationships with public enterprise,
viz. control, which can have a determinative impact
on its performance.

The London Business School has been an excel-

lent academic base for my researches during 1982-83.
I have had the opportunity of a continuous dialogue
with my Faculty colleagues on the subject matter of
this book - in particular with Professors Michael
Beesley, David Chambers and John Heath. The weekly
seminar on Public Enterprise and the Developing
World, which I conducted at the School during
March-June 1983, also proved valuable to me in
organising the material in these studies.

Sir Norman Chester commented on Parts I and

III; Mr. R.W. Roseveare on Part III; Mr. Nick Woodwar
on Part II; Dr. Adrian Strain on Part I; and Profes-
sor Maurice Garner on the entire manuscript. Their
queries and suggestions have helped me in improving
the text at several places. I convey my grateful
thanks to them.

London Business School V.V. Ramanadham

 TABLES

1. Category and concept of public 46

enterprise
2. Holding company structures 92
3. The impact and genesis of public 95
enterprise
4. Accumulated deficits of selected 127
Indian public enterprises
5. Accumulated deficits of selected 128
public enterprises in Pakistan
6. Overall deficit/surplus of central 151
gov·ernmen t
7. Total of domestic and international 153
taxes on goods and services
8. Expenditure on economic services 155
9. Capital expenditure 156
10. Criteria of comparative advantage 166
11. Development indices: classification 182
12. Unfavourable indices of low and 186
middle income countries
13. An illustrative proforma of control 247
decentralisation
 FIGURES

1. Rates of return 38
2. Large-sized public enterprises 102

3. Financial and social returns of 120

a public enterprise

4. Financial and social returns: 122

different combinations

5. Impact of public enterprise on 148

taxation

6. Central government: capital 158

expenditure

7. Central government: expenditure 159

on economic services

8. Central government: capital 161

expenditure (regional figures)

9. Central government: expenditure 162

on economic services (regional figures)

10. Development indices of countries 188

 APPENDICES

1. Some Development Indices 251

2. United Nations MlalHlbership (accessions) 254
3. AI Public Enterprises in India 255
(Central Government)
AII Public Enterprises in the
State of Andhra Pradesh 261
B. Public Enterprises in Pakistan 264

C. Public Enterprises in Kenya 268

D Public Enterprises in Colombia 275

4. Excerpts from Annual Reports of Public

Enterprises in Thailand on Objectives 277

5. A Statement of Public Enterprise 280

Problems Faced in Ethiopia

6. Price Distortion and Growth Rate (1970s) 282

7. Government Capital Expenditure in 283

Public Enterprises in Sri Lanka

8. Planned Share of Public Authorities 284

in Total Gross Investment

9. Public Investments in Manufacturing 285

10. Classification of Countries by 286

Development Indices
PART I
THE CONCEPTOF PUBLIC ENTERPRISE
Chapter One

INTRODUCTION

This study aims at an analysis of the concept of

public enterprise. The focus is on what being a
public enterprise implies conceptually.

(i) At the minimum it sorts out the wood

from the trees and focusses on the conceptual essence
of what a public enterprise implies as distinct from
symptoms and partial perceptions.

(ii) It enables us to compare an actual public

enterprise situation with the conceptual and estab-
lish the area in which practice may have to improve
in order that the conceptual implications are fully
realised. And it suggests the conditions, as de-
rived from the concept, under which the utility of
public enterprise is likely to be at a maximum to
the nation.

(iii) It throws up the inherent difficulties

in creating a situation that closely approximates
to the conceptual model of a public enterprise and
suggests the existence of certain in-built costs in
the evolution of public enterprise as an institution.

Chapter 2 deals with the 'public' element of

the concept and Chapter 3 with the 'enterprise' ele-
~ent; and t~e crucial issue of synthesising the two
is covered in Chapter 4.

Chapter 5 looks at taxonomic aspects relevant

t? th~ conceptual.analysis, limiting ~tself to high-
lighting the particular problems or biases that
certain categories of public enterprises present
in relation to a conceptual element

The last chapter refers to the question of

3
The Concept of Public Enterprise

operationalising the concept of public enterprise

through a definition. The term public enterprise
is employed here in its generic sense and subsumes
such terms as state enterprises, nationalised indus-
tries, parastatals, statutory boards and decentralised
agencies, which we come across in the literature.
These are not necessarily homogeneous in every
aspect, but the interest of the present study lies
in pursuing a matter of commonality, namely, what
they all imply as public enterprises.