Public, Private, and Global Enterprises a ie ee _are owned and managed by the Government. These | organizations are either partially or fully owned by the state or | central government. | Que. What is the Private Sector? | Ans. The private sector is those organizations that are totally || ewned and controlled by private individuals or groups of private — individual. | Que. that are departmental undertakings? <= | Ans. Departmental undertakings are established as. q@__ iniste | extension of the ministry itself. They have not-been | constituted as autonomous or independent institutions and as | Ans. Features of departmental undertakings areas follows: 1. The funding of these enterprises comes directly from the Government Treasury and the revenue earned by these is also paid into the treasury. 2. They are subject to accounting and audit control.3. The employees of these departmental undertakings are considered government servants, 4, They are headed by IAS officers and civil servants. S. It is under the direct control of the ministry. || 6. They can be sued just like the government. Que. Explain the merits of departmental undertakings. |_Ans. Following are the merits of departmental undertakings:- 1, These undertakings facilitate the Parliament to exercise effective control over its operations. 2. These ensure a high degree of public accountability, 3. The revenue earned by the enterprise goes directly to the treasury and hence is a source of income for the Government. 4. Where national security is concerned, this form is the most. Que. Explain the demerits of departmental undertakings. Ans. ntal ui 1s are as Fol 1. Departmental undertakings fail to provide flexibility, which is essential for the smooth operation of the business.2. These enterprises are unable to take advantage of business opportunities. The bureaucrat’s over-cautious and conservative approval does not allow them to take risky ventures. 3, There is red tape in day-to-day operations and no action can be taken unless it goes through the proper channels of authority; 4, There is a lot of political interference through the ministry. S. These organizations are usually insensitive to consumer needs, Que, What is Statutory Corporation? Ans. Statutory corporations are public enterprises brought into existence by a Special Act of Parliament. The Act defines its powers and functions, rules and regulations governing its employees, and its relationship with government departments. Examples:- Reserve Bank of India, LIC, Food Corporation of India, ete. Que. What are the features of a statutory corporation? Ans. Features of a statutory corporation are as follows:- 1, Statutory corporations are set up under an Act of Parliament and are governed by the provisions of the Act. 2. This type of organization is wholly owned by the state.3. A statutory corporation is a body corporate and can sue and be sued, enter into a contract, and acquire property in its own name, 4. This type of enterprise is usually independently financed. It obtains funds by borrowings from the government or from the “public through revenues, derived from the sale of goods and services. S.A statutory corporation is not subject to the same accounting and audit procedures applicable to government || departments. &. The employees of these enterprises are not government or civil servants and are not governed by government rules and regulations. Que, Explain the merits of Statutory Corporations. Ans. Merits of statutory corporations are as follows:- 1. They enjoy independence in their functioning and a high degree of operational flexibility. 2. Since they are autonomous organizations they frame their own policies and procedures within the powers assigned to them by the Act. The Act may, however, provide o few issues/ matters which require prior approval of a particular ministry.3. Since the funds of these organizations do not come from the central budget, the government generally does not interfere in their financial matters. 4. A statutory corporation is a valuable instrument For economic development. Que. What are the limitations of a statutory corporation? Ans._Limitations of a statutory corporation are as follows:- | 1 ln reality, a statutory corporation doesn't enjoy as much operational flexibility are stated. 2. Government and political interference has always been there in major decisions or where huge funds are involved. 3. If there is any disagreement, then the matter is referred to the government for a final decision. This further delays action. 4. Where there is dealing with the public, rampant corruption exists. S. The Government has a practice of appointing advisors to the Corporation Board. This curbs the freedom of the corporation in entering into contracts and other decisions. || Que, What is Government Company? Ans. government company means any company in which not less than SI percent of the paid-up capital is held by the centralgovernment and partly by one or more State governments and includes a company that is a subsidiary of a government company. A government company is established der feiaa is registered and governed by the provisions of e Act. Que. What are the features of a government company? Ans. Features of government company are as follows:- || 1 Registration:- Government company gets incorporated under ie aaa aNE 2. Ownership:- Ownership of a government company is wholly or partially owned by the government. 3, Management:- Management of a government company is “| done by the Board of Directors, who are nominated by the government and other shareholders. 4. Separate Legal entity:- After registration government company becomes a separate legal entity. They can buy and || sell a property for business activities in their own name. $. Ministrial Control:- A government company comes under |_ ministerial control. Ministry makes appoints a director.&. Financial Autonomy:-Government can be financed by the government as well as the public. They are free to issue securities and free to use the revenue for the growth and expansion of the company. 2. Efficient Staff:- The recruitment of employees is made according to their own conditions and rules and regulations as contained in the Memorandum and Articles of Association of the company. 8. Accountability:- Government companies are accountable to || the ministry of the department concerned. Que. What are the merits of government companies? Ans, Merits of government companies are as follows:- 1. Administrative Autonomy:- It enjoys autonomy in all management decisions and takes actions according to business prudence, 2. Greater Flexibility:- Government company can change their rules without any difficulty. They are free to take any decision. 3, Efficient Staff:- The recruitment of employees are made according to their own service condition. They can appoint professional and specialized people by offering service and | salary. 4, Collaboration:- Government companies can collaborate with @ private company as well as with foreign companies.Que. Explain the demerits of government. ‘Ans. Demerits of the government company are as follows:- |. Autonomy on paper only:- Most of the directors of government companies are nominated by the government. They are chosen from various government ministries, The operation of the companies through their representative. 2.Board packed with government representatives:- The Board of directors in government companies is appointed by the | government. So in a government company, directors always try to please the government rather than improve efficiency. 3.Political Interference:- Government companies are treated as the personal property of ministries. The interference of ministries is frequent. The operational policies of the government rather than improving the efficiency of the government company. Que. What is a multinational company? Ans. & multinational company is a company that is registered in one particular country and whose products are produced and "sold in various other countries. Examples:- Puma, Nike, Coco-Cola, Hyundai, etc.Que. What are the Features of multinational companies? ‘Ans. Features of multinational companies are as follows:- 1. Gaint size and huge capital resource:-These enterprises are characterized by possessing huge financial resources and the ability to raise funds from different sources. They are able to tap funds from various sources, They may issue equity shares, debentures, or bonds to the public. They are also in a position to borrow from financial institutions and international banks, They enjoy credibility in the capital market. || 2. Centralised Control:-They have their headquarters in their home country and exercise control over all branches and subsidiaries. However, this control is limited to the broad policy framework of the parent company. There is no interference in day-to-day operations. 3. Advanced technology:- These enterprises possess technological superiorities in their methods of production. They are able to conform to international standards and quality specifications. 4. Expansion of market territory:- Their operations and “activities extend beyond the physical boundaries of their own countries. Their international image also builds up and their market territory expands enabling them to become || international brands. S. Oligopolistic Market:- Oligopolistic power means power in a hands of a few companies only. Due to the giant size of MNCs, it occupies a dominating position in the market.&. Product innovation: These enterprises are characterized by having highly sophisticated research and development departments engaged in the task of developing new products and superior designs of existing products. 2. Marketing strategies: The marketing strategies of global companies are far more effective than other companies. They use aggressive marketing strategies in order to increase their sales in a short period. 8. Foreign collaboration: Global enterprises usually enter into || agreements with Indian companies pertaining to the sale of technology, production of goods, use of brand names for the final products, etc. These MNCs may collaborate with companies in the public and private sectors. Que, What is a joint venture? Ans. When two business agrees to join together for a common purpose and mutual benefit, it gives rise to a joint venture. A joint venture can be flexible depending on the party's requirements. These need to be clearly stated in joint venture agreements to avoid conflict at a large. Que. What are the features of a Joint venture? Ans. Features of a joint venture are as follows:- || Le Increased resources and capacity: Joining hands with another — or teaming up adds to existing resources and capacity enabling the joint venture company to grow and expand more quickly and efficiently.2. Access to new markets and distribution networks: hen a business enters into a joint venture with a partner from another country. They can collaborate with foreign companies and get access to the market of a foreign country as well. 3. Access to technology: Technology is a major factor for most businesses to enter into joint ventures. Advanced techniques of production leading to superior quality products save a lot of time, energy, and investment as they do not have to develop their own technology. Technology also adds to efficiency and effectiveness, thus leading to a reduction in costs. | 4 Innovation: The markets are increasingly becoming more demanding in terms of new and innovative products. Joint ventures allow businesses to come up with something new and creative for the same market. S. Low cost of production: When international corporations invest in India, they benefit immensely due to the lower cost of production. They are able to get quality products for their “global requirements. India is becoming an important global source and extremely competitive in many products. 6. Established brand name: When two businesses enter into a “joint venture, one of the parties benefits from the other's goodwill which has already been established in the market. If the joint venture is in India and with an Indian company, the indian company does not have to spend time or money developing a brand name for the product or even a distribution system. There is a ready market waiting for the product to be launched, A lot of investment is saved in the process.Que, What are the types of joint ventures? Ans, There are two types of joint ventures. 1 Contractual Joint Venture (CIV):- In a contractual joint venture, a new jointly-owned entity is not created. There is only an agreement to work together. The parties do not share ownership of the business but exercise some element of control in the joint venture. 2. Equity-based Joint Venture (EIV): An equity joint venture | agreement is one in which a separate business entity, jointly owned by two or more parties, is formed in accordance with the agreement of the parties. The key operative factor in such cases is joint ownership by two or more parties. The form of business entity may vary — company, partnership firm, trust, limited liability partnership firm, venture capital funds, etc. Example:- Maruti Company of India collaborates with Suzuki Co. of Japan. Que. What is Public Private Partnership? Ans. Public Private Partnership means the relationship between public and private entities in the context of infrastructure and another service. Under PPP model public sector plays an important role and ensures that social obligation is fulfilled and || sector reforms and public investment are successfully met.Que. What are the features of Public Private Partnership? Ans. Features of Public Private Partnership are as follows:- 1. Contract between Public and private sectors:- PPP is a contract/agreement between a public company and a private || company. 2. Cost of using service:- In some types of PPP the cost of using service is borne by users of the service and not by taxpayers and in some the cost of providing service is borne || wholly or partially by the government. 3. Provision of capital subsidy:- To attract private company government grants subsidies to/the private sector. 4. Project of high priority and public welfare:- PPP is suitable for high-investment projects such as the infrastructure sector. & Sharing of revenue;- The revenue of PPP is shared between the government and private companies. $. Problem of PPP:- The problem of PPP is that private investors obtained a rate of return that was higher than the “government bond rate even though most income risk is borne by the public sector.“| Que. Explain the changing role of the public sector. Ans. The Indian economy was in a stage of transition. x in the initial stage of development gave lots of importance to the public sector. | Wa BEAD, the vw econo pliesenphaed | liberalization, privatization, and globalization. — If the public sector was making losses continuously, it was referred to the board of industrial and financial reconstruction | for the complete overhauling or shutdown. 1. Development of infrastructure:- The process of industrialization cannot be sustained without adequate transportation and communication facilities, fuel and energy, and basic and heavy industries. The private sector did not show any initiative to invest in heavy industries or develop them in any manner. They did not have trained personnel or | finances to immediately establish heavy industries which was the requirement of the economy. It was only the government that could mobilize huge capital, coordinate industrial construction, and train technicians and the workforce. || 2. Regional Balance:-The government is responsible for developing all regions and states in a balanced way and removing regional disparities. Most of the industrial progress || was limited to a few areas like the port towns in the pre- Independence period. After 1951, the government laid do ndence pel eh avernment laid down in its Five Year Plans, that particular attention would be paid to || those regions which were lagging behind, and public sector |Tindustries were deliberately set up.3. Economies of scale: Where large-scale industries are required to be set up with huge capital outlay, the public sector had to step in to take advantage of economies of scale. Electric power plants, natural gas, petroleum, and telephone industries are some examples of the public sector setting up large-scale units, These units required a larger base to function economically which was only possible with government resources and mass-scale production, 4. Check over-concentration of economic power:- The public sector acts as a check over the private sector. In the private ||_sector, there are very few industrial houses that would be willing to invest in heavy industries with the result that wealth gets concentrated in a few hands and monopolistic practices are encouraged. S. Import substitution:- During the second and third Five Year Plan period, India was aiming to be self-reliant in many spheres. Obtaining foreign exchange was also a problem and it was difficult to import the heavy machinery required for a strong industrial base. $. Government policy towards the public sector since 199I:- >The main elements of the Government policy are as follows: Releasing the large number of public resources locked up in Reducing the huge amount of public debt and interest burden,Transferring the commercial risk to the private sector so that the funds are invested in able projects — Freeing these enterprises from government control and introducing of corporate governance; —in many areas where the public sector had a monopoly, for example, the telecom sector the consumers have benefitted from more choices, lower prices, and better quality of products and services. @Policy regarding sick units to be the same as thot for the private sector: All public sector units were referred to the Board of Industrial and Financial Reconstruction to decide whether a sick unit was to be restructured or closed down. d.Memorandum of Understanding: Improvement of performance through MoU (Memorandum of Understanding) system by which managements are to be granted greater autonomy but held accountable for specified results.