Chapter 10: Public Sector Undertakings and Global Enterprises
Every economy has activities that private business is unwilling or unable to take up. A rail network reaching the whole country, atomic energy, or the storage and supply of foodgrains needs enormous capital, returns slowly, and matters too much to be left to profit alone. Where this happens, the government itself enters business. Enterprises owned, managed and controlled by the government are called public enterprises, and together they form the public sector of the economy. The government must still decide how such an enterprise is to be organised. A railway system, a life insurance business and a heavy electricals factory cannot be run in the same manner — the first needs direct ministerial control, the last needs commercial freedom. Three organisational forms have developed to meet these differing needs, and a further arrangement, the public private partnership, draws private capital and expertise into government projects. This chapter explains what public enterprises are, how they differ from private enterprises, the three forms they take, the working of public private partnerships, and the meaning, characteristics and types of global enterprises.
Figure
Fig. 10.0-1 — An Indian Railways Passenger Train At A Station Photograph of a passenger train at an Indian railway platform, showing a service run directly by a government department.
10.1 What Public Enterprises Mean
Not every business activity a country needs can be left to private ownership. Some undertakings call for capital far beyond what an individual or a firm can raise, some return a profit only after many years, and some supply services so essential that their price and availability cannot depend on what the market will bear. In such areas the government does not merely regulate business — it owns and runs the business itself.
An enterprise established, owned, managed and controlled by the government is called a public enterprise. Such an enterprise is run on behalf of the public at large, and the funds it uses are public funds. Together, all such undertakings make up the public sector of the economy, in contrast with the private sector of sole proprietorships, partnerships and companies.
Why The State Enters Business
The government takes on business activity for reasons a private firm cannot easily serve.
- Heavy capital requirement — industries such as steel, heavy machinery, shipbuilding and power need investment on a scale and over a period that private investors are often unwilling to risk.
- Essential service at a reasonable cost — transport, insurance and the supply of foodgrains must reach the ordinary citizen at a price the citizen can pay, which a profit-seeking firm may not offer.
- Balanced regional development — a public enterprise can be located in a backward region to create employment there, whereas a private firm chooses the site that suits its own costs.
- Control of strategic sectors — activities involving national security or the country’s basic resources are kept under government control rather than private control.
Because these enterprises exist to serve the public, their purpose is stated in terms of social welfare rather than profit alone. This does not mean profit is irrelevant. A public enterprise that consistently loses money becomes a burden on the exchequer, so a reasonable surplus is treated as a test of how efficiently it is being run.
Levels Of Government Ownership
A public enterprise may be owned by the Central Government, by a State Government, or by a local body such as a municipal corporation. It may also be owned jointly — by the Centre together with one or more States, or, in some forms, by the government together with private shareholders.
10.2 Characteristics Of Public Enterprises
The features of a public enterprise are not a random collection. Almost every one of them follows from a single fact — the owner is the government, and the government answers to the public. Once that is understood, the reason behind each feature becomes clear.
Ownership, Control And Finance
- State ownership — the enterprise is owned by the Central Government, a State Government or a local authority, and in some cases jointly by two or more of them. Ownership may also be shared with private shareholders, provided the government retains the controlling interest.
- Management and control — the enterprise is managed either directly by a government department or by a board of directors appointed by the government. Control follows ownership, so the persons who run the undertaking are answerable to the government that appointed them.
- Financing — capital is drawn mainly from government funds, that is, from budget allocations or from borrowings raised by the government. A part may come from private shareholders or from loans, depending on the form of organisation adopted.
- Establishment by the state — a public enterprise is brought into existence by a decision of the government, by a special Act of the legislature, or by registration under company law. It is attached in each case to a ministry that oversees its working.
Objectives And Working
- Service objective — the main aim is to supply necessary goods and services to citizens at a reasonable cost. Profit is not ruled out, but it is treated as a measure of efficiency rather than as the purpose of the undertaking.
- Public accountability — because public money is used, the enterprise is answerable to the public through Parliament or the State Legislature. Its working is discussed by the legislature and its accounts are subjected to government audit.
- Liberal industrial relations — these enterprises are set up to serve economic and social objectives, so the interests of employees, consumers and society are given weight alongside cost. Wages and service conditions tend to follow government rules rather than market bargaining.
- Bureaucracy — the working is marked by hierarchy, a fixed division of work and extensive record-keeping. This system suits large-scale administration and ensures uniform treatment, but it is criticised for rigidity and slow decision-making.
10.3 Public Sector And Private Sector Enterprises Compared
Both sectors produce goods and supply services, and both employ managers, workers and capital. The difference lies in who owns the enterprise, and ownership then decides everything else — what the enterprise is trying to achieve, how quickly it can decide, and to whom it must answer.
A private sector enterprise is owned by individuals or by private investors, and it exists to earn a return for them. A public sector enterprise is owned by the government, and it exists to serve the public. Because the owner is different, the two behave differently in practice, as set out in Table 10.1.
The last basis deserves particular attention. A private firm that earns less than its rivals has failed by the only test that applies to it. A public enterprise may earn little and still have succeeded, if it carried an essential service to people who would otherwise have gone without. Judging the two by the same yardstick misreads what each was set up to do.
The Public Sector Today
The public sector expanded rapidly in the decades after independence and came to occupy the central position in the Indian economy. Since the economic reforms of 1991 the emphasis has shifted towards restructuring these enterprises and towards disinvestment, that is, the sale by the government of a part of its shareholding in an enterprise. Disinvestment in a loss-making unit is easier to justify than in a soundly running one, and it is generally argued that shares should be offered widely to the public rather than transferred to a few private buyers.
10.4 Forms Of Public Or State Enterprises
Once the government decides to run an undertaking, it must decide how tightly to hold it. A defence factory cannot be given commercial freedom, because secrecy and direct ministerial control matter more than speed. A heavy electricals plant competing with private manufacturers cannot be run like a government office, because delay in taking a routine decision would cost it its customers.
The three forms of organisation used in the public sector answer this single question — how much control does the government keep, and how much autonomy does the undertaking get. Moving from the first form to the third, control loosens and commercial freedom increases. The classification is shown in FC 10.1.
Flowchart
FC 10.1 — Forms Of Public Or State Enterprises Public or State Enterprises → Departmental Organisations, Statutory or Public Corporations, Government Companies
A departmental organisation is a part of a government department itself and has no separate existence. A statutory corporation is created by a special Act of the legislature and has a separate legal identity of its own. A government company is registered under company law, with the government holding the major share of its capital. Each of these is examined in the sections that follow.
The choice of form is therefore a practical judgement, made according to the nature of the activity, the degree of secrecy or public control required, and the extent to which the undertaking must compete in the market.
10.5 Departmental Organisations
The oldest and simplest way for a government to run a business is not to create a separate organisation at all, but to run it as part of an existing department. Under this arrangement the undertaking is managed by a ministry, staffed by government servants and financed out of the government budget, exactly as any other branch of administration would be.
An undertaking organised in this way is called a departmental undertaking. It is attached to a particular ministry of the Central or a State Government, and the departmental head who runs it is answerable to that ministry. Posts, telegraphs, railways, broadcasting and defence production have traditionally been organised in this form.
Features Of A Departmental Undertaking
- Part of a ministry — the undertaking is a division of a government department and is under the direct control of the departmental head, who in turn is accountable to the minister concerned.
- Budgetary finance — it is financed by annual appropriations voted from the treasury, and whatever it earns is paid back into the treasury. It cannot retain its earnings or reinvest them at will.
- Government budget and audit rules — it is subject to the same budgeting, accounting and audit controls that apply to any government department, which makes its spending transparent but slow.
- No separate legal existence — the undertaking is not a body distinct from the government, so it cannot own property, sue or be sued in its own name.
- Sovereign immunity — since it is the government itself, it can be sued only through the procedure by which a suit against the government is filed.
- Civil service staff — recruitment, appointment and conditions of service of its permanent staff are the same as those of other government servants.
- No administrative autonomy — because the undertaking is a government department in substance, decisions travel up and down the official hierarchy and political influence in day-to-day working is a regular feature.
The pattern running through these features is direct control. Nothing in this form is left to the judgement of the undertaking alone, which is precisely why the government keeps it for activities where control, secrecy and public accountability matter more than commercial speed — defence production, currency and coinage, and other strategic services.
10.6 Statutory Or Public Corporations
A departmental undertaking gives the government complete control, but it also ties the undertaking to budget procedure and official routine. Where a public enterprise must handle large sums, borrow, employ its own specialists and take commercial decisions quickly, that arrangement becomes a handicap. The statutory corporation was developed to meet this difficulty.
A statutory corporation is created by a special Act passed by Parliament or by a State Legislature. The Act itself states the objects of the corporation, the powers it may exercise and the functions it must perform. Because it owes its existence to a statute, it is also called a public corporation. Its entire capital is provided by the government, but it exists in law as a body separate from the government.
Features Of A Statutory Corporation
- Separate legal entity — it is a body corporate with perpetual succession and a common seal. It can own property, enter into contracts, and sue and be sued in its own name.
- Created by statute — its objects, powers and functions are laid down in the Act that created it, so its working can be altered only by amending that Act.
- Wholly government owned — the entire capital is provided by the government and is held in the government’s name.
- Financial autonomy — it may borrow from the public and from the treasury and may reinvest its earnings, which allows it to plan its finances on commercial lines instead of waiting for annual budget grants.
- Management by a board — the corporation is run by a board of directors appointed by the government, and the government does not interfere in day-to-day working.
- Accountability to the legislature — it submits an annual report on its working to Parliament or the State Legislature, its accounts are audited by the Comptroller and Auditor General of India, and the audit report may be discussed by the legislature.
- Own service rules — it frames its own rules of recruitment and remuneration, so its employees are not civil servants and can be recruited on the terms the work requires.
- Profit is not the main motive — legitimate profit, if earned, is welcome as evidence of efficient working, but the purpose of the corporation remains the service assigned to it by the statute.
Taken together, these features describe an enterprise that is publicly owned and publicly accountable, yet managed on business lines. That combination explains why the form is used for insurance, banking regulation, foodgrain procurement, financing and other public utility services.
Figure
Fig. 10.6-1 — A Foodgrain Storage Godown Photograph of stacked sacks of foodgrain inside a large storage godown, with handling equipment visible.
10.7 Government Companies
The statutory corporation requires a separate Act for every enterprise the government wishes to create, and that Act must be amended whenever its objects need to change. Where the government wants an enterprise that can be set up quickly, that can raise capital from investors, and that can be run on ordinary commercial lines, it uses the form already available to private business — the company.
A government company is a company registered under the Companies Act, 2013 in which not less than fifty-one per cent of the paid-up share capital is held by the Central Government, by one or more State Governments, or partly by the Central Government and partly by one or more State Governments. A subsidiary of such a company is also treated as a government company. The remaining share capital, up to forty-nine per cent, may be subscribed by private individuals or institutions.
Characteristics Of A Government Company
- Incorporation under company law — it is registered under the Companies Act, 2013 and therefore possesses all the attributes of a company: a separate legal entity, perpetual succession and a common seal.
- Majority government shareholding — at least fifty-one per cent of the paid-up capital is held by the government, which is what secures government control while allowing private participation.
- Governed by the Companies Act — it is not subject to the accounting and audit rules that apply to government departments, but follows the provisions of the Companies Act, 2013 and other relevant laws.
- Management by a board of directors — directors are appointed by the government and by the other shareholders, so management is professional and corporate in character.
- Access to the capital market — funds come from government shareholding, from private shareholders and from the capital market, which widens its sources of finance beyond the government budget.
- Legal capacity of its own — it can enter into contracts, acquire and hold property in its own name, and sue or be sued as any other company.
- Report to the legislature — an annual report on its working is placed before Parliament or the State Legislature, preserving public accountability despite its commercial form.
Note the balance being struck. Government control is retained through the shareholding, while the flexibility of the company form is retained through incorporation under ordinary company law. Table 10.2 sets the three forms side by side.
10.7.1 Types Of Government Companies
Government companies are of two types, distinguished by whether any private shareholder holds capital in them.
- Wholly owned government companies — the entire share capital is held by the government, so no outside shareholder has any stake in the enterprise.
- Mixed ownership government companies — the government and private shareholders are joint owners, but the major part of the capital, and therefore control, remains with the government.
10.7.2 Suitability Of The Government Company Form
The government company sits between the rigidity of a departmental undertaking and the full autonomy of a statutory corporation, which is why it is described as a compromise between the two. It is chosen in the following situations.
- When the enterprise is to be launched in association with private interests, domestic or foreign, since the company form allows outside investors to hold shares alongside the government.
- When the government wishes to take control of a struggling private company without nationalising it, by acquiring a majority of its shares in order to protect the workers, suppliers and public connected with it.
- When an enterprise is to be started as a public venture with the intention of transferring it to the private sector later, which the company form makes possible through a sale of shares.
- When the government wishes to promote and develop a new field of economic activity, where the enterprise must operate commercially from the outset.
10.8 Public Private Partnership
Roads, ports, airports and metro rail systems were traditionally built and run by the government alone. The difficulty is that a government’s ability to spend is limited by its budget and by how much it can borrow, while the demand for infrastructure keeps growing. One way of closing that gap is to bring in the private sector — not as an owner of a public service, but as a partner in delivering it.
A public private partnership, commonly written as PPP, is a long-term contractual arrangement between a government or statutory body on one side and a private sector company on the other, for financing, designing, building and operating an infrastructure facility that the public sector would otherwise have provided. It is also referred to as P3 or as private sector participation. The private partner brings capital, technology and management expertise; the government retains responsibility for the service the citizen finally receives.
The general structure of such an arrangement is summarised in FC 10.2.
Flowchart
FC 10.2 — Structure Of A Public Private Partnership Government or statutory entity identifies the project → concession agreement signed with private sector company → private partner arranges finance, design and construction → facility operated for the agreed period → user charges collected → government remains accountable for quality and cost of the service
Features Of A Public Private Partnership
- Combination of capacities — the arrangement brings together the skills, experience and resources of both sectors so that the service delivered is of a higher quality than either could achieve alone.
- Sharing of risk — the risks of construction, finance and operation are divided between the partners by agreement, so that each risk is carried by the side better able to manage it.
- Used for high-priority projects — PPPs are applied to planned government projects aimed at public benefit, chiefly in infrastructure.
- Relief from budgetary constraints — because the private partner brings in funds, the government can undertake a project it could not have financed from its own budget or borrowings.
- Faster completion — a project executed by a private partner under a contractual deadline is generally implemented more quickly and at a lower life-cycle cost.
- Government remains accountable — responsibility for the quality and the cost of the service to the public stays with the government, whoever operates the facility.
- Distinct from privatisation — ownership of the asset is not transferred to the private sector; only defined tasks are, and only for an agreed period.
Benefits And Strengths
The case for the arrangement rests on what each partner contributes. The private sector supplies investment that bridges the infrastructure gap, along with modern technology, better project design and more efficient use of resources than a departmental construction effort usually achieves. The government supplies the mandate, the land and the assurance that the facility will serve the public rather than only those who can pay most. The result is faster implementation, lower life-cycle costs, risk allocated to the party best able to bear it, and improved delivery of public services.
10.9 Global Enterprises: Meaning And Concept
A business that has grown as large as its home market allows must look outward if it is to grow further. Selling abroad is the first step; producing abroad is the next. When a company sets up factories, offices or subsidiaries in other countries and manages them as parts of one business, it has become a global enterprise.
A global enterprise, also called a multinational company or a transnational corporation, is a business that has its head office in one country and carries on production, marketing or service operations in a number of other countries. The word ‘multinational’ is formed from ‘multi’, meaning many, and ‘national’, referring to nations, and the two parts together describe exactly what such a company does — it operates across many nations while remaining incorporated in one.
The country in which the company is incorporated and has its headquarters is called its home country. The countries in which it carries on operations through branches, subsidiaries or affiliates are called its host countries.
Why Companies Go Global
The decision to operate abroad is a commercial one, taken for reasons that a purely domestic firm cannot obtain.
- Access to markets — producing within a host country places the company close to its customers there and avoids the cost and delay of exporting from home.
- Access to inputs — raw materials, labour or capital may be cheaper or more readily available abroad than at home.
- Reduction of transport costs — manufacturing near the market removes the expense of carrying finished goods across long distances.
- Spreading of risk — a company operating in several countries is less exposed to a slowdown in any one of them.
Host countries, for their part, invite these firms for the advanced technology and capital they bring, and for the output and employment that follow. The relationship is therefore two-sided: the company seeks markets and inputs, and the host country seeks investment and skills.
10.10 Characteristics Of Global Enterprises
Most of the features of a global enterprise follow from two facts — it is very large, and it must survive in more than one market at the same time. Size gives it resources that a domestic firm cannot match; competition across markets forces it to use those resources well.
Size And Reach
- Operations in more than one country — the company carries on business in several countries through branches, subsidiaries or affiliates controlled from its headquarters.
- Giant size — its capital, turnover and assets are very large, which is what allows it to bear the cost of entering a foreign market and to wait for returns.
- Wide scale of operation — production, marketing and research are all carried on in a number of countries rather than concentrated in the home country alone.
- Worldwide profit motive — the company plans its operations to maximise profit taken as a whole across all its markets, not country by country.
Resources And Working
- Advanced technology — it commands technology of a high order and uses it to offer products and services of international standard, which is also the main gain a host country expects from its presence.
- Capital intensive methods — heavy investment in machinery and systems is made not only in manufacturing but in marketing and distribution as well, because scale makes such investment worth its cost.
- Professional management — trained managers are employed to handle advanced technology, large funds and operations spread across different legal and cultural systems.
- Attention to quality — since it competes globally, its products are judged against the best available anywhere, and quality cannot be allowed to slip in any one market.
- Heavy advertising and brand building — large sums are spent on advertising and sales promotion, because a name recognised across countries is one of the company’s most valuable assets.
A caution is in order. These features describe capability, not benevolence. The same financial strength that lets a global enterprise bring technology into a country also lets it outspend and outlast local firms, which is why host countries welcome such investment while regulating the terms on which it enters.
10.11 Types Of Global Companies
Companies do not all cross borders in the same way. Some merely sell abroad what they make at home; others manufacture abroad but keep every decision at headquarters; still others hand real freedom to their local units. What separates the types is the answer to two questions — how far the company adapts to local markets, and how far decision-making is centralised. The five types recognised on this basis are listed in FC 10.3.
Flowchart
FC 10.3 — Types Of Global Companies Global Companies → International Company, Multinational Corporation, Global Company, Multidomestic Company, Transnational Company
The Five Types
- International company — a domestic company that mainly exports its products to other countries with little or no local adaptation. Production stays at home, so the company gains foreign sales without taking on the cost of foreign operations. A Swiss watchmaker manufacturing only in Switzerland and exporting worldwide works in this way.
- Multinational corporation — a company with operations in several countries, usually maintaining a separate management structure in each market while repeating the model that works at home. Its headquarters lie in one country, with subsidiaries, branches or affiliates elsewhere.
- Global company — a company that offers a standardised product and follows one strategy across all its markets, with decision-making centralised at headquarters. It treats the world as a single market, which keeps costs low but leaves little room for local variation.
- Multidomestic company — a company that adapts its products and its marketing to the specific needs of each local market and grants substantial autonomy to its local subsidiaries. It sacrifices some economy of scale in return for acceptance in each market.
- Transnational company — a company that attempts both at once, combining global efficiency with responsiveness to local markets through a decentralised management structure that allows flexibility across regions. Large banking and consumer goods groups such as HSBC are organised in this manner.
Read in order, the list moves from selling abroad to producing abroad, and then from imposing one pattern everywhere to adjusting the pattern in each market. The last type is the most demanding to manage, because a company pursuing efficiency and local flexibility at the same time must constantly decide which of the two should give way.
10.12 Summary
- A public enterprise is a business undertaking owned, managed and controlled by the Central, State or local government on behalf of the public, and financed mainly from public funds. Together these undertakings form the public sector.
- The government enters business where capital requirements are heavy, where an essential service must reach citizens at a reasonable cost, where regional development must be promoted, and where strategic sectors must stay under public control.
- The characteristics of public enterprises follow from government ownership: state ownership, government management and control, financing from government resources, a service objective, public accountability, establishment by the state, liberal industrial relations and bureaucratic working.
- Public and private sector enterprises differ in objective, formation, capital, management, freedom of operation, employees, accountability and the way performance is evaluated. A public enterprise is judged by the social purpose it serves as well as by its financial results.
- Since 1991 the emphasis has been on restructuring public enterprises and on disinvestment, which is the sale of part of the government’s shareholding and is distinct from privatisation.
- Public enterprises are organised in three forms, differing in how much control the government retains and how much autonomy the undertaking receives:
- Departmental organisation — run as part of a government department, financed from the budget, staffed by government servants, with no separate legal existence and no administrative autonomy.
- Statutory or public corporation — created by a special Act of the legislature, a separate legal entity, wholly government owned, financially autonomous, managed by a government-appointed board and accountable to the legislature.
- Government company — registered under the Companies Act, 2013 with not less than fifty-one per cent of the paid-up share capital held by the government, managed by a board of directors and able to raise funds from the capital market.
- Government companies are of two types — wholly owned, where the entire capital is with the government, and mixed ownership, where private shareholders hold a minority stake. The form suits ventures with private or foreign participation, the takeover of a private company without nationalisation, enterprises intended for later transfer to the private sector, and the development of a new field of activity.
- A public private partnership is a long-term contractual arrangement between a government or statutory entity and a private sector company for financing, designing, building and operating an infrastructure facility, with the service delivered on payment of user charges.
- A public private partnership combines the capacities of both sectors, shares risk between them, relieves budgetary constraints, speeds up implementation and lowers life-cycle costs, while the government remains accountable for the quality and cost of the service. It is not privatisation, since ownership is not transferred.
- A global enterprise, or multinational company, is incorporated and headquartered in one country, the home country, and owns and manages operations in other countries, the host countries. Companies go global for access to markets and inputs, lower transport costs and the spreading of risk.
- Global enterprises are marked by operations in several countries, giant size, a wide scale of operation, a worldwide profit motive, advanced technology, capital intensive methods, professional management, attention to quality and heavy expenditure on advertising.
- Global companies are classified by how far they adapt to local markets and how far decisions are centralised, into international companies, multinational corporations, global companies, multidomestic companies and transnational companies.
10.13 Key Terms
- Bureaucracy An administrative system marked by hierarchy, a fixed division of work and extensive record-keeping, which ensures uniformity but slows decision-making.
- Departmental undertaking A public enterprise run as a part of a government department, financed from the budget, staffed by government servants and having no separate legal existence.
- Disinvestment The sale by the government of a part of its shareholding in a public enterprise, usually while retaining control.
- Global enterprise A business having its head office in one country and carrying on production, marketing or service operations in a number of other countries.
- Government company A company registered under the Companies Act, 2013 in which not less than fifty-one per cent of the paid-up share capital is held by the Central Government, one or more State Governments, or partly by both.
- Home country The country in which a global enterprise is incorporated and has its headquarters.
- Host country A country in which a global enterprise carries on operations through a branch, subsidiary or affiliate.
- Multinational company Another name for a global enterprise, describing a company that owns, controls and manages operations in more than one country from a single home base.
- Public accountability The answerability of a public enterprise to the public through Parliament or the State Legislature, arising because public funds are used.
- Public enterprise A business undertaking owned, managed and controlled by the Central, State or local government on behalf of the public at large, and financed mainly out of public funds.
- Public private partnership A project based on a contract or concession agreement between a government or statutory entity and a private sector company, for delivering an infrastructure service to the public on payment of user charges.
- Public sector That part of the economy which consists of enterprises owned and controlled by the government.
- Statutory corporation An autonomous public enterprise created by a special Act of Parliament or a State Legislature, wholly owned by the government and possessing a separate legal identity.
10.14 Points To Ponder
- A public enterprise is judged partly by the social purpose it serves and partly by its financial results. When the two point in opposite directions — a service that is needed but cannot pay for itself — which should decide whether the enterprise continues?
- Public accountability makes a public enterprise answerable for every rupee it spends, but it also makes its managers cautious about taking risks. Is there a way to keep the accountability without losing the willingness to decide?
- The government company form gives commercial freedom while keeping control through a majority shareholding. Does holding fifty-one per cent of the shares guarantee that the enterprise will actually serve public purposes rather than commercial ones?
- In a public private partnership the government keeps accountability for the service while the private partner keeps the operating decisions. What difficulties can arise when responsibility and control are held by different parties?
- Host countries welcome global enterprises for the technology and capital they bring, yet local firms may be unable to compete with them. On what terms should a country admit such investment?
- A transnational company tries to be efficient globally and responsive locally at the same time. Where these two aims conflict in a particular market, which should a manager give up, and why?
10.15 Objective Questions
- Which form of public enterprise has no separate legal existence apart from the government? [1]
- Statutory corporation
- Departmental undertaking
- Government company
- Multidomestic company
- The minimum share of paid-up capital that the government must hold in a government company is [1]
- twenty-six per cent
- forty-nine per cent
- fifty-one per cent
- seventy-five per cent
- A statutory corporation is brought into existence by _______________ . [1]
- Assertion (A): A public private partnership is not the same thing as privatisation. Reason (R): In a public private partnership the government transfers ownership of the asset permanently to the private partner. [1]
- Both (A) and (R) are true, and (R) is the correct explanation of (A).
- Both (A) and (R) are true, but (R) is not the correct explanation of (A).
- is true, but (R) is false.
- is false, but (R) is true.
- Match the type of global company given in Column A with its description in Column B. [1]
- International company
- Global company
- Multidomestic company
- Transnational company
- Changes its product for each market and gives autonomy to local units
- Mainly exports from the home country with little local adaptation
- Combines global efficiency with local responsiveness through decentralised management
- Sells a standardised product everywhere with centralised decision-making
- (i)–(B), (ii)–(D), (iii)–(A), (iv)–(C)
- (i)–(A), (ii)–(B), (iii)–(D), (iv)–(C)
- (i)–(B), (ii)–(A), (iii)–(C), (iv)–(D)
- (i)–(D), (ii)–(B), (iii)–(A), (iv)–(C)
10.16 Check Your Concepts
- Define a public enterprise and state one reason why a government sets one up. [2]
- Explain why a departmental undertaking is slow in taking decisions. [3]
- State any three characteristics of a global enterprise. [3]
- Distinguish between a statutory corporation and a government company on any four bases. [4]
- ‘A public private partnership relieves the government of its responsibility for a public service.’ Evaluate this claim, explaining what a public private partnership actually transfers and what it retains, and state any three benefits of the arrangement. [6]
10.17 Case-Based Questions
- Sarita Devi heads a state government committee examining two proposals. The first is a plant to manufacture power generation equipment, which must compete with private manufacturers, recruit engineers on its own terms and raise part of its capital from investors. The second is a facility for the storage of strategic defence supplies, where secrecy is essential and the government wants complete control over every decision.
- Identify the form of public enterprise most suitable for each proposal. [2]
- State two features of the form you have suggested for the second proposal that make it suitable for that activity. [2]