Notes on Public, Private and Global Enterprises Chapter 3 Class 11 Business Studies 

Types of Public Sector Enterprises:

1. Departmental Undertaking
2. Statutory Corporation
3. Government Company

Departmental Undertaking:

These are oldest and traditional form of public sector enterprises.

These are established as departments of ministries.

Examples include railways, post offices, telegraph etc.

Features of Departmental Undertakings:

1. Finance: Departmental Undertakings are funded directly from government treasury. The revenue earned by these enterprises are also contributed to government treasury. 
2. Audit: Departmental Undertakings are subjected to audit by government. 
3. Employees: Employees of departmental undertaking are just like other government servants and they are recruited as per the same terms and conditions which are applicable to other government employees. Employees are headed by civil servants. 
4. Control: Departmental Undertakings are subjected to direct control of ministry. 
5. Accountability: Departmental Undertakings are directly accountable to the concerned ministry under which they are formed.

Merits:

1. These undertakings facilitate the Parliament to exercise effective control over their 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 most suitable since it is under the direct control and supervision of the concerned Ministry.

Limitations:

1. Departmental undertakings fail to provide flexibility, which is essential for the smooth  operation of business.
2. The employees or heads of depart-ments of such undertakings are not allowed to take independent decisions, without the approval of the ministry concerned. This leads to delays, in matters where prompt decisions are required.
3. These enterprises are unable to take advantage of business opportunities. The bureaucrat’s over-cautious and conservativeapproval does not allow them to take risky ventures.
4. There is red tapism in day-to-day operations and no action can be taken unless it goes through the proper channels of authority.
5. There is a lot of political interference through the ministry.
6. These organisations are usually insensitive to consumer needs and do not provide adequate services to them.

Statutory Corporation

Statutory Corporation is a form of public enterprise which is established by a Special Act of the Parliament. 

Examples: RBI, LIC, FCI etc.

Features of Statutory Corporation

1. It is brought into existence by a Special Act of the Parliament. 
2. The Act defines its powers, functions, rules and regulations.
3. It is usually independently financed. It obtains funds by borrowings from the government or from the public through revenues, derived from sale of goods and services.
4. It is a body corporate having a separate legal entity. 
5. The employees of these enterprises are not government or civil servants and are not governed by government rules and regulations.The conditions of service of the employees are governed by the provisions of the Act itself.

Merits

1. They enjoy independence in their functioning and a high degree of operational flexibility. They are free from undesirable government regulation and control.
2. Since the funds of these organisations do not come from the central budget, the government generally does not interfere in their financial matters, including their income and receipts.
3. Since they are autonomous organisations they frame their own policies and procedures within the powers assigned to them by the Act. The Act may, however,provide few issues/matters which require prior approval of a particular ministry.
4. A statutory corporation is a valuable instrument for economic development. It has the power of the government, combined with the initiative of private enterprises.

Limitations

1. In reality, a statutory corporation does not enjoy as much operational flexibility as stated above. Allocations are subject to many rules and regulations.
2. Government and political interference has always been therein major decisions or where huge funds are involved.
3. Where there is dealing with public,rampant corruption exists.
4. 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. If there is any disagreement, the matter is referred to the government for final decisions. This further delays action.

Government Company

A government company means any company in which not less than 51 per cent of the paid up capital is held by the central government, or by any state government or partly by Central government and partly by one or more State governments.

For eg: BHEL, SAIL etc. 

• A government company is established under the Companies Act, 2013 andis registered and governed by the provisions of The Act.
• A government company may be formed as a private limited company or a public limited company.
• The shares of the company are purchased in the name of the Presidentof India.
• Since the government is the major shareholder and exercises control over the management of these companies, they are known as government companies.

Features of Government companies:

1. It is an organisation created under the Companies Act, 2013 or any other previous Company Law.
2. The company can file a suit in a court of law against any third party and be sued. The company can enter into a contract and can acquire property in its own name.
3. The management of the company is regulated by the provisions of the Companies Act, like any other public limited company.
4. The employees of the company are appointed according to their own rules and regulations as contained in the Memorandum and Articles ofAssociation of the company. The Memorandum and Articles ofAssociation are the main documents of the company, containing the objects of the company and its rules and regulations.
5. These companies are exempted from the accounting and audit rules and procedures. An auditor is appointed by the CentralGovernment and the Annual Report is to be presented in theParliament or the State Legislature.
6. The government company obtains its funds from government shareholdings and other private shareholders. It is also permitted to raise funds from the capital markets. 

Merits of Government companies 

1. A government company can be established by fulfilling the requirements of the IndianCompanies Act. A separate Act in the Parliament is not required.
2. It has a separate legal entity, a part from the Government.
3. It enjoys autonomy in all management decisions and takes actions according to business prudence.
4. These companies by providing goods and services at reasonable prices are able to control the market and curb unhealthy business practices.

Limitations

1. Since the Government is the only shareholder in some of the companies, the provisions of theCompanies Act does not have much relevance.
2. It evades constitutional responsibility, which a company financed by the government should have. It is not answerable directly to the Parliament.
3. The government being the sole shareholder, the management and administration rests in the hands of the government. The main purpose of a government company, registered like other companies, is defeated.

Global Enterprises:

Global Enterprises are enterprises which operate in more than one country. Global Enterprises are also known as Multinational Corporations (MNCs).

Features of Global Enterprises/ MNCs

1. Centralised Control: MNCs operate in more than one country. They have branches and offices in several countries and keep control over their operations from the headquarter in their home country. 
2. Huge Capital Resources: MNCs are characterised by huge financial resources. They are in position to raise funds from capital market because banks and financial institutions are willing to give them loans due to their credibility. 
3. Advanced Technology: MNCs enjoy superior technology in production and marketing of goods. 
4. Product Innovation: Due to their huge financial resources, global enterprises are in position to invest in research and development for innovating their products.
5. Marketing Strategies: MNCs use aggressive marketing strategies to increase their sales. They make use of effective advertising and sales promotional techniques to promote their products. 
6. Expansion of Market Territory: MNCs operate beyond the physical boundaries of their own countries. They try to expand their market territories and become international brand.
7. Foreign Collaboration: Companies in private and public sector collaborate with MNCs to diversify and expand their markets. 

Public Private Partnership (PPP): 

Public Private Partnership (PPP) is a contract between public sector and private sector for provision of public services. 

Features of Public Private Partnership:

1. It is a partnership between the government and a private enterprise for provision of public services. 
2. PPP arrangement is for specific duration and this partnership comes to an end on competition of the project. 
3. It is suitable for big and high priority projects eg. infrastructure. 
4. Revenues are shared between the government and the private enterprises in an agreed ratio. 
5. Risks are also shared between the government and the private enterprises.

Joint Ventures