Chapter 3 Private, Public and Global Enterprises - BST class 11th

The private sector

Public Sector Company

Global Company- OR Multinational company

consists of business owned by individuals or a group of individuals

You must have come across all types of business organisations in your daily life. In your neighbourhood market, (Nai ki dukan , stationery ki dukan , panwari ki dukan , sadak ka idli wala , dosa wala . Big bazar, Dairy, selling milk and related products,Departmental stores,  groceries shops, stationery shops, eatables shops, Pharmacies, selling medicines shops. There are shops owned by sole proprietors or big retail organisations run by a company. Again  there are people providing you services like legal services, (Law firms)  medical services, Hospital being owned by more than one person i.e., partnership firms. These are all privately owned organisations:

These all shops can be in any form of organization such as Sole proprietorship ,

Partnership firms , HUF, Co operative societies. Even joint stock company owned by an individual or groups of individual where government stake does no exist.

1.Reliance Industries Limited.

2.Tata Consultancy Services (TCS)

3.Infosys Technologies Ltd.

4Wipro Limited.

5.Bharti Tele-Ventures Limited.

6. ITC Limited.

– Owned by government. Remember like private sector even government register its company as per company law. Government too bring  public issue , aapne 2022 mein LIC ka public issue dekhenge.

So when government register the company then it becomes public sector company.

Ab AApko government ke dwra ltd company formation karna samjh gaye honge , and ye bhi samjh gaye honge ki government dwara managed and operated by government bhi public issue lata hain .

 There are many companies  which are  owned by the government.

For example,

1.Railways is an organisation wholly owned and managed by the government.

2.The post office, in your locality is owned by the Post and Telegraph Department, Government of India, though our dependence on their postal services, particularly in cities and towns has been greatly reduced. This is because of plenty of private courier services firms operating in bigger towns.

3. Bharat Heavy Electricals Limited (BHEL)

4.Bharat Petroleum Corporation Limited (BPCL)

5.Coal India Limited (CIL)

6.Gas Authority of India Limited (GAIL)

7.Hindustan Petroleum Corporation Limited (HPCL)

8.Indian Oil Corporation Limited (IOCL)

9.National Thermal Power Corporation (NTPC)

P Agar Delhi ke connought place me jayenge then aa piss mcdonald ko dekha hoaga , ye kaha ki company hain ,?

America ki company hain , Appne Pizza Hutt ye bhi American Company,Rado Swiss company , Watch , Rolex Watch, Swiss company. Lotto is itallian brand , Adidas German multinational corporation,

Rebbock german compny subsidiary ,Burger king .

1

Departmental undertaking

विभागीय उपक्रम

Government departments that do some commercial activity like production, sales etc and prepares their separate accounts.

For example a department is made under AAYUSH Ministry for production and marketing of medicine to increase immunity against Covid-19. They are part of Government but are considered different for accountability, governance and accounting purpose. These are not separate legal entity like Government Companies.

Sarkari vibhag jo utpadan ya sales me laga ho

They do not do clerical or administrative work:

1.Ministry of Housing & Urban Affairs -Government press does printing of government stationery and gazettes (raj patra).

2.The Ministry of Defence- Ordinance factories produces weapons shells and bullets.

1.The Ministry of Railways-Indian Railways

2.Ministry of Communications-Postal  and telegraph,

3. the Ministry of Information & Broadcasting-All India Radio, Doordarshan. 

The departmental undertaking is the oldest and traditional form of an organization of the public sector enterprise. It is organized, financed and controlled in such a manner that any other government organization. The undertaking is under the control of a minister who is responsible to the parliament.

2

Statutory corporation

Sakari corporation established under special act of parliament

Like LIC

Statutory corporations are body corporates formed by a special act of parliament or by the central or state legislature. It is fully financed by the government. Its powers, objects, limitations etc. are also decided by the act of the legislature.

1.Reserve Bank of India (RBI)

2.Air India Corporation.

3.Food Corporation of India (FCI)

4. State Bank of India (SBI)

5. LIC -Life insurance corporation of india

3

Government company

Sarkari company (where 51% se jayeda capital is owned by Government)

And company is registered under the Companies Act.

But remember these companies too are controlled by some ministry too -

1.Ministry of Petroleum and Natural Gas-IOCL,ONGC,BPCL.HPCL,GAIL

2.Ministry of commerce -MMTC,STC

3.Ministry of Coal -Coal India

4,Civil Aviation MAINISTRY – Airport Authority of india

5. Ministry of Power – NTPC, NHPC,Power Grid.

State psu

1.DTC, DSIDC(Delhi state industrial development of corporation),DTC (Delhi Transport Corporation, BEST

PSU – Public Sector Undertaking:

“Government company” means any company in which not less than fifty-one per cent of the paid-up share capital is held by the Central Government, or by any State Government or Governments, or partly by the Central Government and partly by one or more State Governments, and includes a company which is a subsidiary ...

1

Funding  

The funding of these enterprises come directly from the Government Treasury and are an annual appropriation from the budget of the Government. The revenue earned by these is also paid into the treasury;

2

Accounting and audit co

They are subject to accounting and audit controls applicable to other Government activities;

3

Government Employee

The employees of the enterprise are Government servants and their recruitment and conditions of service are the same as that of other employees directly under the Government. They are headed by Indian Administrative Service (IAS) officers and civil servants who are transferable from one ministry to another

i

Subdivision of the Government department

It is generally considered to be a major subdivision of the Government department and is subject to direct control of the ministry

II

Accountable to the ministry

They are accountable to the ministry since their management is directly under the concerned ministry

1

Accountability

These ensure a high degree of  public accountability

2

Revenue earned

The revenue earned by the enterprise goes directly to the treasury and hence is a source of income for the Government

3

Control

These undertakings facilitate the Parliament to exercise effective control over their operations

4

National security

Where national security is concerned, this form is most suitable since it is under the direct control and supervision of the concerned Ministry

1

Flexibility No

Departmental undertakings fail to provide flexibility, which is essential for the smooth operation of business;

2

bureaucrat’s set up

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

Independent decision Not possible

The employees or heads of departments 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;

4

Insensitive to consumer needs

These organisations are usually insensitive to consumer needs and do not provide adequate services to them.

5

Political interference

There is a lot of political interference through the ministry

6

Red tapism

There is red tapism in day-to-day operations and no action can be taken unless it goes through the proper channels of authority;

1

Act of Parliament

Statutory corporations are set up under an Act of Parliament and are governed by the provisions of the Act. The Act defines the objects, powers and privileges of a statutory corporation

2

Accounts and audit

A statutory corporation is not subject to the same accounting and audit procedures applicable to government departments. It is also not concerned with the central budget of the Government

3

Control

This type of organisation is wholly owned by the state. The government has the ultimate financial responsibility and has the power to appropriate its profits. At the same time, the state also has to bear the losses, if any;

4

Separate legal entity

A statutory corporation is a body corporate and can sue and be sued, enter into contract and acquire property in its own name

5

Financially independent

This type of enterprise 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. It has the authority to use its revenues;

6

Employment

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. At times, some officers are taken from government departments, on deputation, to head these organisations.

1

Independent functioning 

They enjoy independence in their functioning and a high degree of operational flexibility. They are free from undesirable government regulation and control

2

Funding

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

Autonomous organizations

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

Combination of government and private enterprises 

A statutory corporation is a valuable instrument for economic development. It has the power of the government, combined with the initiative of private enterprises

1

Not Much Autonomous

In reality, a statutory corporation doesnot enjoy asmuchoperational flexibility as stated above. All actions are subject to many rules and regulations;

2

Red Tapesim

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.

3

Corruption

Where there is dealing with public, rampant corruption exists;

4

interference

Government and political interference has always been there in major decisions or where huge funds are involved

1

Created under Companies Act, 2013

It is an organisation created under the Companies Act, 2013 or any other previous Company Law

2

Management

The management of the company is regulated by the provisions of the Companies Act, like any other public limited company

3

Accounting and Audit rules procedure exemption

These companies are exempted from the accounting and audit rules and procedures. An auditor is appointed by the Central Government and the Annual Report is to be presented in the Parliament or the State Legislature;

4

Separate legal entity

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

5

Funding

The government company obtains its funds from government shareholdings and other private shareholders. It is also permitted to raise funds from the capital market.

6

Employment

The employees of the company are appointed according to their own rules and regulations as contained in the Memorandum and Articles of Association of the company. The Memorandum and Articles of Association are the main documents of the company, containing the objects of the company and its rules and regulations;

1

Created under companies Act

A government company can be established by fulfilling the requirements of the Indian Companies Act. A separate Act in the Parliament is not required;

2

Curb unhealthy business practices

These companies by providing goods and services at reasonable prices are able to control the market and curb unhealthy business practices

3

Autonomous

It enjoys autonomy in all management decisions and takes actions according to business prudence

4

Separate legal entity

It has a separate legal entity, apart from the Government

1

No complete Autonomous

Since the Government is the only shareholder in some of the companies, the provisions of the Companies Act does not have much relevance;

2

Not answerable directly to the Parliament

It evades constitutional responsibility, which a company financed by the government should have. It is not answerable directly to the Parliament

3

Government and political interference

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.

1

Marketing strategies:

STORY OF THUMSUP AND CAMPA

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. They posses a more reliable and upto-date market information system. Their advertising and sales promotion techniques are normally very effective. Since they already have carved out a place for themselves in the global market, and their brands are wellknown, selling their products is not a problem.

2

Advanced technology

APPLE IBM

These enterprises possess technological superiorities in their methods of production. They are able to conform to international standards and quality specifications. This leads to industrial progress of the country in which such corporations operate since they are able to optimally exploit local resources and raw materials. Computerisation and other inventions have come due to the technological advancements provided by MNCs

3

Product innovation

PHILIPS , GE

These enterprises are characterised by having highly sophisticated research and development departments engaged in the task of developing new products and superior designs of existing products. Qualitative research requires huge investment which only global enterprises can afford.

4

Centralized control

UNILEVER

They have their headquaters 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

5

Huge capital resources

 MARUTI ,TOYATA

These enterprises are characterised 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. Even investors and banks of the host country are willing to invest in them. Because of their financial strength they are able to survive under all circumstances.

6

Expansion of market territory

COKE -Swis story

 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. They operate through a network of subsidiaries, branches and affiliates in host countries. Due to their giant size they occupy a dominant position in the market.

7

Foreign collaboration

Starbucks TATA

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 sector. There are usually various restrictive clauses in the agreement relating to transfer of technology, pricing, dividend payments, tight control by foreign technicians, etc. Big industrial houses wanting to diversify and expand have gained by collaborating with MNCs in terms of patents, resources, foreign exchange etc. But at the same time these foreign collaborations have given rise to the growth of monopolies and concentration of power in few hands.

1

Contractual joint venture

2

Equity-based joint venture

1

Two or more parties have a common intention – of running a business venture;

2

Each party brings some inputs;

3

Both parties exercise some control on the business venture; and

4

The relationship is not a transaction-to-transaction relationship but has a character of relatively longer duration

1

There is an agreement to either create a new entity or for one of the parties to join into ownership of an existing entity

2

Shared ownership by the parties involved

3

Shared management of the jointly owned entity

4

Shared responsibilities regarding capital investment and other financing arrangements; and

5

Shared profits and losses according to the agreement

1

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. The new business pools in financial and human resources and is able to face market challenges and take advantage of new opportunities.

2

Access to new markets and distribution networks:

When a business enters into a joint venture with a partner from another country, it opens up a vast growing market. For example, when foreign companies form joint venture companies in India they gain access to the vast Indian market. Their products which have reached saturation point in their home markets can be easily sold in new markets. They can also take advantage of the established distribution channels i.e., the retail outlets in different local markets. Otherwise, establishing their own retail outlets may prove to be very expensive.

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 saves 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 reduction in costs

4

Innovation

: The markets are increasingly becoming more demanding in terms of new and innovative products. Joint ventures allow business to come up with something new and creative for the same market. Specially foreign partners can come up with innovative products because of new ideas and technology.

5

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. There are many reasons for this, low cost of raw materials and labour, technically qualified workforce; management professionals, excellent manpower in different cadres, like lawyers, chartered accountants, engineers, scientists. The international partner thus, gets the products of required quality and specifications at a much lower cost than what is prevailing in the home country.

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 in 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

1

The public partners in PPP are Government entities, i.e., ministries, government departments, municipalities or state-owned enterprises

2

The private partners can be local or foreign (international) and include businesses or investors with technical or financial expertise relevant to the project

3

PPP also includes NGOs and/or community-based organisations who are the stakeholders directly affected by the project.

4

.. PPP is, therefore, defined as a relationship between public and private entities in the context of infrastructure and other services

5

Under the PPP model, public sector plays an important role and ensures that the social obligations are fulfilled and sector reforms and public investment are successfully met. The government’s contribution to PPP is in the form of capital for investment and transfer of assets that support the partnership in addition to social responsibility, environmental awareness and local knowledge

6

The private sector’s role in the partnership is to make use of its expertise in operations, managing tasks and innovation to run the business efficiently

7

Sectors in which PPPs have been completed worldwide include power generation and distribution, water and sanitation, refuse disposal, pipelines, hospitals, school buildings and teaching facilities, stadiums, air traffic control, prisons, railways, roads, billing and other information technology systems, and housing.