Public Sector Enterprises

Public sector enterprises have been set up in India to achieve several objectives. Which of them is not correct—

1. Substantial increase in industrial output
2. To balance in the development of various sector of economy
3. To provide opportunities for gainful employment to millions of people in rural area
4. To curb private monopoly

Answer

To provide opportunities for gainful employment to millions of people in rural area

Reason — Public enterprises do provide opportunities for gainful employment to millions of people, but this is not restricted to rural areas alone. The objective of employment generation under public enterprises covers people in all areas — urban, semi-urban, and rural. The other three options — substantial increase in industrial output (rapid industrialisation), balanced development of various sectors (planned growth), and curbing private monopoly (egalitarian society) — are all correct objectives of public sector enterprises.

Public enterprises frequently faces labour trouble because

Statement I: Workers of enterprises are permanent and cannot be removed.

Statement II: Politicians use trade unions for their selfish interests.

1. Statement I is correct
2. Statement II is correct
3. Statements I and II are correct
4. Neither statement I nor II is correct

Answer

Statements I and II are correct

Reason — Both statements are correct. Workers of public enterprises know that their services cannot be terminated and they put pressure on the Government leading to frequent strikes and lockouts. Additionally, politicians use trade unions of public sector enterprises for their selfish interests, which further contributes to labour problems in these enterprises.

Which of the following cannot be a form of Public Sector Enterprises?

1. Departmental Undertaking
2. Statutory Corporation
3. Private Corporation
4. Government Companies

Answer

Private Corporation

Reason — Public sector enterprises may be organised in three forms — Departmental Undertakings, Statutory/Public Corporations, and Government Companies. A "Private Corporation" is owned and controlled by private individuals or groups and is not a form of public sector enterprise.

Which of the following enterprises does not belong to departmental undertaking?

1. Indian Railways
2. Post and Telegraph
3. Air India
4. All India Radio

Answer

Air India

Reason — The examples of departmental undertakings include Indian Railways, Post and Telegraph Department, Doordarshan, All India Radio (AIR), and Defence Ordnance Factories. Air India is organised as a government company and is registered under the Companies Act, not as a departmental undertaking.

If the government wants to maintain secrecy in a national defence project, which form of public enterprise should it choose?

1. Government Company
2. Public Corporation
3. Departmental Undertaking
4. Private Company

Answer

Departmental Undertaking

Reason — A departmental undertaking is the most suitable form when complete secrecy is required because the government can avoid disclosure on the plea of public interest. It is under direct ministerial control and is suitable for defence and public utility undertakings requiring utmost secrecy and of strategic significance. Defence Ordnance Factories are organised as departmental undertakings for this reason.

Public sector organisation may either be partly or wholly owned by the ............... government.

1. State
2. Central
3. Foreign
4. Central or State

Answer

Central or State

Reason — Public sector consists of all industrial and commercial enterprises owned and operated by the Central and/or State governments. A public sector enterprise — whether a departmental undertaking, statutory corporation, or government company — may be run either by the Central Government or by a State Government, or jointly by both.

An organisation is working for the purpose of public welfare as a ministry of government and all its income is deposited in the government treasury. Identify which kind of public sector enterprise it is.

1. Partnership
2. Department undertaking
3. Sole proprietorship
4. Company

Answer

Department undertaking

Reason — A departmental undertaking is organised, financed and controlled in much the same way as any other government department. It is a major part of the department attached to a particular ministry, has no separate entity distinct from the government, and practically all its earnings are paid into the government treasury.

Public Corporations are formed by a Special Act of Parliament or State Legislature without private participation. The act defines their powers, objects and privileges.

1. True
2. False
3. Can't say
4. Partial False

Answer

True

Reason — A statutory or public corporation is a body corporate set up under a Special Act of the Parliament or of the state legislature. The statute defines its objects, powers, functions, and privileges. It is wholly financed by the government with no private participation in its ownership.

The company shown in the image collaborates with private companies for technical expertise. Which form of organisation does this represent?

1. Statutory Corporation
2. Government Company
3. Departmental Undertaking
4. Public Trust

Answer

Government Company

Reason — A government company is the only form of organisation by which the government can avail of the management skill, technical know-how and expertise of the private sector and foreign countries. Hindustan Aeronautics Limited (HAL) shown in the image is a government company that collaborates with private companies and foreign enterprises for technical expertise.

A Public Corporations has its own staff and civil service rules are not applicable to them.

1. True
2. False

Answer

True

Reason — A statutory/public corporation has its own staff. Their appointment, remuneration and service conditions are decided by the corporation itself. Its employees are not government servants, and therefore, civil service rules are not applicable to them.

A government company is a company in which ............... of the paid up share is held by the Central Government.

1. not less than 30%
2. not less than 51%
3. not less than 71%
4. not less than 50%

Answer

not less than 51%

Reason — A government company is defined as a company in which not less than 51 per cent of the paid-up share capital is held by the Central Government or by one or more State Governments or jointly by the Central and State Governments. It is formed and registered under the Companies Act, 2013.

The directors and officers of government companies do not take bold decisions due to fear of criticism in ............... .

1. the media
2. the Parliament
3. the public
4. none of these

Answer

the Parliament

Reason — The directors and officers of government companies do not take active interest and initiative in their day-to-day functioning. They like to play safe and do not take bold decisions due to fear of criticism in the Parliament, since the annual report of a government company is placed before and discussed in the Parliament.

Assertion (A): Public sector enterprises may have a social responsibility to provide employment opportunities.

Reasoning (R): Government ownership often leads to an emphasis on job creation as part of the broader social welfare objectives.

1. A is true but R is false.
2. A is false but R is true.
3. Both A and R are true and R explains A.
4. Both A and R are true but R does not explain A.

Answer

Both A and R are true and R explains A.

Reason — Public sector enterprises do have a social responsibility to provide gainful employment to millions of people. This emphasis arises directly from government ownership, which prioritises social welfare objectives such as job creation, improving per capita income, checking recession, and protecting employment by nationalising sick units. Hence, R correctly explains A.

The Ministry of Defence manages an enterprise that produces military equipment. Under which form of organisation does this enterprise most likely fall?

1. Public Corporation
2. Government Company
3. Departmental Undertaking
4. Cooperative Society

Answer

Departmental Undertaking

Reason — An enterprise producing military equipment under direct management of the Ministry of Defence requires complete secrecy and direct government control. Defence Ordnance Factories are organised as departmental undertakings for these reasons. This form is most suitable for defence and public utility undertakings requiring utmost secrecy and of strategic significance.

Assertion (A): Public sector enterprises promote balanced regional development.

Reasoning (R): They set up industries in backward areas to reduce regional disparities.

1. Both A and R are true, and R is the correct explanation of A.
2. Both A and R are true, but R is not the correct explanation of A.
3. A is true, but R is false.
4. A is false, but R is true.

Answer

Both A and R are true, and R is the correct explanation of A.

Reason — Private entrepreneurs avoid setting up industries in remote and backward areas because they lack infrastructural facilities such as electricity, transport, banks, and communications. Public enterprises are deliberately set up in such backward regions to remove regional disparities and ensure balanced development across different parts of the country. Hence, R correctly explains A.

A government organisation producing electricity for rural areas is entirely owned by the government. It was established under a special statute passed by Parliament. This organisation is independent in its operations and has its own staff. What type of public sector enterprise is described here?

1. Government Company
2. Public Corporation
3. Departmental Undertaking
4. Cooperative Society

Answer

Public Corporation

Reason — The organisation described matches all the key features of a public/statutory corporation — it is wholly owned by the government, established under a special statute passed by Parliament, independent in operations (autonomous body), and has its own staff (employees not governed by civil service rules). All these are distinctive features of a statutory corporation.

A government company is allowed to borrow funds and make contracts independently. This reflects which feature of a government company?

1. Flexibility
2. Accountability
3. Bureaucratic Interference
4. Financial Dependence

Answer

Flexibility

Reason — Flexibility of operations is a key feature of a government company. As a separate legal entity formed under the Companies Act, it can take prompt decisions regarding management, finance, borrowing, and contracts without bureaucratic interference. This independence to borrow funds and make contracts independently reflects the flexibility of its operations.

Which of the following has the power of the government and the considerable amount of operating flexibility of public enterprise?

1. Department undertaking
2. Statutory Corporations
3. Government companies
4. All of the above

Answer

All of the above

Reason — All three forms — departmental undertakings, statutory corporations, and government companies — are forms of public enterprises that combine the authority of the government with varying degrees of operating flexibility. Each form is established to serve public interest with governmental backing while undertaking commercial activities, though the degree of flexibility differs across the three forms.

The government has partnered with private stakeholders to run an airline company. The government holds 51% of the shares, and the rest is owned by private investors. The company is registered under the Companies Act and is managed by a Board of Directors. What is the key advantage of this form of enterprise?

1. Full government control
2. Reduced accountability
3. Flexibility in management and operations
4. Rigid structure

Answer

Flexibility in management and operations

Reason — The described enterprise is a government company since the government holds 51% shares, the company is registered under the Companies Act, and is managed by a Board of Directors. The key advantage of a government company is flexibility in management and operations — its objects, powers and organisational set-up can be easily altered, and it can take prompt decisions on commercial principles without amending any statute.

Assertion (A): Government companies are highly flexible in their operations compared to other public enterprises.

Reasoning (R): They are governed by the Companies Act and can make decisions independently without bureaucratic interference.

1. Both A and R are true, and R is the correct explanation of A.
2. Both A and R are true, but R is not the correct explanation of A.
3. A is true, but R is false.
4. A is false, but R is true.

Answer

Both A and R are true, and R is the correct explanation of A.

Reason — Government companies are highly flexible because they are governed by the Companies Act, 2013. As separate legal entities, they can make prompt decisions regarding management, finance, and operations independently. They are relatively free from bureaucratic control and political interference in their day-to-day functioning, allowing them to operate on commercial principles. Hence, R is the correct explanation of A.

Statutory Corporation is wholly owned by the government. Its entire equity share capital is contributed by the state. This statement is

1. True
2. False

Answer

True

Reason — A statutory corporation is wholly owned by the government. Its entire equity share capital is contributed by the state with no private participation. It is an autonomous body fully financed by the government and established under a special Act of Parliament or state legislature.

The government established a corporation under a special act to provide insurance services. This corporation has its own legal identity and operates with a service motive. However, its operations are periodically reviewed by Parliament to ensure public accountability. What is the role of Parliament in such organizations?

1. To oversee the day-to-day operations
2. To ensure financial accountability and transparency
3. To make management decisions
4. To hire staff

Answer

To ensure financial accountability and transparency

Reason — A public corporation is fully accountable to the Parliament. Parliament does not interfere in day-to-day operations, make management decisions, or hire staff. Its role is limited to scrutiny and discussion of the annual report and audited accounts to ensure financial accountability, proper use of public money, and transparency in operations.

Statement I: Departmental undertakings are financed through budgetary allocations from the government.

Statement II: Departmental undertakings have the flexibility to make autonomous decisions.

1. Both statements are correct.
2. Both statements are incorrect.
3. Statement I is correct, but Statement II is incorrect.
4. Statement II is correct, but Statement I is incorrect.

Answer

Statement I is correct, but Statement II is incorrect.

Reason — Statement I is correct — departmental undertakings are financed by annual appropriations from the government budget, and practically all their earnings are paid into the treasury. Statement II is incorrect — departmental undertakings function under strict parliamentary and direct ministerial control with very little delegation of powers; they have no autonomy or flexibility to make independent decisions.

Define the term 'Public Enterprise'.

Answer

A public enterprise refers to an industrial or commercial enterprise owned and controlled by the Central and/or State Government.

State arguments against public enterprises.

Answer

The arguments against public enterprises are:

1. Poor Project Planning — Public enterprises are often established in a hurry without proper evaluation.

2. Time and Cost Overruns — Public sector projects are often not completed on time and exceed cost estimates.

3. Heavy Overhead Expenses — Huge amounts spent on townships and infrastructure block capital in unproductive way.

4. Inefficient Management — Efficiency is low due to uninspiring leadership, staff, red tape, bureaucratic procedures, transfers of top executives, and lack of personal responsibility for results.

5. Labour Trouble — Public enterprises frequently face strikes, lockouts and other labour problems as workers know their services cannot be terminated.

6. Rigid Financial Control — Strict control by the Comptroller and Auditor General of India and Parliament makes the management overly cautious, resulting in failure to take initiative.

7. Poor Returns — Most public enterprises fail to earn a reasonable profit on their investment.

8. Political Interference — Frequent political interference in day-to-day working reduces freedom of action and flexibility of operations.

Explain the meaning of departmental undertaking.

Answer

A departmental undertaking is the oldest and traditional form of organising public sector enterprises. It is organised, financed and controlled in much the same way as any other government department. It may be run either by the Central Government or by a State Government.

Some examples are: Post and Telegraph Department, Indian Railways, Doordarshan, All India Radio (AIR), and Defence Ordnance Factories.

What role do statutory corporation play in achieving government objectives?

Answer

Statutory corporations help the government achieve its objectives in the following ways:

1. Provide Essential Services — They provide services such as banking, insurance, food supply and social security.

2. Public Welfare — Their main aim is service to the public, not profit-making.

3. Balanced Development — They help in the development of different regions and sectors.

4. Efficient Working — They enjoy autonomy and can take quick business-like decisions.

5. Public Accountability — They are accountable to Parliament or the State Legislature.

6. Control Private Monopolies — They protect consumers from exploitation by private monopolies.

Thus, statutory corporations help in promoting public welfare and economic development.

A statutory corporation faces criticism for its rigid structure. Explain why this happens.

Answer

A statutory corporation faces criticism for its rigid structure due to the following reasons:

1. Statute-Based Formation — The constitution of a statutory corporation is created by a Special Act of Parliament or state legislature, which makes it inherently rigid.

2. Difficult to Amend — Its objects, powers and functions are defined by the statute and cannot be changed without amending the Act.

3. Time-Consuming Process — Amending the statute is a cumbersome and time-consuming process.

4. Cannot Adapt Quickly — Due to this rigidity, the corporation cannot quickly adapt to changes in technology, market conditions or the business environment.

5. Loss of Business Opportunities — The rigid structure may result in loss of business opportunities.

Give three examples each of statutory corporations and government companies.

Answer

Three examples of Statutory Corporations:

1. Reserve Bank of India (RBI)
2. Life Insurance Corporation of India (LIC)
3. Damodar Valley Corporation

Three examples of Government Companies:

1. Steel Authority of India Limited (SAIL)
2. Bharat Heavy Electricals Limited (BHEL)
3. Hindustan Machine Tools Limited

Define a government company.

Answer

A government company is a company in which not less than 51 per cent of the paid-up share capital is held by the Central Government or by one or more State Governments or jointly by the Central and State Governments. It is formed and registered under the Companies Act, 2013. Some examples are Hindustan Insecticides Ltd., Hindustan Antibiotics Ltd., Indian Oil Corporation, Bharat Heavy Electricals Ltd., and State Trading Corporation of India.

A government company decides to collaborate with a foreign enterprise for technical expertise. Why this collaboration is easier compared to other forms of public enterprises?

Answer

Collaboration is easier in a government company because:

1. Private Participation — Private and foreign investors can hold up to 49% of its share capital.

2. Technical Expertise — It allows the government to use private sector and foreign technical know-how.

3. Flexibility — It can take quick decisions without amending any special statute.

4. Separate Legal Entity — It can enter into contracts, own property, and sue or be sued in its own name.

Thus, a government company provides flexibility and legal convenience for collaboration with private and foreign enterprises.

Explain the meaning and features of public sector enterprises.

Answer

Meaning of Public Sector Enterprises — According to A.H. Hanson, "Public enterprise means state ownership and operation of industrial, agricultural, financial and commercial undertakings."

Features of Public Sector Enterprises:

1. Government Ownership — Public enterprises are owned wholly or partly by the Central Government, State Government, or both.

2. Government Control — They are controlled and managed by the government, either directly through ministries or through nominated boards and officials.

3. Service Motive — Their primary objective is service to the public and promotion of social welfare rather than maximisation of profit.

4. Financed by Government — They are financed mainly by the government, either through budgetary appropriations or through equity share capital contributed by the government.

5. Public Accountability — They are accountable to the Parliament or state legislature for their performance.

6. Public Welfare — They aim at achieving social objectives like rapid industrialisation, balanced regional development, employment generation, curbing private monopolies, and economic self-reliance.

7. Variable Autonomy — Depending on the form, they enjoy varying degrees of autonomy in operations.

8. Legal Status — They are created either by an executive decision of a government ministry, by a special Act of Parliament/state legislature, or by registration under the Companies Act, 2013.

Government companies are considered more flexible than other forms of public enterprises. Analyse the features of government companies that contribute to this flexibility with relevant examples.

Answer

Government companies are considered more flexible than other forms of public enterprises due to the following features:

1. Easy Formation — A government company can be easily formed by registration under the Companies Act, 2013. No separate statute has to be passed in the Parliament or state legislature; it can be created by an executive decision of the government. Example: Indian Oil Corporation was formed without any special Act of Parliament.

2. Separate Legal Entity — It is a body corporate independent from the government. It can acquire property, make contracts, sue and be sued in its own name. This independence speeds up business decisions. Example: Bharat Heavy Electricals Limited (BHEL) signs international contracts in its own corporate name.

3. Internal Autonomy — It is relatively free from bureaucratic control and political interference in its day-to-day functioning. As it is a separate entity and autonomous body, it can manage its affairs independently on commercial principles. Example: Steel Authority of India Limited (SAIL) takes day-to-day operational decisions like a private firm.

4. Flexibility of Operations — The objects, powers and organisational set-up of a government company can be altered easily as no statute has to be amended.

5. Expert Management — It can appoint professional managers on high salaries. It can offer better conditions of service than those available to government officers. Example: Indian Oil Corporation recruits experienced professionals from the petroleum industry.

6. Collaboration — It is the only form of organisation by which the government can avail of the management skill, technical know-how and expertise of the private sector and foreign countries. Example: Hindustan Aeronautics Limited collaborates with foreign aerospace firms.

7. Financial Autonomy — It enjoys borrowing powers and is not subject to the budgetary, accounting and audit controls applicable to government departments. It can raise funds from capital markets.

Discuss the features of departmental undertakings.

Answer

The main features of a departmental undertaking are as follows:

1. Ministry Established Undertaking — It is established by a ministry of the Central or State Government.

2. No Separate Entity — It is a part of the government establishment and has no separate entity distinct from the government. It does not have an independent legal status.

3. Finances from Government Funds — It is financed by annual appropriations from the government budget. Practically, all its earnings are paid into the treasury.

4. Uniform Budget and Audit Controls — It is subject to the same budget, accounting and audit controls as are applicable to other government departments.

5. Direct Ministerial Control — It is under the direct control of the departmental head who is accountable to the concerned minister.

6. Management and Recruitment — It is managed by officials and civil servants drawn from the concerned ministry.

7. Legal Proceedings Governed by Government Protocols — It enjoys the sovereign immunity of the state. It can be sued only through the procedure by which suits against the government can be filed.

What is a statutory corporation? Describe its features.

Answer

Statutory Corporation — A statutory corporation or a public corporation is a body corporate set up under a Special Act of the Parliament or of the state legislature. It is known as a statutory corporation because it is created by a statute.

Features of a Statutory Corporation:

1. Formation — It is established under a special statute which defines its objects, powers and functions. The statute also defines the relationship of the corporation with the government.

2. Separate Legal Entity — It has a special existence independent of the government. It can own property, make contracts and file suits in its own name. It is a body corporate with perpetual succession and a common seal.

3. Ownership — The corporation is wholly owned by the government. Its entire equity share capital is contributed by the state.

4. Management — Its management is vested in a Board of Directors appointed or nominated by the government. However, there is no government interference in the day-to-day working of the corporation.

5. Service Motive — The main object of the corporation is to serve the public. However, it is expected to be self-supporting or even to earn reasonable profits.

6. Own Staff — A statutory corporation has its own staff. Their appointment, remuneration and service conditions are decided by the corporation itself. Its employees are not government servants and civil service rules are not applicable to them.

7. Financial Autonomy — It is authorised to plough back its earnings. It can borrow money and adopt an independent financial policy. It is not subject to the budgetary, accounting and audit controls applicable to government departments.

8. Public Accountability — A public corporation is fully accountable to the Parliament or state legislature. Its annual report is submitted to and discussed in the Parliament. Its accounts are audited by the Comptroller and Auditor General.

Explain the merits and limitations of a statutory corporation.

Answer

Merits of a Statutory Corporation:

1. Internal Autonomy — It enjoys a good deal of autonomy in its day-to-day operations. It is free from political interference by ministers and bureaucrats.

2. Quick Decisions —It can take prompt decisions and easily adjust to changes in technology and market conditions. It has less red tapism and fewer bureaucratic procedures.

3. Motivation — The service conditions of employees are better than those of government servants.

4. Parliamentary Control — The performance of a statutory corporation is subject to scrutiny and discussion by the Parliament.

5. Efficient Management — The directors and top executives can be drawn from different occupations.

6. Economies of Scale — A statutory corporation is generally large in size and can enjoy economies of large-scale operations.

Limitations of a Statutory Corporation:

1. Theoretical Autonomy — The autonomy of a statutory corporation exists only on paper. In actual practice, ministers and politicians interfere in the internal management of the corporation.

2. Nominated Board — The directors of a corporation are appointed by the government. Quite often civil servants who do not possess required skills and experience in management are appointed.

3. Rigid Structure — The constitution of a statutory corporation is rigid. Its objects and powers cannot be changed without amending the statute, which is a time-consuming process.

4. Abuse of Monopoly — A statutory corporation may misuse its monopolistic power to exploit consumers.

Describe the features of a government company.

Answer

The main characteristics of a government company are as follows:

1. Incorporation — It is registered or incorporated under the Companies Act, 2013.

2. Separate Legal Entity — It is a body corporate independent from the government. It can acquire property, make contracts, sue and be sued in its own name.

3. Ownership — It is wholly or partly owned by the government. Where it is partly owned, the share of the government is at least 51 per cent of the total share capital.

4. Management — It is managed by a Board of Directors nominated by the government and other shareholders.

5. Own Staff — Its employees are not government servants. Their appointment and service conditions are independently decided by the government itself but they are not governed by civil service rules.

6. Financial Autonomy — It enjoys borrowing powers. It is not subject to budgetary, accounting and audit controls applicable to government departments.

7. Accountability — It is accountable to the ministry or department concerned. Its annual report is placed before the Parliament or the state legislature as the case may be.

Discuss the merits and limitations of government companies.

Answer

Merits of a Government Company:

1. Easy Formation — It can be easily formed as no separate statute has to be passed in the Parliament or state legislature.

2. Internal Autonomy — It is relatively free from bureaucratic control and political interference in its day-to-day functioning. It can be operated on commercial principles.

3. Flexibility of Operations — The objects, powers and organisational set-up of a government company can be altered easily as no statute has to be amended; only the provisions of the Companies Act have to be observed.

4. Expert Management — It can appoint professional managers on high salaries. It can offer better conditions of service than those available to government officers. Therefore, efficiency of management can be high.

5. Collaboration — It is the only form of organisation by which the government can avail of the management skill, technical know-how and expertise of the private sector and foreign countries.

Limitations of a Government Company:

1. Lack of Responsibility — It evades its constitutional responsibility to the Parliament. Being the major or sole shareholder, all decisions are under government control.
2. Autonomy in Name — The independent character of a government company exists on paper only.
3. Board Packed with Yes-men — The Board usually consists of politicians and civil servants who may not be able to follow sound business principles.
4. Lack of Continuity in Policies — The top management and chairman of government companies keep on changing. As a result, policies and rules are often changed.
5. Lack of Motivation — The directors and officers of government companies do not take active interest and initiative in their day-to-day functioning.

Distinguish between public sector and private sector enterprises.

Answer

The government set up a steel plant in a backward region with poor infrastructure to promote regional development. Over time, the plant created employment opportunities, improved roads, and supported the growth of ancillary industries. However, it also faced criticism for inefficiency and low profitability.

Analyse how public enterprises contribute to regional development. Discuss the challenges they face in balancing social objectives with profitability.

Answer

Contribution of Public Enterprises to Regional Development:

Public enterprises play a vital role in regional development as illustrated by the case study. The contributions are:

1. Setting Up Industries in Backward Areas — Private entrepreneurs are not keen to set up industries in remote and backward regions, but public enterprises are deliberately set up in such areas to fill this gap.

2. Infrastructure Development — When a large industry is set up in a backward area, it leads to the development of roads, railways, power supply, water supply, and communication facilities.

3. Employment Generation — Public enterprises generate large-scale employment opportunities for local people.

4. Growth of Ancillary Industries — A large industrial unit gives rise to many small and medium ancillary industries that supply raw materials, components, and services.

Challenges in Balancing Social Objectives with Profitability:

1. Higher Initial Costs — Setting up infrastructure from scratch in backward regions involves heavy capital expenditure.

2. Poor Returns — Most public enterprises fail to earn a reasonable profit on their investment. They continue to survive due to liberal financial help from the government.

3. Inefficient Management — Low efficiency results from uninspiring leadership, frequent transfers of bureaucrats, red-tapism and lack of personal responsibility for results.

4. Political Interference — Decisions are often taken on political considerations rather than commercial grounds, leading to delays and reduced business viability.