Answer
The mixed economy of India is characterised by the
co-existence of public, private, joint and co-operative
sectors since the declaration of Industrial Policy in 1948.
Imperative of Public Sectors:
Policy on the public sector has been guided by the
Industrial Policy Resolutions 1956 & 1991 which gave the public sector
a strategic role in the economy. At the time of India’s independence in 1947,
there were various problems confronting the country which needed to be
tackled in a planned and systematic manner. India was basically an
agrarian economy with a weak industrial base, low level of savings and
investment and near absence of infrastructural facilities.
Public, Private, Joint and
Co--operative Sectors
A vast percentage of population
was extremely poor. There existed considerable inequalities in
income, low level of employment opportunities, serious regional imbalances
in economic attainments and lack of trained man-power in various fields
of management. It was, thus, obvious that if the country
was to speed up its economic growth and maintain it in the long run
at a steady level, a big push was required. As such, State’s intervention in
all the sectors of the economy, was inevitable because private sector had
neither the necessary resources in terms of funds, managerial and
scientific skill, nor the will to undertake risks involved in
large long-gestation investments. Among the imperatives were removal of
regional, imbalances, accelerated growth of agricultural and industrial
production, better utilisation of natural resources and a wider
ownership of economic power to prevent its concentration in
a few hands.
Private Sector
In a mixed economy, the
private sector too has an important role to play. The Industrial
policy resolution 1956 had made it very clear that private
sector will also have the opportunity to development and
expand. The policy of the state was to encourage the development of
industries in the private sector in accordance with the programs
formulated in successive five year plans. By ensuring the development
of transport, power and other services. And by
appropriate budget allotment. Government decided that for both
private and publicly owned units, it would continue to give its support which
is fair and non-discriminatory to both of them.
Cooperative Sector
In India the cooperative sector has been assigned an
important role in the development of many sectors. In the first five
year plan it undertook areas like agricultural, rural and small scale
industries, retail distribution, and housing.
The important objectives of the
co-operative sector area:
1) Prevention of concentration of economic
power
2) Wider disbursal of ownership
of productive resources
3) Active involvement of people in the development
programs
4) Speedier economic development
5) Liquidation of unemployment
and poverty.
Major Problems of Public Sector
(Economy)
1. Inefficient Management &
It has been found that these enterprises are managed
by public savants. They are not professionally qualified nor expert in the
management of industrial enterprises. Public enterprises always suffer from
delayed decision making. Whereas private enterprises are managed by
professionals which make them more punctual in working.
Public enterprises are usually managed by the
bureaucrat. Organisational hierarchy, fix up responsibility, the delegation of
authority and management information system is the weak part of public
enterprises.
2. Lack of Efficiency and
Public sector is not run on commercial principles. Their main
motto is social welfare, not the profit earning. If a public enterprise
in-cursed losses due to efficiency, it is overlooked. Whereas private
enterprises are run for profit.
Public enterprises are becoming means of fulfilling the political objective of political parties. They have to serve the political interests of the ruling parties.
It has been observed that political factors influence decisions about the location of projects, appointments, and even day operations. Location of the project is decided on the basis of political interest and not on the basis of the economic viability of the project, resulting in incurring losses.
3. Lack of Innovations
Innovations are essential for economic development.
Public enterprise lacks it due to monopoly or lack of competition. The private
sector is always busy with innovating new techniques, new production methods
etc.
For the purpose of cost reduction and profit
maximization. On the other hand, public sector employees are government
employees and their jobs are secure. They do not bother about the cost and
profit of public enterprises.
4.Mounting Losses
A review of the working of PSUs reveals that either
their profits are deplorably low or they are making losses. The losses are
mounting year after year.
Although some
of the public enterprises are earning profits, the amount is very thin in
comparison to capital employed and our expectations. The losses in public
enterprises can be justified during the gestation period but afterward, they
must try to wipe out losses and earn profits.
The government should, therefore, make a case by case
study of the loss incurring enterprises and take remedial, measures. 17 Major
Problems of Public Sector (Economy).
5. Under Utilization of Capacity
Public enterprise is facing the problems of
underutilization of their installed capacity. Thus, the capital resources are
not fully utilized by public enterprise.
Therefore, it is necessary to find the causes of low
capacity utilization and thus remedy the situation with appropriate measures.
Shortage of power, inadequate demand, equipment breakdowns, inadequate raw
material, managerial inefficiency etc. Are the major causes of underutilization
of capacity.
6. Increase in costs:
Most of the public sector projects take the long ester
time to complete than was initially envisaged. The cost of the projects also
run upwards due to delay in completion of projects.
Poor and adequate project planning is the main cause
of their delay in construction time schedule and increase in cost. Therefore,
it is essential to prepare completion of other project and an increase in cost
can be avoided.
7. Problems of Price Policy
Public sector cannot charge heavy profits, because of social objectives. Therefore, they have to keep in mind the social implications of price policy. In many cases, prices are kept low even then the cost. This naturally affects their profitability.
Profit earning is not the main object of public
enterprises. They are operated for social welfare. If they indulge themselves
in profit-making activities then there will be no difference left between
public enterprise.
Regarding price policy, public enterprises should
adopt no profit any loss theory or the theory of minimum profit. So that they
can maintain their relevance in the economy. If they follow below cost price
policy, they have to bear losses and it cannot be justified.
8. Excess Staffing
It has been noticed that in the most public
enterprise, manpower is in excess of actual requirement. Due to poor manpower
planning, public enterprises are facing the problem of over staffing. Modern
Theories of Motivation (Updated for Employees)
There is a lack of proper education and training of
the employees in the public sector. Therefore, it is suggested to reduce the
staff and top positions should be open to its employees.
9. Lack of Motivation
There is a lack of motivation in public enterprises.
Employees get fixed salaries and other perks. There is no reward for good work
and no punishment for bad. Thus, efficient and innovative employees are not
motivated to do hard work.
10. Problems of Managerial Structure
Public enterprises are governed by a board of
directors. All imported decisions are taken by the board. Therefore, The
success of the enterprise depends on the ability and efficiency of the members
of the board.
It is a difficult question, as to who should be made a
member of the board of directors and what should be his qualifications.
Politicians, bureau-craft etc. Are nominated as the member of the board of
directors in public enterprises.
11. Problems of Audit and Inspection
Although there is a system of audit and inspection in
such enterprises, it is not followed in practice. Accounts should be audited by
the competent authority at least once a year. It should be seen that public
funds are not misused.
The audit department of government is already
overburdened and the employees of the enterprise are not cooperative. Hence, it
is suggested to appoint an expert committee that can audit the accounts of each
public enterprises to judge its efficiency.
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