Short Answer Type Questions
Q. 1. List the names of some enterprises under the public sector and classify them.
Ans.
(i) Indian Railways - Departmental undertakings
(ii) Air India - Statutory Corporation
(iii) ONGC - Government company
(iv) Post and Telegraphs - Departmental undertakings
(v) LIC - Statutory Corporation
Q. 2. Explain the concept of public sector and private sector.
Ans. Private sector consists of privately owned enterprises formed with private ownership, profit motive, without state participation and with independent management whereas, Public sector consists of enterprises owned, controlled and managed by the government, guided by several social, economic and political objectives to maximise public welfare. The examples of Private Sector and Public Sector Enterprises are: Tata Motors, DLF, Vodafone, etc. and GAIL, Pawan Hans Limited, Indian Railways, etc. respectively.
Q. 3. What is meant by departmental undertaking? State its two merits.
Ans. Departmental undertakings are those public sector enterprises which are the part of the government only having no separate entity and which functions under the overall control of one of the ministries of central or state government For e.g. , Railways, Defence, etc. The merits are:
(i) Effective control of Parliament: These undertakings ensure effective control over their operations by the parliament. Annual reports of the undertakings are laid on the table of both the houses of the parliament. Hence, Parliament can effectively ensure the efficiency of these undertakings.
(ii) Public accountability : These undertakings are established for some specific work of the ministry. Sometimes government reviews the working of these undertakings through government audit. Hence, they provide a high degree of public accountability.
Q. 4. State three features of a departmental undertaking.
OR
Explain any three features of departmental undertaking.
Ans. Three features of a departmental undertaking are as follows:
(i) Part of the Government: Departmental Undertaking is a part of the Government and is organised as a unit of the concerned ministry. For example, Ministry of Railways is accountable for the working of Diesel Locomotive Work (DLW).
(ii) Government financing: Since the Government fully owns a departmental undertaking; the concerned ministry is responsible for financing it from the budget allotted to it. Its surpluses are also part of the concerned budget.
(iii) Accounting and audit: Departmental Undertakings are subject to same accounting and audit rule pattern which are relevant for other government departments.
Q. 5. Write the merits of departmental undertakings.
Ans. Some merits are:
(i) Effective control of Parliament: These under- takings ensure effective control over their operations by the Parliament. Annual reports of the undertakings are laid on the table of both the houses of the Parliament. Hence, Parliament can effectively ensure the efficiency of these undertakings.
(ii) Public accountability: These undertakings are established for some specific work of the ministry. Sometimes government reviews the working of these undertakings through government audit. Hence, they provide a high degree of public accountability.
(iii) Revenue is a source of income for government : Whatever revenue is earned by these enterprises is deposited directly into the government treasury. Hence, their revenue is an important source of income for the government.
(iv) National security : These enterprises work under the direct control and supervision of the concerned ministry. Hence, there is no danger to the national security.
Q. 6. Write a short note on public sector and private sector?
Ans. Business enterprises owned and managed by individuals or group of individuals come under the private sector. For example, Co-operative societies, Sole proprietorship. 1½ Enterprises that are managed and owned partly or wholly by the Central or State Government come under the public sector. Such enterprises are either a part of the concerned ministry or are created by a Special Act of the Parliament. For example, Departmental undertakings, Government companies, Statutory corporations.
Q. 7. Write the limitations of a government company.
Ans. Some of the limitations are:
(i) Provisions of Companies Act not relevant: In some government company, the government is the only shareholder. The management and administration lies in the hands of the government. Some of the provisions of the Companies Act do not have much relevance.
(ii) Evades constitutional responsibility: In some of the companies, the provisions of the Companies Act do not have much relevance because the government is the only shareholder. These companies are not directly answerable to the parliament, thus they evade constitutional responsibility, which an enterprise financed by the government should have.
(iii) Main purpose defeated : The whole management and administration lies in the hands of the government. Thus, the purpose of registering it under the Companies Act, 2013 gets somewhat defeated.
Q. 8. List the different types of public sector enterprises.
Ans. The different types of public sector enterprises are as follows:
(i) Departmental undertakings: This is the oldest and most traditional form of organising public enterprises. Examples of these undertakings are railways, post and telegraph department.
(ii) Statutory corporations: Statutory corporations are public enterprises brought into existence by a Special Act of the Parliament.
(iii) Government Company: A Government company is established under the Indian Companies Act, 2013 and is registered and governed by the provisions of the Indian Companies Act.
Q. 9. Why is the government company form of organisation preferred to other types in the public sector?
Ans. Reasons why the government company form of organisation is preferred to other types in the public sector are as follows:
(i) It has a separate legal entity, apart from the government.
(ii) It enjoys autonomy in all management decisions and takes actions according to business prudence.
(iii) A government company can be established by fulfilling the requirements of the Indian Companies Act. A separate Act in the Parliament is not required.
Q. 10. Write the merits of statutory corporations.
Ans. Some of the merits are:
(i) Operational flexibility: Statutory corporation is able to enjoy a high degree of flexibility in its operations, as it is free from unnecessary government controls and regulations.
(ii) Non-interference by government: The government does not interfere in the financial matters of the organisation because they are independently financed.
(iii) Autonomous organisation: Statutory corporations have the autonomy to frame their own policies and procedures within the authority of the Act granted to them under the Special Act of Parliament or by State or Central Legislature.
(iv) Valuable instrument for economic growth: These enterprises are considered to be an effective instrument for economic development because they have the power of the government along with the initiative of private enterprises.
Q. 11. Write the merits of government companies.
Ans. Some of the merits are:
(i) Ease of formation : A separate Act of the Parliament is not required for setting up a government company, as it is established under the Indian Companies Act, 2013.
(ii) Independent status: A government company has its own legal entity separate from the government.
(iii) Autonomy: A government company has full autonomy in doing its business operations and in all business decisions. It can take any decision which is favourable for the company for its effective growth.
(iv) Good market control: These companies are able to control the market and reduce unhealthy business practices by providing goods and services at reasonable prices.
Q. 12. State the limitations of statutory corporations?
Ans . Some of the limitations are:
(i) Government interference: In the matters related to some important decisions or involving huge investment, there is always government and political interference.
(ii) Corruption: Where it involves dealing with the public, corruption is inevitable. This corruption destructs the whole purpose of creating such enterprises.
(iii) Flexibility on papers only: All decisions of such enterprises are subjected to many rules and regulations of the government. Therefore, the operational flexibility is available on papers only.
(iv) Delays in action: An advisor from the government side is appointed in these enterprises. His presence reduces the freedom of the enterprise to enter into contracts or to take independent decisions. Sometimes, some issues are referred to the government for further clarifications or opinion. All these channels further lead to delays in action.
Q . 13. “Main objective of Public-Private Partnership (PPP) is to combine the skills, expertise and experience of both the public and private sector.” In the light of this statement, specify its main advantages.
Ans. Public-Private Partnership refers to the involvement of private sector in the Government projects aimed at public benefit in the form of management expertise and monetary contribution. Advantages offered by PPP are:
(i) The PPP approach enables the Government to overcome its budgetary and financial constraints.
(ii) Leads to faster implementation of infrastructural projects with high degree of efficiency.
(iii) Benefits of combined expertise of private and public sector. Public-Private Partnership’s (PPP).
Q. 14. Explain any four features of a Multinational Company.
Ans. Four features of an MNC are explained below:
(i) International operations: Global MNCs run their foreign operations by establishing branches or subsidiary companies in host countries.
(ii) Giant size: MNCs have huge base of assets and revenues because of their huge size operations spread in a number of countries.
(iii) Centralised control: MNCs have a centralised control system. All the decisions for subsidiaries or branches are taken by the headquarters of MNCs. Headquarter of MNCs exercise control over their foreign subsidiaries.
(iv) Modern technology and management practices: Most of the MNCs compete in the international markets on the basis of their modern technology and efficient management practices. In fact, these global enterprises are sources of spreading of modern technology and management practices in the world.
Q. 15. Write a short note on global enterprises (Multinational companies).
Ans.
(i) Multinational companies are gigantic corporations which have their operations in a number of countries.
(ii) They are huge in size, having a network of operations all over the world and by using advanced technology and marketing strategies, they produce large number of products.
(iii) The aim of these enterprises is not just to make profits from one or two products but to spread their branches all over the world. For example: LG, Samsung, Pepsi, Coca Cola, Reebok, etc.
Q. 16. Explain the process of formation of joint venture.
Ans. A joint venture company can be established in any of the three ways:
(i) By transferring business to a new company: In this case, individuals or companies incorporate a company. One party transfers its business to the new company and in consideration thereof, shares of the new company are issued to transferring companies. The other party has to subscribe to the shares of the new company in cash.
(ii) By subscribing to shares of the new business: In this case, individuals or companies form a new business and subscribe to the shares of that new business in an agreed ratio and the business is started.
(iii) By collaboration of promoters of an existing Indian company and another party: In this case, promoter shareholders of an existing company join hands with another party, which may be an individual or a company, to carry out a business of that company. The other party, resident or non-resident, takes the shares of that company.
Q. 17. Explain briefly the following features of global enterprises :
(i) Huge capital resources;
(ii) Foreign collaboration;
(iii) Expansion of market territory;
(iv) Centralised control.
Ans.
(i) Huge capital resources : These enterprises have huge financial resources and also possess the ability to raise funds from different sources. They can raise funds by issuing equity shares, debentures, etc. Because of their high credibility in the market, the investors of the host countries are always willing to invest in them.
(ii) Foreign collaboration: Usually, these enterprises enter into agreements with companies of the host countries. These agreements are made in respect of sale of technology, production of goods, patents, resources, etc.
(iii) Expansion of market territory: As the network of operations of these enterprises extends beyond their existing physical boundaries, they expand their market territory. They operate through their branches, subsidiaries in host countries and occupy dominant positions in various markets.
(iv) Centralised control: Despite the fact that branches of these enterprises are spread over in many countries, they are controlled and managed by their Head Office (H. O.) in their home countries only. All these branches have to work within the broad policy framework of the parent company. A common system for working of all the companies under their control is evolved.
Q. 18. Explain the different ways to form joint ventures.
Ans .
(i) Joint ventures between the Government of India or a State Government and another company or companies, whether Indian or Foreign.
(ii) Joint venture between two or more Indian companies.
(iii) Joint venture between an Indian company and a foreign company.
Q. 19. In order to promote infrastructural development in the country with active participation of private sector which type of business partnership would you suggest to the government? Also enumerate three features of such partnership.
Ans. I would suggest for Public-Private Partnership. The features of PPP are as follows:
(i) It is a contractual relationship between government and private sector organisation for implementing a project for public benefit.
(ii) PPP is confined to a particular project for a specific area like its operation or maintenance or management.
(iii) Selection of the private partner is done by the government through competitive bidding or competitive negotiations.
Q. 20. Define Public-Private Partnership. Enlist its main features.
Ans . Public-Private Partnership refers to the involvement of private sector in the government projects aimed at public benefit in the form of management expertise and monetary contribution. The following are the main features of PPP :
(i) PPPs are related to high priority government planned projects.
(ii) PPP’s main objective is to combine the skills, expertise and experience of both public and private sectors to deliver high quality services.
(iii) PPPs divide the risk between public and private sector.
(iv) The government remains accountable for the quality and costs of the services.
(v) PPPs are used in the government projects aimed at public benefit.
(vi) PPPs projects lead to faster implementation and reduced life cycle.
Q. 21. Enlist advantages of PPP to the economy?
Ans. Advantages offered by PPP are as follows:
(i) The PPP approach enables the Government to overcome its budgetary and financial constraints.
(ii) Leads to faster implementation of infrastructural projects with high degree of efficiency
(iii) Benefits of combined expertise of private and public sector.
Q. 22. Explain the concept of private sector and public sector?
Ans. Private sector includes business enterprise owned and managed by individuals or group of individuals with the sole motive of earning profits. The various forms of organisation are sole proprietorship, partnership, joint Hindu family, co- operative and company. The public sector consists of various organisations owned and managed by the government. These organisations may either be partly or wholly owned by the central or state government. Bharat Heavy Electricals Ltd, Oil India Ltd and Life Insurance Corporation of India are examples of public sector industries.
Q. 23. State the various types of organisations in the private sector.
Ans. The various types of private sector organisations in India are:
(i) Sole proprietorship
(ii) Partnership
(iii) Joint Hindu Family Business
(iv) Co-operative societies
(v) Joint stock company
Q. 24. What are the different kinds of organisations that come under the public sector?
Ans. The following are the various forms of public sector organisations:
(i) Departmental undertakings
(ii) Statutory corporations
(iii) Government companies
Q. 25. What is meant by Government Company? Explain any three features of Government Company.
Ans. A Government Company is established under the Indian Companies Act, 2013 and is registered and governed by the provisions of the Indian Companies Act, 2013
Three features of Government Company are:
(i) It has a separate legal entity, apart from the government.
(ii) It enjoys autonomy in all management decisions and takes actions according to business prudence.
(iii) A Government Company can be established by fulfilling the requirements of the Indian Companies Act. A separate Act in the Parliament is not required.
Q. 26. Why is the government company form of organisa - tion preferred to other types in public sector?
Ans. The reasons that the government-company form of organisation is preferred over the other forms in the public sector:
(i) Separate entity: Government company can sue and be sued by third party. It can hold property in its name and enter into contracts.
(ii) A government company enjoys financial and administrative autonomy.
(iii) It faces no undue interference by the department concerned in its operations.
(iv) It provides goods and services at reasonable rates and at the same time also ensures safe marketing activities.
Q. 27. How does the government maintain a regional balance in the country?
Ans. The government maintains regional balance in the country by paying particular attention to those regions which were lagging behind and public sector industries were deliberately set up. This helps in creating employment opportunities and facilitate the economic development and growth of rural and backward areas. At the same time, government prevents the mushrooming growth of private sector units in already advanced areas.
Q. 28. State the meaning of public private partnership.
Ans. Public private partnership is a partnership between two or more government agency and private company, typically for long-term nature, aimed at public benefits in the form of management expertise and monetary contribution. It also enables government to overcome its budgetary and financial constraints.
Long Answer Type Questions
Q. 1. Briefly explain the features of statutory corporation. (KVS Agra 2017)
Ans. According to the Administrative Reform Commission, the following are the features of a statutory corporation :
(i) Ownership: It is owned by the state.
(ii) Formation: It is created by or pursuant to, a special law, defining its powers, functions, privileges, form of management and its relationship with government departments.
(iii) Separate legal entity: It is a corporate body and can sue and be sued, enter into contract and acquire property in its own name.
Q. 2. State the different areas where you find the following as the suitable form of public enterprise:
(i) Government Company
(ii) Statutory Corporations
(iii) Departmental Undertaking
Ans.
(i) Government Company is a suitable form of organisation in public sector where :
(a) Government wants to promote and develop certain industrial and commercial enterprises in national interest.
(b) Government wants to control a company in the private sector without nationalisation.
(c) Goverment wants to go for collaboration with domestic and foreign enterprises of private sector.
(d) The business projects require government planning and funds.
(ii) Statutory Corporations are found most suitable form of public enterprise where :
(a) Public utility services are to be provided at reasonable rates.
(b) Government wants to develop the projects for economic development.
(c) Where government funding is required with private sectors managerial efficiency to run the enterprise on competitive lines.
(d) The government wants to promote those infrastructure areas where private sector is unwilling to invest.
(iii) Departmental Undertaking are most suitable forms of organisation in public sector where:
(a) The government wants full control over the operations of enterprise.
(b) National security is the major issue/concern.
(c) The generation of revenue for the treasury is required.
(d) The projects are to be carried on strictly according to policies and direction of the government.
Q. 3. Write the features of departmental undertakings.
Ans . Some features of departmental undertakings are:
(i) Direct funding from the government: They are financed directly from the government treasury i.e., Consolidated Fund of India and through annual budget of the government. Any revenue earned by these undertakings belongs to the government and is paid into the government treasury.
(ii) Government accounting and auditing: These undertakings follow government accounting rules as framed by the Indian Audit and Accounts Department. Audit of these undertakings is also under the control of government.
(iii) Service conditions: The employees of these enterprises are government servants and their service conditions are same which are applicable to any other government servant. These undertakings are headed by officers from Indian Administrative Services, Indian Revenue Service, Indian Audit and Accounts Service, etc. The terms and condition of their recruitment and service are the same as those of any other government employees.
(iv) Control of ministry: These undertakings are sub- divisions or part of the ministry under which they are expected to work. Hence, the concerned ministry exercises full and direct control over such undertakings.
(v) Accountability to the ministry: These enterprises are established to assist the ministry in particular fields. Hence these enterprises are fully accountable to the ministry concerned.
(vi) Government accounting : These undertakings are subject to government accounting and audit control.
Q. 4. State the limitations of departmental undertakings.
Ans . Some of the limitations are:
(i) Lack of flexibility: Excessive control and rigid rules of the ministry reduce the flexibility of operations in these undertakings.
(ii) Delay in decision making: These enterprises fail to take prompt decisions because for each and every decision they have to obtain the approval from the concerned ministry. Employees and even heads of these enterprises are not allowed to take independent decisions.
(iii) Bureaucracy hinders benefits of business opportunities: These enterprises are not able to take the full benefits of business opportunities. Bureaucratic and conservative approach of the concerned ministry hinders their initiatives.
(iv) Red tapism: Departmental undertakings suffer from red tapism in its day-to-day working. Actions are taken only after following proper channels of authority.
(v) Political interference: The political interference hinders the efficient working of these undertakings. Most of the time is elapsed in attending political meetings, implementing their recommendations, etc.
(vi) Consumer needs are ignored: These enterprises are insensitive to consumer needs and do not provide adequate services to them.
Q. 5. Explain any three benefits and two criticism of Global corporations. (KVS Silchar 2017)
Ans. Benefits of Global corporations:
(i) Employment opportunities: They increase the investment level and thereby employment and income level.
(ii) Advanced technology: Developing countries are generally technologically backwards. The global corporations bring advanced technology to these countries.
(iii) Foreign capital: Global corporations make direct foreign investment, thereby speeding the process of economic development.
(iv) Growth of domestic firm: Global corporations stimulate the growth of local enterprises.
Limitations of multinational corporations /GE are as follows:
(i) Disregard of national objectives: Sometimes, the multinational companies disregard the national objectives. As a result, planning done by the government falls in vain.
(ii) Depletion of national resources: Multinational companies are set up with profit motive only. They exploit the natural resources in an unbalanced manner. So it is harmful for the economies.
(iii) Threat of obsolete technology: Sometimes in the ‘technology transfer’ process, obsolete technology is transferred as a result of which the diseconomies of scale prevail.
