Indian Economy
General Knowledge

Public Sector

Public Sector

» In terms of ownership public sector enterprise (PSE) comprises all undertakings that are owned by the government, or the public, whereas private sector comprises enterprises that are owned by private persons.

The main Objectives of Public Sector are :

» To promote rapid economic development through creation and expansion of infrastructure;
» To generate financial resources for development;
» To promote redistribution of income and wealth;
» To create employment opportunities;
» To encourage the development of small scale and ancillary industries;
» To promote exports on the new side and import substitution on the other; and
» To promote balanced regional development

Disinvestment and Privatisation

» There is a difference between privatisation and disinvestment. Privatisation implies a change in ownership resulting in a change in management. Disinvestment is a wider term extending from dilution for the stake of the government to the transfer of ownership (when govt, stake reduced beyond 51%).

» The Government of India constituted the Disinvestment Commission with Mr. G. V. Ramakrishna as the chairman in August 1996 to advise it on disinvestment programme of public sector enterprises. It has suggested classification of PSE in to core and non core. In core sector maximum of 49% disinvestment would be allowed while in non core disinvestment would be upto 74%. PSEs shares will given to small investors and employees to ensure wide dispersal of shares thus introduce mass ownership and workers shareholding. It has also suggested greater autonomy to PSEs.

» To minimize the financial burden on the Public Sector Enterprises the Government has started Voluntary Retirement Scheme (VRS) for the employees by giving full compensation to employees. This is called "Golden Hand Shake Scheme".

» Privatisation refers to a general process of involving the private sector in the ownership, or operation of a state owned enterprise. Thus it refers to private purchase of all or part of a company.