24th Sept: Class Notes for Public Administration
DEPARTMENT of PUBLIC ENTERPRISES
In 1965, Bureau of Public Enterprises was established in the ministry of Finance.
In 1985 it was replaced by a full fledged Department of Public Enterprises under the ministry of Industry.
Public Enterprises Selection Board (set up in 1974)
Chairman and three members
- Autonomous decision making body.
- Works under the administrative control of the department of personnel and training which is a part of the Ministry of Personnel, Public Grievances and Pensions.
- Make recommendations to the Government for appointment to full time board posts of chief executives, functional / executive directors and part time directors of Central public enterprises
- Advise on organizational structure
- Oversee management development activities
Public Enterprises Role & Performance
Industrial Policy Resolution 1956: Important role to Public Sector
- To accelerate economic development and rate of growth
- Economic infrastructure
- prevent monopolies and concentration of wealth
- attain self reliance in strategic fields to reduce dependence on foreign technology
- regional balance development
- employment opportunities and standard of living
- assistance for the development and expansion of small and ancillary industries
- redistribution of income and wealth
- In 1951 only 5 with investment Rs 29 crore
- In 2003, their number increased to 240 with an investment of Rs 3,33,475 crores
- all round development of the economy. Contributed entire output of lignite, copper, petroleum, 80% of zinc, 95% coal, 50% steel and aluminum, 1/3 fertilizers.
- model employers, social amenities housing, schools, hospitals, recreation centers. In 2003 1.87 million employees.
- Account for 1/4 of the export earning.
- Corporate tax, excise, custom duties, dividends. Rs 81926 crore in 2003.
- Important role in collecting savings and mobilization of resources for public investment. IDBI, IFCI, LIC, UTI, SBI and so on
Out 240, 100 are loss making, 50 sick industrial enterprises which have accumulated whooping losses.
Reasons: many for failures………………………….
Impact of Liberalization
1991 New Economic Policy
1956 policy : radical departure
Liberalization means free market economy.
- free regime
- reducing, relaxing and dismantling of government’s controls and regulation in economic activities.
- delicensing of a good number of indutries, raising of licensing limits, relaxations under MRTP Act
- legalisation of additional capacities
- relaxation in export- import policy
- relaxation under FERA (now FEMA) regulations.
- denationalisation – ownership change
- deregulation entry of private sector to public sector
- Operating contract – use private management
- progressive integration of Indian economy with the world economy
- MNCs in India
- dismal financial performance of the public sector
- Low returns against heavy investments in public enterprises
- Budgetary support
- global trend
- Private sector huge investment
- external factors influence- World Bank, IMF
1991 policy steps
- public sector investments will be confined to strategic, hi-tech and essential infrastructure
- opened for private sector
- Sick public enterprises referred to BIFR ( Board for Industrial and Financial Reconstruction for formulation of revival and rehabilitation schemes.
- Board more professional more power
- MOU system
- Budgetary support progressively reduced
2. Sick Units
3. Golden Hand Shake
National Renewal Fund (NRE) created 1992, abolished in 2000.
Committee 1992 Dr. C. Rangarajan, 1996 Commission on Public Sector Investment. 1999 Full fledged Department of Disinvestment.
1997 Nine precious Jewels,latter two more autonomy given. Present nine. VSNL, IPCL privatized
1997 : 97 profit making identified
7. Memorandum of Understanding
- agreement between Govt (ministry) and Public enterprise to grant autonomy
- obligations of both parties for improving performance of public enterprise
- responsible and accountable
- Recommended by Arjun Sengupta Committee ( committee to Review the policy for the Public Enterprises) Report 1986
- It is Indian version of French performance Contracts System’ and the Korean ‘ Signaling System’.