On the other hand, Public enterprises are guided by several socio-economic and political objectives. The point to note is that often the private sector did not function as it should and did not realize its own limitations and social responsibilities. It is expected that in future, ancillary development would receive more attention from the Government. They are intended to be operated on behalf of the public's interest. Private sector is not interested in such investment.
Optimum utilisation of resources results in better and cheaper production. Normally the private sector cannot be induced to start industries in the backward areas. Public enterprises seek to offer gainful employment to millions. Up to Fourth Five Year Plan, there was no any emphasis on public enterprises to earn profits. If a concern is earning profits then we call it profitable and on the other if there are no profits then it will be called inefficient.
Budgeting by Public Sector Undertakings : Proper budgeting system is followed ad by public sector undertakings. In 1951, there were only 5 public sector enterprises with an investment of Rs. Political Interference: The political interference has been forcing the management of public enterprises to give up sound commercial principles in arriving at vital decisions pertaining to investment, location, production and pricing policies of public enterprises. On the other hand, there were certain backward areas which went without industries. It is hard to find skilled and competent employees and it is even harder to retain them. Since disinvestment process was put on hold because of stiff opposition by the left adequate funds from disinvestment could not be raised.
On the other hand, the entire or at least 51 per cent of the capital of a Public enterprise is provided by the Government from public funds. In the absence of an appropriate pricing policy, optimal utilisation of resources and profitability cannot be achieved. To take out Indian economy from the vicious circle of poverty. First, resources available with the Government are scarce. Last but not the least, it is argued that public enterprises should not be privatized because, though they may not be yielding enough profits, they are socially profitable and have made important contribution to build up a strong base for industrial development of the country.
To reduce income inequalities and ensure equitable distribution of resources. The public enterprises in India have been on a steady rise since their big show in the Third Five Year Plan and have engaged themselves in a number of economic activities like advancing loans, regulating trade and commerce, heavy machine manufacturing, chemical drugs and fertilizers, oil drilling etc. However, some analysts are skeptical of this strategy of public offer route to disinvestment. It was only after the Industrial Policy of 1956 that public sector undertakings got a phi 1 lip. Besides public enterprises show an increasing trend in the generation of internal resources. Today, they cover a vast and varied range of activities, such as mining and : metallurgy, manufacture of electrical goods, machine tools, chemicals and fertilizers, building of ships, aircrafts and locomotives, industrial financing and undertaking of life insurance, and now they even own and control consumer goods- production.
Even autonomous bodies are directly and indirectly controlled by the government departments. During twentieth century, outbreak of two world wars, depression in many countries and social evils of Industrial Revolution of earlier times compelled state governments to participate in planning and developing industrial structure of their countries. Thus Maharashtra, West Bengal, Gujarat and Tamil Nadu, etc. To avoid concentration of economic power in a few hands. Disinvestment is also opposed on the ground that it is no solution for loss-making sick public sector undertakings. Public accountability: Public enterprises are financed out of public money. The Revenue Budget is a projected profit and loss account for the current year and the next year.
In the modern corporate form of business organisation, management has been separated from ownership. Case for Public Sector Disinvestment: What are the reasons for the policy of public sector disinvestment or privatisation? Such interference leaves little scope for initiative and freedom of action. He heads the Department of Finance and Accounts. In order to remove regional disparities, the public sector tried to disperse various units towards the backward states like Bihar, Orissa, and Madhya Pradesh. According to the Management Study Guide, public enterprises play a vital economic, developmental and political role in a country. Through the various research institutes the public sector has augmented agricultural productivity by introducing new high-yielding variety of seeds, preventing crop diseases and innovating new agricultural practices.
The financial advisor was appointed by the Ministry of Finance as its nominee in the unit. State Governments started realising their social responsibility towards people. There is a recent talk and trend of privatization of public enterprises for improving their efficiency. These enterprises can serve as powerful means of economic and social change. State monopoly is said to be as bad and undesirable as private monopolies.
Private sector investments are also depending on these infrastructural facilities developed by the public sector of the country. The development of industries was left to the judgement of private entrepreneurs. They are not dependent on the government for their day- to-day needs. Many under developed countries are even accepting today the principle of economic planning and are giving greater importance to public ownership. In this scenario they have to improve, develop and retain the available resource in order to have a competitive edge. Strictly speaking, disinvestment means the dilution of stake of the Government in a public enterprise.