Public Sector

The country was facing problems like inequalities in income and low levels of employment, regional im eases in scotch development and lack of trained manpower. India at that time was predominantly an agrarian economy with a fainthearted industrial base, low level of savings, inadequate enthronements and infrastructure facilities. In view of this type of socio- scotch set up, our ethereal leaders drew up a roadmap for the development of macrocosm Sector as an instrument for autonomous economic growth.This guiding factor take to the passage of industrial Policy Resolution of 1948 and followed by industrial Policy Resolution of 1956. The 1948 Resolution envisaged development of core fields with the ordinary enterprises. Public Sector would chasten the regional imbalances and create employment. Industrial Policy Resolution of 1948 set emphasis on the expansion of production, both(prenominal) agricultural and industrial and in particular on the production of capital equipment and goods satisfying the basic ineluctably of the people, and of commodities the export of which would increase earnings of outside fill in. . 1. 3 In early course of studys of independence, capital was scarce and the base of entrepreneurship was also non strong enough.Hence, the 1956 Industrial Policy Resolution gave primacy to the role of the State which was right off responsible for industrial development. Consequently the planning process (5 year Plans) was initiated taking into account the needs of the country. The bran-new strategies for the overt sector were later outlined in the policy statements in the years 1973, 1977, 1980 and 1991. The year 1991 elicit be termed as the watershed year, heralding liberalisation of the Indian economy. 2- 1. 1. 4 The public sector provided the required dig to the economy and developed and nurtured the human resources, the vital ingredient for success of any enterprise public or private. 1. 2 GLOBAL TREND industrial revolution in Europe. With the advent of world(prenominal)ization, the public sector approach new challenges in the developed economies. No longer the public sector had the privilege of operating in a sellers market and had to face competition both from domestic and international competitors.Further, in the second fractional of the 20th century in the developed economies, the political opinion started swinging towards the views that the intervention as wellhead as investment by Government in commercial activities should be reduced to the extent possible. 1. 2. 1 The Public Sector emerged as the driver of economic growth consequent to the 1. 2. 2 Many lofty economists argued that Government must not venture into those areas, where the private sector could undertake job efficiently.Lot of emphasis was laid on market driven economies, rather than State controlled and administered economies. The collapse of socialist economy of the Soviet quit convinced the policy planners, around the valet, t hat role of the State should be that of a facilitator and regulator rather than the producer and manager. It may be worth mentioning that, in various countries, the turn towards liberalism including deregulation and decontrol also led to discontent amongst some sections of population as its benefit did not flow down to the weaker and disadvantaged sections of society. . 2. 3 Today, both Public Sector & Private Sector have become an integral part of the economy. at that place may not be much difference in working of these sectors in advanced countries, plainly in developing countries, the performance of Public Sector has considerable scope for improvement. It is also observed that wages packages are almost similar in both sectors in developed countries, but large differences know in remuneration in the two sectors in developing countries, like ours. -3- 1.3 Economic Scenario and Role of Public Sector in India General perspective 1. . 1 Government of India, as part of its nation al agendum to promote growth, increase in efficiency and international competitiveness, has been continuously framing policies for industrial growth, fiscal, trade and foreign investment to achieve overall socio-economic development of the country. As a result of exceptionally severe balance of payments and fiscal crisis in the year 1991, the government decided to shift to a liberalized economy with greater combine upon market forces, a larger role for the private sector including foreign direct investment. 1. 3. The Government agnise that a strong and growth oriented nation could be built if India grows as part of the world economy and not in isolation. Thus, liberalising and deregulatory steps were initiated from the year 1991 onwards, which aimed at supporting growth and integration with the global economy.Since then, the thrust of New Economic Policy has been on progressive reforms such as reduction in the scope of industrial licensing, reforms in the Monopolies and Restricti ve Trade Practices (MRTP) Act, reduction of areas reserved exclusively for public sector, disinvestment of quity of selected public sector enterprises (PSEs), enhancing limits of foreign equity participation in domestic industrial undertakings, liberalization of trade and exchange rate policies, rationalization and reduction of customs and excise duties and personal and corporate income taxes, promoting FDI, investments from NRIs (Non-Resident Indians), extension of the scope of CENtub, implementing the VAT regime in States, taking steps to switch over to goods & services tax system w. e. f. 01. 04. 010, e-governance and reduction of various procedures, rules and regulations etc. 1. 3. 3 Since the setting up of World Trade Organization (WTO) in the year 1995, as an apex body at the international level, to which India is a signatory, the world trade has definitely crowing thereby giving indications that international trade reforms do play an important role in boosting economic devel opment of various countries. 1. 3. 4 Industrial policy has seen a sea change with most primaeval Government industrial controls being liquidated.The Central Public Sector Enterprises (CPSEs) were classified into strategic and non-strategic. Strategic CPSEs were set in -4- the areas of (a) Arms & Ammunition and the allied items of defence equipments, Defence air-crafts and warships (b) Atomic Energy (except in the areas cerebrate to the operation of nuclear power and applications of radiation and radio-isotopes to agriculture, medicine and non-strategic industries) and (c) Railway transport. All other CPSEs were considered as non-strategic.Further, Industrial licensing by the Central Government has been almost abolished except for a few hazardous and environmentally bare-assed industries. 1. 3. 5 The main elements of the present Government policy towards Public Sector enterprises as contained in the home(a) Common Minimum Programme (NCMP) are reproduced below i) To devolve full managerial and commercial autonomy to successful, profit making companies operating in a competitive environment ii) Generally , profit-making companies will not be privatized ii) Every effort will be do to modernize and restructure sick public sector companies and revive sick industry iv) Chronically loss making companies will either be sold off, or closed, after all workers have got their legitimate dues and compensationv) Private industry will be inducted to turn-around companies that have potential for revival vi) Privatization revenues will be used for designated social sector schemes vii) Public sector companies and nationalized banks will be encouraged to enter the capital market to raise resources and offer new investment avenues to retail investors. . 3. 6 The Government has made a clear commitment to empowering the CPSEs and their managements. It was recognised that public enterprises could not compete effectively with private entrepreneurs without freedom to function an d operate -5- commercially. Thus, the concept of Navratna and Mini-Ratna was introduced with greater delegated authority, both pecuniary and managerial. Government has realized that Navratnas, Mini-ratnas and other CPSEs are required to grow and deliver on the promises they have made to their stakeholders.Other reforms have also been announced, such as professionalisation of the Boards of Directors of public sector enterprises and evaluation of performance of CPSEs through Memorandum of Understanding (MOU). 1. 4 Performance Status wide invest of activities in the manufacturing, engineering, steel, heavy apparatusry, machine tools, fertilizers, drugs, textiles, pharmaceuticals, petro-chemicals, extraction and refining of crude oil and services such as telecommunication, trading, tourism, warehousing, etc. and a range of consultancy services.