CHANGING ROLE
OF PUBLIC
SECTOR
By Varshini .B and Varun Krishna .B
Agenda
Meanings
Introduction
Development of infrastructure
Regional balance
Economies of scale
Check over concentration of economic power
Import substitution
Government policy towards the PS since 1991
2
MEANINGS
1. Globalization ; Integration of global economy , culture and etc
2. Transition ; Changes from one state
3. Privatization ; The transfer of ownership, property or business from the
government to the private sector
4. Economically ; careful in the use of one's money or resources
5. Monopolistic tendencies ; complete control so that others have no shares
Presentation title 3
• When India gained independence in 1947, the
economic condition of the country was very poor.
There were hardly any public sector enterprises
other than the Railways and the Postal Services
• Provide services essential for economy
• Indian economy is in stage of transition
• First year plans gave importance to PS
INTRODUCTION • As we know that in 1991 India opened up its
economy and started the process of globalization.
But also, through the same changes in economic
policies, we embraced privatization.
• Finance Minister Dr. Manmohan Singh introduced
some major economic reforms. Now, we call it
the liberalization of the Indian Economy and
the LPG reforms.
Presentation title 4
BIFR(Board Of Industrial
And Financed
Reconstruction)
IF PS WAS MAKING LOSS CONTINUOUSLY SO IT WAS REFFERED TO
BIFR TO COMPLETE REVISE OR SHUTDOWN
DEVELOPMENT OF INFRASTRUCTURE
In a newly independent country, with a nascent economy, it is not suitable for private
enterprises to invest huge capitals into infrastructure projects.
So this responsibility falls to the public sector. And the development of infrastructure is
absolutely essential for the development o an economy.
Investments were to be made in order to:
•Provide infrastructure to the core sector requiring large capital investments, complicated
and updated technology, and large and efficient organizational structures, such as steel
plants and so on
•Take the lead in investing in core sectors where private sector firms are not performing
well, such as medicines, petrochemicals, newsprint, and medium and heavy engineering.
•Give directions for future investments such as hotels, project management, consulting and
so on
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1. Private sector companies tend to
focus on industrial areas.
2. This results in the backward areas
and the smaller towns and villages to
be excluded from economic growth.
3. But the government can ensure that
REGIONAL
growth happens throughout the BALANCE
country in a balanced manner
4. One of the main objective of planned
development
5. Public sectors set up units and
factories in backward areas bring
employment opportunities and
economic development to such
areas. 7
ECONOMIES OF SCALE
1. As large industries set up with huge capital , so PS to
take advantage of economies of scale
2. The large units like telephone , natural gas industries
which require a large base to function economically
3. It is possible with govt. resources and mass
production.
Presentation title 8
Check over concentration of economic
power
1. When the private sector sometimes the wealth gets concentrated in the hands of a few.
2. This may lead to monopolistic tendencies and concentration of economic power.
3.The public sector helps keep this in check
4. The income generated by a public enterprise is shared by a large number of employees
and also the public at large. This helps restore some economic equality
Presentation title 9
• Consistent rehearsal Seek feedback
• Strengthen your familiarity Reflect on performance
• Refine delivery style Explore new techniques
• Pacing, tone, and emphasis Set personal goals
• Timing and transitions Iterate and adapt
• Aim for seamless, professional delivery
• Practice audience
• Enlist colleagues to listen & provide feedback
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Speaking engagement metrics
Impact factor Measurement Target Achieved
Audience interaction Percentage (%) 85 88
Knowledge retention Percentage (%) 75 80
Post-presentation surveys Average rating 4.2 4.5
Referral rate Percentage (%) 10 12
Collaboration opportunities # of opportunities 8 10
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IMPORT SUBSTITUTION:-
• During 2nd and 3rd first five year plan, india aim- self relient.
• Major problem- foreign exchange.
• Difficult to import foreign heavy machinery.
• In this situation public sector companies like STC-The State Trading Corporation of
India Ltd and MMTC- Minerals and Metals Trading Corporation Limited, helped in
import substitution.(Import substitution is a strategy under trade policy that
abolishes the import of foreign products and encourages production in the
domestic market. The purpose of this policy is to change the economic structure
of the country by replacing foreign goods with domestic goods.
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GOVERNMENT POLICY TOWARDS THE PUBLIC
SECTOR SINCE 1991:-
The government had introduced four major reforms in the public sector in its new
industrial policy in 1991 they are,
1. Reduction in the no. of industries reserved for the public sector
2. Disinvestment of shares of a select set of public sector enterprises.
3. Policy regarding sick units to be the same as that for the private sector.
4. Memorandum of understanding.
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Main elements of Government policy:-
The main elements of the Government policy are as follows:
• Restructure and revive potentially viable PSUs
• Close down PSUs, which cannot be revived
• Bring down governments equity in all non-strategic PSUs to 26 per cent or lower, if
necessary.
• Fully protect the interest of workers.
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Reduction in the no of industries reserved for
the public sector from 17 to 8(then to 3 )
• In the 1956 resolution on industrial policy- 17 reserved.
• In 1991 only 8 industries were reserved for public sector.
• In 2001 only 3 were reserved (atomic energy, arms and rail).
• Private sector can compete with public sectors except these 3 areas.
• Public sector major role in development of economy and private sector also assume
to have greater public responsibilities.
• Public sector focus- achieving more in a competitive market.
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Disinvestment of shares of a select set of
public sector enterprises.
• Government decision to withdrew from industrial sector and reduce its equity.
• Leads to improve in managerial performance and financial discipline.
• Main objectives,
1. Releasing large amount of public resources from non strategic PSEs.(All other PSUs
apart from the strategic sectors fall under Non-strategic Sector
including insurance, mining, Power distribution companies, Discoms etc. )
2. Reducing debs.
3. Transform commercial risk to private sector.
4. Introduction of corporate governance.
Presentation title 16
Policy regarding sick units to be the same
as that for the private sector:-
• All public sector units were referred to the Board of Industrial and Financial
Reconstruction to decide whether a sick unit was to be restructured or closed
down.
• There is a lot of resentment amongst workers of the units which are to be closed
down.
• A National Renewal Fund was set up by the government to provide compensation
to public sector employees seeking voluntary retirement.
• There are many enterprises which are sick and not capable of being revived as they
have accumulated huge losses.
• The only option available to the government in such cases is to close down these
undertakings after providing a safety net for the employees and workers.
Presentation title 17
Memorandum of understanding:-
• Improvement of performance through a MoU (Memorandum of Understanding)
system by which managements are to be granted greater autonomy but held
accountable for specified results.
• Under this system, public sector units were given clear targets and operational
autonomy for achieving those targets.
• The MoU was between the particular public sector unit and their administrative
ministries defining their relationship and autonomy.
(A memorandum of understanding (MOU) is a document that describes the broad
outlines of an agreement that two or more parties have reached.)
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Thank you
