Difference between Public and Private sector

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Every economy is divided into various types of enterprises that define their functioning and growth. It broadly includes that of private and public sector enterprises, which students must understand in detail for their academia.

 

What is a Private-Sector Enterprise?

Private sector enterprises refer to a segment of a national economy. These are owned and controlled by a private group of individuals or even a single entity. This sector comprises countless companies that are divided based on their size and functional capabilities. It includes small and medium enterprises, as well as large companies. They can be both privately or publicly traded organisations.

Generally, a private enterprise is formed by establishing a new company. However, there can even be the privatisation of existing public sector companies. Typically, these companies are run with a singular motive of maximum profit generation. This plan is usually promoted by building a brand reputation. These enterprises must follow government norms and regulations. However, these are not controlled by government entities and usually focus more on quality than quantity.

Generally, private enterprises offer maximum employment in an economy. They mainly focus on the performance of an employee for his/her job stability. This list mentioned below consists of some of the most prominent private sector examples in an economy.

  • Educational services like private schools, colleges and universities along with the numerous available professional courses

  • Telecommunication services in a country

  • IT services which are usually global in nature

  • Courier services which function within and beyond national boundaries

  • Infrastructural development of different sectors in an economy

 

Also Read: Private, Public and Global Enterprises

 

What is a Public Sector Enterprise?

The single defining characteristic that students must understand while learning public sector meaning is that they are owned, controlled and managed by government bodies. This ownership, control and management by a government body can be complete or partial. Vitally, these companies usually come under specific ministries and are functionally administered by them. Notably, few public sector enterprises are set up by Parliamentary acts. These acts define both their functioning and control.

A public enterprise primarily focuses on providing cheaper goods and services to the general people. It includes central government bodies, state government entities and even local government authorities. This sector can be broadly divided into two sections depending on its government control.

  • Financed entirely by a government body with the help of revenues like taxes, excise and other duties, etc.

  • More than 51% share capital of an enterprise is owned by a government entity

Types of public sector organisations include departmental undertaking, statutory corporations and government companies. Such organisations are primarily run to provide these following services:

  • Generation of employment for a country’s population. It includes backwards and minority classes, disabled individuals, etc.

  • Postal services of a country

  • Readily available and economically viable educational and health services

  • Security to its citizens and geographical territories

  • Railway services

Along with these definitions above, students must also learn every difference between public and private sector organisations. Both of these sectors comprise a few common industries. Yet, these are run very differently by private and public sector administrations.

 

Differences Between Private and Public Sector Enterprises

Basis of Comparison

Private Sector Organisations

Public Sector Organisations

Definition 

It is a section of a nation’s economy that is owned and controlled by a private group of individuals or even singular entities.

It is a section of a nation’s economy, which is under government ownership and control. That can be central, state or even local government entities.

Objective 

Primarily towards profit maximisation. Vastly focuses on constructing a brand image.

Primarily towards serving the general population of a country with the available resources.

Source of capital

Capital can be obtained by loans, issuing shares and debentures, etc.

Capital is obtained by public revenue earnings like taxes, excise and other duties, treasury bills, bonds, etc. 

Areas generally covered

Financial sectors, information technology, mining corporations, transport, education, telecommunication sectors, manufacturing units, construction enterprises, pharmaceuticals, etc.

Armed forces like police, army, airforce, navy; basic health, educational, and transport facilities, electricity, agricultural sector, insurance, etc.

Benefits usually offered

Higher salary packages based on progress and merit, competitive environment of working, incentives and bonuses, etc.

Highly secured jobs, multiple retirement benefits, allowances and perquisites, etc.

Basis of promotion

It is generally based on merit and progress, along with commitment and production values.

While merit and progress are also considered at some level, it primarily depends on seniority and years of employment.

Stability 

Usually unstable since it is based on merit and production output.

Extremely stable since. It cannot be threatened by the parameters of merit, progress, production output, revenue generation, etc.

 

This table above gives a detailed description of the types of public enterprises and private organisations, their differences, functional capabilities, etc.

Understanding the difference between public and private companies gives clarity to students of standard 10 + 2 commerce. However, there are many topics in this curriculum which should also be adequately understood. To that effect, Vedantu offers detailed study materials on numerous topics in this academic course. Furthermore, Vedantu also offers live classes. These classes are quite convenient for students trying to clear their doubts from different chapters and subjects.

 

FAQ (Frequently Asked Questions)

1. What are the Examples of a Public Sector Enterprise?

Public sector enterprises are companies owned, and entirely or partially controlled by the government of a country. Departmental undertakings, public and statutory corporations, government companies are some of the enterprises that come under public sector companies. Usually, they offer numerous facilities to their employees, including reservations for minorities, women, backward classes, etc.

2. What are the Examples of a Private Sector Enterprise?

Private sector enterprises are owned and controlled by a private group of individuals or even a single entity. It includes the likes of a sole proprietorship, partnerships, cooperative companies, multinational corporations, joint-stock companies, etc. These companies primarily focus on profit maximisation and brand image. Therefore, it concentrates on quality rather than quantity primarily and thereby, encourages talent.

3. What is the Basic Difference Between a Private Sector and a Public Sector Enterprise?

Private sector enterprises are owned by a group of individuals or a single entity, while public sector enterprises are owned partially or completely by the government. As a result, the former primarily focuses on profit maximisation, while this latter mainly aims to provide convenient services to a country or state’s population.