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Public Enterprises and Their Structures

Last updated date: 17th May 2024
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Definition of Public Enterprises

There are so many state-controlled public enterprises, but what is a public sector enterprise? How is this beneficial for people living in the country or state? Well, today we will find the answer to these questions, but first, we will find the meaning of public sector companies.

A public enterprise is made up of autonomous or semi-autonomous enterprises controlled by the state or the national government. These companies were born to help the inhabitants of the state in their commercial and industrial activities.


Types of Public Enterprises

Here is the list of the different types of organizations that fall under the definition of public enterprise

  1. Departmental Organization

When the public enterprise is managed by a department, it functions as one of the government departments. One of the few examples of this type of organization is telegraphs, broadcasting, etc.

The staff of these organizations is permanent and in India, they were selected based on civil service exams. In the event that the people that the organization helps with its service are not satisfied with its functioning, it is possible to file a complaint with the parliament because the organization is part of the different sections of the parliament.

  1. Public Company

This type of company was born after the approval of a special act by the government which defines its powers, the scope of its functions, and its privileges. The three main characteristics of this type of business are: First, it is a self-managed entity. Second, it is quite massive in terms of the management of public enterprises. As a result, he can run his operations like a real business without having to worry about direct parliamentary control.

Finally, these types of businesses are capable of being financially self-sufficient; they are formed mainly with capital financing. Once the income begins to flow, the organization is allowed to spend it.

  1. Government Company

Most of the time, these companies operate and operate like a typical limited liability company. The government owns all or part of the shares, equal to or greater than 51%. In this organization, most of the directors are appointed by the government. The company is free to sue or be sued by others. In addition, he can enter into a contract and acquire property on his own. Unlike other state-owned enterprises, it is only created when the executive decision of the government is approved. Without parliamentary approval, this society cannot be founded. In addition, the government has the right to cancel any commercial act and way of working, at any time.


Features of Public Enterprises

Currently, you know the definition of the public enterprise, let's shed some light on its features:

  1. First, these companies are owned by the government, and all important decisions are made only after the government has approved them.

  2. These types of enterprises become separate legal entities; they must have a common seal for their legal activities.

  3. On the other hand, these companies operate in perpetual succession, which means that their existence cannot be hindered if their employees, managers, or even their stakeholders change over time. Society is constituted by law and only the law has the power to dissolve it.

  4. The company is owned and indirectly financed by the people because they are the ones who elected the government, and the government manages these public enterprises.

  5. One of the examples of public enterprises in India is the Hindustan Petroleum Corporation Limited (HPCL)

  6. The government and private shareholders are responsible for providing funds to these enterprises.

  7. Only employees not belonging to any delegation are considered civil servants.

  8. One of the most significant advantages of working in a public enterprise is its flexibility, both operational and functional.

  9. Likewise, public enterprises finance themselves to cover losses in order to raise funds for an upcoming project.

  10. The people chosen to lead this organization are among the best in their fields. They are the best in the public service and the best in management.

  11. Finally, these are some of the most stable companies you can find, no matter how difficult things get for other companies, these public companies will remain stable in all their dimensions.

FAQs on Public Enterprises and Their Structures

1. What is the major difference between a public corporation and a private corporation?

Public Enterprise: Any enterprise owned, managed, and controlled by the government in its day-to-day functions, as well as its long-term objectives, is a public enterprise. These companies are known to help the public and help them in times of need, such as natural disasters.

Private Enterprise: An enterprise that is owned by an individual or a group of individuals who have a full or greater than 51% share in the enterprise is called a private enterprise. These could be small IT companies owned by one person or multi-billion dollar companies run by a board of directors with investors from different countries. The main objective of private companies is to make a profit by selling products and services.

2. What are the forms of organization in public enterprises?

There are three different types of organization in public enterprises, we have briefly described each of them:

  • Government Department: this is one of the oldest forms of running a government enterprise and feeling of control of the central state or state departments such as railways, defense, post, etc.

  • Public Corporation: These types of businesses began to expand all over the world after the end of WWI. It is the entity created by the government to carry out its public missions with other public services.

  • State Company: This category includes any company which owns more than or equal to 51% of the share under the control of the central government. In addition to this, two different state governments can also partially own the shares of these companies.

3. What is an example of a public company?

The government sells goods and services to ordinary citizens through a system of public enterprises that integrates the characteristics of public and private enterprises. India is a suitable example of this mania where railways are still the most significant example of a successful public enterprise today.

4. What are the advantages and disadvantages of a public enterprise?

Benefits of Public Enterprises

  • It is a legal person that is, it can sue, and it can be sued.

  • He has perpetual existence.

  • He is accountable to the general public.

  • Help generate revenue for the government.

  • Public enterprises provide infrastructure services to citizens.

Disadvantages of a Public Body

  • Difficult to manage.

  • Risk of producing ineffective products.

  • Financial charge.

  • Political interference.

  • Abuse of power.

  • Consumer interests were ignored.

  • Expensive to maintain and use.

  • Antisocial activities, or overpaying for a product.

5. What is the distinction between private enterprise and public enterprise?

Private enterprise refers to an enterprise owned, managed, and controlled by private persons. Public enterprise refers to the enterprise owned, operated, and controlled by the government. The main motive of private enterprise is to make a profit. Private enterprise does not involve rules and regulations.

6. What happens when the business goes public?

Stock exchange listing refers to the initial public offering (IPO) of a private company, which thus becomes a listed and owned entity. The stock market listing increases the reputation and supports a business raising capital to invest in future operations, acquisitions, or expansions.

Explore the Vedantu to learn more about Public Enterprises. Vedantu provides free study material for students which downloads from the Vedantu website and app.