What is a public enterprise? What are its characteristics? How is it different from a private enterprise?
Public enterprise is an industrial, commercial or business activity of the government, where a return on investment is expected. It is owned, managed and operated by central, state or local government and the output obtained from such enterprises is not supplied free of cost. Such enterprises include trading, manufacturing and service organizations which are said to be business undertakings.
Enterprises promoted under the ownership and control of government and nationalized private organizations fall under public enterprises. Some examples of public enterprises established by private organizations are Life Insurance Corporation, Indian Airlines Corporation etc. Government promotes some enterprises like Hindustan Machine Tools and Hindustan Antibiotics Ltd.
Features of Public Enterprises
- Government or agencies set up by the government and manage, operate and own such enterprises.
- It is possible to organize a public enterprise as a statutory corporation or a government company or a departmental undertaking.
- Such enterprises are accountable to state legislature or parliament for their performance and fulfillment of objectives that are laid down in conformity with the developmental plans.
- It is the government who provides the whole or major part of capital needed for such enterprises.
- Public enterprises are not guided totally by profit motive and are governed by public policies that are laid down by the government in the public interest.
Private Enterprises are commercial and industrial organizations set up under individual or group ownership within the general framework of rules, regulations and laws of the government. Manufacturing companies, medium and small firms organized as proprietary and partnership concerns fall under private enterprises.
Difference between Public and Private Enterprise
Public enterprises aim at maximizing social welfare and upholding interests of public. These are governed by public policies that the government frames. On the other hand, private enterprises work with an aim to earn profit. Their primary motive is to fetch profit.
Public enterprises are accountable to Parliament or State Legislature for their performance and fulfillment of objectives that are laid down conformity with the developmental plans, whereas private enterprises are regulated by government controls of various kinds. They can perform any business activity but it should be legal because they are free to set their objectives. Government cannot interfere or set objective in for such enterprises.
Life Insurance Corporation, Coal India Ltd., Hindustan Machine Tools, Hindustan Antibiotics Ltd., etc. are a few examples of public enterprises. On the other hand, private enterprises include commercial companies, medium and small firms organized as preparatory and partnership concerns.