The government is fundamental to properly functioning the public sector to ensure that it impacts national development and societal welfare. To explain the government’s role in the operation of the public sector, it is involved with managing resources, making policies, and running public sector undertakings to fulfill both economic and social objectives. It ensures that the public sector attends to the population’s needs and achieves economic stability.
What is the Public Sector?
It involves government-owned organizations and enterprises that provide services and products that benefit everybody. This sector is dominated by the government, filling some gaps that would otherwise be unsolved by the private enterprise sector since it faces very low returns or too much risk for the private company to sustain. Everyone is allowed access to and afford their products.
Chief Characteristics of the Public Sector
The Government possesses a whole or a part of the public sector organizations.
- Welfare-oriented These public sector organizations are more focused on welfare and less concerned about profit.
- Regulated Operations: All the policies and rules formulated by the government need to be adhered to by these organizations.
- Extremely Diverse Types: These are the organizations working under the healthcare, transportation, energy, and education sectors
- Service-oriented: The public sector’s core objective is providing fundamental service to the citizens.
Public Sector Undertakings in India
Public Sector Undertakings (PSUs) in India are government-owned corporations or state enterprises established to undertake commercial activities on behalf of the government. They play a crucial role in India’s economic development by fostering industrial growth, providing essential services, and promoting public welfare. The public sector examples are listed as follows:-
- Indian Railways offer cheap transportation to millions
- Bharat Heavy Electricals Limited (BHEL), one of the most significant contributing organizations in the industrialization process of India
- National Thermal Power Corporation (NTPC) provides green energy solutions.
Objectives for Forming Public Sector Units
Public sector units are established with specific goals that accelerate economic growth and satisfy society’s needs. The specific goals show that the government is dedicated to developing the country and distributing the resources judiciously.
- Economic Development: The public sector initiates industrialization and economic development. Governments make PSUs in core industries such as steel, power, and transport. These require huge investments with long-term planning. The public sector is better equipped for these investments.
- Employment Generation: PSUs create a massive amount of job opportunities. For example, thousands are working in SAIL and Indian Railways; it is sending steady income to millions of families all over the country. It helps in achieving this goal as it reduces unemployment and strengthens the economy.
- Infrastructure Development: PSUs are set up by the government to build roads, bridges, and power plants. NTPC and organizations of this kind are what help in building the energy backbones of the country. The developments in turn enable private enterprises to grow and expand with all support systems.
- Regional Balance: The public sector provides balanced regional development through investments in underdeveloped regions. Government schemes for health care, education, and other essential services are also undertaken in rural and distant regions.
- Welfare-Based Objectives: PSUs have been focusing on the easy accessibility of essential services like health care, education, and public transportation. For instance, the LIC has insurance products for the financial requirements of all sections of society.
Role of Government in Public Sector
The role of the government in the public sector is highly significant as it manages to move and develop society; thus, it manages to cover the gaps that other private ventures would not be willing to fill. So, it empowers underprivileged groups, reduces disparities, and provides sustainable growth to the economy. The public sector is machinery for both economic and social goals of attaining the target of the government. The emphasis here is on balanced development and welfare. Let’s see how governments perform their role in the public sector.
Cheap Services
The government provides the basic amenities, such as health care, education, transportation, and energy, to everyone and makes them cheap and accessible. It caters to the economically weaker sections of society by establishing and running public sector undertakings and provides equal opportunities to everyone.
For example, the medical treatment available in government hospitals is relatively very cheap. This also trickles down to the poor strata of the society. Indian Railways is a gigantic public sector undertaking and therefore transport at a minimum cost is available to the millions of people of this vast country. Similarly, BSNL ensures the availability of telecommunication facilities at a minimal cost even in rural areas. The interest of the public at large is put by such programs. That is to say, the needs of people in general are satisfied without considering economic status.
Reducing Inequality
It is engaging the public sector in reducing the gap between the urban and rural communities as well as income inequality. Investment in the backward regions and employment generation through subsequent inclusive growth have helped marginalized societies lift their living standards.
Public sector undertakings like SAIL and BHEL construct industries in the most remote corners; therefore regional development accelerates. Infrastructural activities developed in rural regions ensure education, healthcare, and employment; therefore people are developed both economically and socially. Structural inequalities exploited by the government balance out the resource distribution and opportunity with which social strength increases in the country.
Welfare of the People in Terms of Social Services
Social welfare the government executes and supports mainly for improving better standards of life for the poorest of people while at the same time giving social security to those, all vulnerable who would be receptive of receiving such social security.
The program provides a job guarantee to the families of rural households families, wherein the food distribution system is available at subsidized rates to the underprivileged class, thus providing shelter facilities at low or even subsidized rates. The government guides the public sector to the benefit of the weaker groups of the economically weaker sections; hence, the incidence of poverty decreases, and it ensures better socio-economic conditions for the nation as a whole.
Protection of National Interests
The government exerts its influence in strategic sectors like defense, energy, and transport through the public sector. It results in the protection of national security, promotion of self-reliance, and prevention of undue influence from foreign parties on sensitive sectors.
For instance, HAL develops the defense capability of India by manufacturing aircraft for the armed forces. Similarly, NTPC develops energy security by producing a large amount of power. Indian Railways caters to the civilian and military sectors by providing uninterrupted connectivity during emergencies. The government protects and safeguards the national interest by keeping all the industries under control.
Developing Sustainable Development
The government runs for sustainability but its public sectors operate for economic upliftment and protection of the environment. Public sector undertakings carry eco-friendly measures and install renewable energy projects to reduce climate change and resource conservation.
For instance, NTPC is aggressively taking up solar and wind energy projects to reduce dependence on fossil fuels. Ecological sustainability by public sector initiatives in afforestation, water conservation, and waste management. The government hence emphasizes sustainable development so that such resources are left for the future since it is meant to solve the short-term needs of the population.
The role of the government in public sector operations is of immense importance for national development and societal welfare. It provides critical areas, which private enterprise may not do, such as cheap services, elimination of inequality, welfare schemes, protection of national interest, and support towards sustainable growth. Active engagement of the government ensures inclusive growth, equitable resources, and sustainable stability, therefore strengthening the nation’s socio-economic foundation.
Public Sector Undertakings (PSUs) – Problems
Public sector undertakings, though being very essential, pose various problems before them. Solution of these issues becomes inevitable for its long-term viability.
- Inefficiency: Most of the public sector undertakings suffer from inefficiencies due to red-tapism, archaic processes, and surplus manning. The inefficiency cuts into profits and affects the quality delivery of services.
- Financial Losses: Most of the public sector enterprises suffer from losses because of a high operating cost and low revenues. Inadequate management and lack of innovation are some of the other reasons for financial distress.
- Political Interference: Political interference in the decision-making process is very common and has resulted in the loss of operational autonomy. Populist measures sometimes take precedence over profitability because of political pressure.
- Lack of Accountability: Some PSUs have very low accountability for performance. Lack of responsibility leads to inefficiency and delayed decision-making processes.
- Private Sector Competition: The more private players are involved, the more competition is increased, thereby reducing the market share of the public sector. For instance, private telecom operators have captured more market share than BSNL in the telecom sector.
Problem Effect
- Inefficiency Reduces profitability and delays operations.
- Financial Losses Strain government resources.
- Political Interference Limits operational autonomy.
- Lack of Accountability Reduces transparency and efficiency.
- Private Competition\
- Reduces market share and revenue.
Public Sector Undertaking – Reforms
The public sector reforms aimed at making them more efficient, profitable, and competitive. These reforms are based on restructuring operations and increasing accountability.
- Disinvestment: The government diminishes its stake in PSUs via disinvestment and enables private investments. It enhances efficiency by inducting professional management practices. Some examples include disinvestment in companies like Air India.
- Privatization: Privatization is the transfer of ownership from the government to private hands. This move minimizes political interference and leads to better resource allocation. One such privatization example is Bharat Petroleum Corporation Limited (BPCL).
- Operational Restructuring: The government makes operational changes to increase efficiency. Such reforms include modern technology, process simplification, and performance-based incentives.
- Public-Private Partnerships (PPPs): Public-private partnerships promote collaborative involvement between the government and private firms. Such partnerships pool public welfare with the efficiency of private enterprise, favoring industries that involve infrastructure or health care, among others.
- More Autonomy: More autonomy on the part of PSUs enables them to be self-dependent with regard to strategy-making. Innovation is promoted with reduced bureaucratic red tape.
Role of Government in Public Sector FAQs
What is the public sector?
The public sector comprises government-owned enterprises and institutions, which offer goods and services within a country’s life to cater to public welfare.
Mention a few examples of public sector
Indian Railways, Bharat Heavy Electricals Limited (BHEL), and National Thermal Power Corporation (NTPC).
Define the government’s role in managing the public sector
The government oversees the public sector units by forming policies, management of resources, and attainment of both economic and social goals.
Challenges faced by the public sector undertakings of India
It faces inefficiency, financial loss, political interference, and private-sector competition.
Which of the following has helped improve the performance of the public sector undertaking?
Reforms in the public sector undertaking including disinvestment, privatization, public-private partnerships, and granting greater autonomy have helped improve their performance.
