Public enterprises

Class 11 HSEB

1. Public enterprises are operating under six broad sectors in Nepal. They are industrial, commercial, service, social, public utility and finance.   There are 36 public enterprises, 7 in industrial sector, 6 in commercial sector, 7 in commercial sector, 5 in social sector, 3 in public utility and 8 in financial sector.

2. S .N.   Sectors   Total   Capital investment   Gross profit (million)   1.   Industrial   7   23884   -784.3   2.   Commercial   6   54698   3033.1   3.   Service   7   11733.5   1358.0   4.   Social   5   1590.5   -292.5   5.   Public Utility   3   121539.4   5032.4   6.   Finance   8   79930.4   1056.6   Total   36   222,652.0   10003.3   Source: Ministry of Finance, 2010   The above table shows that only 4 sectors (commercial, service, public utility and finance) have earned profit and rest two (industrial and social) has faced loss during the fiscal year 2008/09, rest of the sector incurred losses. Thus, overall financial status of the public enterprises is very unsatisfactory.

3. Concept Public enterprise is an organization which is owned, managed and controlled by the government. It is necessary for the active participation of government in individual and commercial level. It is financed and operated by the government. It provides service to the public. It provides goods and services to the public at reasonable price. It is guide by service motive but it can earn nominal profit. It helps in maintaining the state of ownership and operation of industrial, agricultural, financial and commercial undertaking. It is one autonomous body which is managed and owned by government and which provide goods/ services for public.

4. Characteristics of public enterprises Features   Government ownership : It is totally owned by government. Its majority shares are taken up by the government. In this enterprise, sometimes 50% of share is owned by the government.   Government management and control : It is one autonomous body which is managed and owned by government. Government controls and manages organization by appointing key personnel. It is like board of directors, managing directors, chairman and so on which manage the appointing, transfer of members and so on.

5. Public accountability : They are operated by government fund. It is also accountable to general public. It is carried out by the parliament and helps in providing goods and services for public.   Service motive : It provides service to the public. It provides goods and services to the public at reasonable price. It is guide by service motive but it can earn nominal profit.   Autonomous : It is one autonomous body which is managed and owned by government. It receives fund from the government. But government doesn’t interfere in the day to day activities of the organization.  

6. Monopoly : Government has monopoly in this sector.   Separate legal entity : It is established under acts and is rum under a law. It can purchase and sell securities, can enter into any contract, can sue and can be sued.   Stability : It is generally stable and perpetual in nature.

7. Importance of public enterprises Importance   Planned development : Its main aim is to promote economic and social development in the weaker section. It helps to run all the works of development in an efficient manner. It follows government plans and policies. It generally focuses on private sector. It also earns profit. It provides planned development by setting up industries too.

8. Balanced development : Development works are done in planned and balanced way. It also provides decentralization of industries. It tries to develop all regions in harmonious ways. Balanced development is the main aim of public enterprise.   Accelerating the rate of economic growth : In developing countries, increasing the rate of economic growth always gets the first priority. It tries to remove deficiency of economy. It provides infrastructural facilities for economic development. It provides employment opportunities. Government invests the money. Amount of capital, technical empowerment and other facilities can be easily arranged by the government.

9. Public utilities : Public enterprises provide the utility of transportation, water supply, irrigation, electricity, communication, education, health facilities and so on to the general public. Supply essential goods and services : public enterprise provides goods and services to the public at reasonable price. The government helps in manufacture and distribution of goods. These types of services are not done for earning profit.   Provide job opportunities : They help to create the employment opportunities in the society and work as the model employer. They help in uplifting the living standard of the people.  

10. Reducing economic inequality : It removes economic inequality. It helps to develop different regions of the country. Therefore, it maintains living standard of the public.   Establishment of social welfare : They help in planned development and balanced development of the country. They also try in accelerating the rate of economic growth. They are also established for supply essential goods and services. They help in providing job opportunities to many people. They further help in reducing economic inequality. Thus, they establish social welfare.

11. Types of public enterprise   Departmental undertaking: It is a traditional form of operating and managing affairs of public enterprise. They are organized, financed and controlled by the certain department of the government. Budget is prepared very year Features It is totally financed by treasury and all the revenues are paid into treasury. The budgeting, accounting and audit procedures are controlled and managed by the rules and regulations of the government The civil servants are the permanent staff. The recruitment, training, promotion, terms and conditions of employment are same for all civil servants. It is managed by the officials of the concerned department of the government. The ministry is directly controlled by administrative staff. The policy and performance are discussed in parliament. It has no separate legal entity. Nothing can be done without the permission of government.  

12. Public corporation: They are the most widely use form of organization under public enterprise. Under public corporation act 1961, statutory companies or public corporation are established. They are governed by the special act of the parliament. It is managed and controlled by board of directors and boards of directors are appointed by the government. It is established for service motive. Its main aim is to maximize the social welfare. The employees are appointed under the terms and conditions of the corporation. They are not civil servants. Some examples are; Nepal oil corporation, Nepal Airlines Corporation. Features The act defines the objectives, functions, powers, rights and duties, privileges and relationship with other department of the government It is totally owned by the government In some cases, public my hold the portion of share capital. It is a separate legal entity. It can purchase and sell securities, can enter into any contract, can sue and can be   sued. It has independent accounting, auditing and financial system. It is established for service motive Employees are not civil servants Employees are appointed under the terms and conditions of the corporation It is managed and controlled by board of directors and boards of directors are appointed by the government They are governed by the special act of the parliament. Its main aim is to maximize the social welfare Expenditure and revenues are not shown in the budget of department  

13. Government companies A public enterprise which is established under the prevailing law of the country is called a government company. In this company, government owns at least 51% of total shares. This type of company is a popular form of company because it is easy to organize and is considered to be more efficient. It is incorporated under company law of the country. It doesn’t need any special act for its incorporation. There are 2 types of Government Company. They are; 1. It is totally owned by government 2. At least 51% of its shares is taken up by government Features  It is incorporated under company law of the country. At least 7 promoters are required for incorporation It has separate legal entity. It can purchase and sell securities, can enter into any contract, can sue and can be   sued. It is totally owned by government or at least 51% of its shares is taken up by government. It is managed and controlled by board of directors and boards of directors are appointed by the government It is financed by the government. Expenditure and revenues are not shown in the budget of department Employees are not civil servants The policies are mentioned in memorandum and articles of association. The budgeting, accounting and audit procedures are not controlled and managed by the rules and regulations of the government Activities of the company are accountable to the parliament.

14. Department board: They are established in the form of development board. They are needed to contact different ministry for the incorporation. Its main aim is to operate public welfare development work. It is established under development board act 2013. For eg trade promotion center, cottage and small industry development board etc.