Public sector is the sector is the sector of the economy where all the
factors of are owned by the government. Public sector business units may
be run by central government, local government authorities, or specially
appointed agencies.
The
different types of public sector
enterprises are;
1)
Government trading –
central government or local government authorities carries out trading
activities under the direct control of a government department.
2)
Government as shareholder – The
government holds shares in some limited companies. This may be because of
the long standing interest in the development of that industry or
to help some reputed firms to survive. Occasionally, government setup limited
company under its sole ownership.
3)
Public corporation – An organization
owned and controlled by the government but run by a board of directors.
4)
Municipal enterprises – An
organization owned and controlled by the governments local body like island
office or atoll office administration.
A
public corporation is different from a public limited company because of the
following reasons. A public corporation is state owned/in the public sector
whereas a public limited company is owned by individuals/in the private sector.
.A public limited company has shareholders whereas a public corporation does
not and the government owns it. A public corporation seeks to provide a
service/work in the public interest whereas a public limited company aims to
maximise profit.
Public corporation – An organization owned and controlled by the government
but run by a board of directors.
The
major features of public corporation
are;
1)
It has a separate legal entity (person).
2)
It is owned by government.
3)
Managed by a board of directors.
4)
A financial report regarding the performance should be submitted to the
government.
5)
Normally motivated by welfare of the public and operate at profit maximization.
The
day-to-day management of a public corporation is theoretically free from
government interference. The control of
public corporation is exercised in several ways.
1)
Each public corporation must publish
its accounts annually and it is verified by the public accounts
committee of the parliament.
2)
A select committee of the parliament
has powers to make general investigation into the affairs.
3)
A provision of annual debate in
parliament on the affairs of each corporation.
4)
For a more continuous control is exercised by appointment of a government minister.
5)
Monopolies and Mergers commission
also look into the activities that whether they behave against the public
interest.
There
are two groups of public corporations
1)
Produce and sell goods or service directly to the public, charging each
customer for what is used.
2)
Provide a service but do not charge for it directly from consumers.
Public
corporations raise their capital from a
variety of sources.
1)
The corporation used to issue their own securities (Bond) to the public.
2)
Treasury issue Gilt edged securities to finance corporations.
3)
Some corporations have been allowed to raise finance from their foreign trading
partners.
There
are many benefits to the general public
from the public corporation.
1)
Industries that are essential to an
economic system can be kept going as public corporation even if they are
not profitable.
2)
Factors other than profits such as social
security cost, public welfare etc., can be taken into consideration.
3)
Government ownership can avoid the
wasteful competition.
4)
If any profits are made, government can
use it for other general purpose.
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