Model Question and Answers for APSC | What are the reasons for failure of Public sector enterprises (PSEs) in India? Discuss advantages and disadvantages of privatising them. (APSC Mains 2020 GS- III)

Model Question and Answers for APSC | What are the reasons for failure of Public sector enterprises (PSEs) in India? Discuss advantages and disadvantages of privatising them. (APSC Mains 2020 GS- III)

Ans : A public sector enterprise (PSE) may be defined as any commercial or industrial undertaking owned and managed by the government with a view to maximise social welfare and uphold the public interest. Public enterprises consist of nationalised private sector enterprises, such as, banks, Life Insurance Corporation of India and the new enterprises set up by the government such as Hindustan Machine Tools (HMT), Gas Authority of India (GAIL), State Trading Corporation (STC) etc.
While some PSEs are doing exceptionally well like LIC and organisations attached to ISRO, the majority of them are failures.
Causes of failure of public enterprises in india:
1. Lack of importance to profit motive and political Interference
2. Inappropriate location based on politics rather than business sense
3. Underutilization of installed capacity
4. Overstaffing, Defective Recruitment and Promotion Policy
5. Not making proper technical feasibility studies and Delay in project completion

6. Absence of professional management and Lack of Rational Pricing Policy
Privatisation
It is a term implying the transformation of a public sector company into a private sector company. Also, when government regulations on a private company are lessened or removed; the company is said to have undergone “deregulation”. The term “deregulation” is also often used as a synonym of privatisation.
Advantages and disadvantages of privatising PSEs

Way Forward:
1. Whether privatising a particular industry will be beneficial in the long run or not, depends entirely on the industry. For example, let us compare the transport industry and education sector.
2. In the transport industry the revenue collected can be used for further improvement, but there is a need to regulate the fare charges as it may compromise public interest by overcharging.
3. Switching to the education industry, the motive of profit generation becomes less significant, hence it would be an uphill task for any private firm to work for absolutely no or very low profit. Even if it does so, it’s more likely that public interests will be compromised in some way or the other.