Paper II, Unit 3: Public Sector Undertakings
Public enterprise is a choice of instrument, not a single organisational model.
Public enterprise is a choice of instrument, not a single organisational model. Analyse why the state owns an enterprise, how its objectives are defined, and how management can answer for performance without constant operational interference.
Official wording of this unit: see the Paper II syllabus (unit 3).
Syllabus phrases and how to read them
| Syllabus phrase | Meaning and preparation focus |
|---|---|
| Public sector in modern India | Study industrialisation, infrastructure, strategic capability, regional balance and social objectives. Distinguish the rationale at establishment from the rationale for continued ownership. |
| Forms of PSUs | Compare departmental undertakings, statutory corporations and government companies in legal identity, finance, personnel, autonomy and oversight. |
| Autonomy | Separate strategic discretion, financial powers and operational freedom. Nominal board autonomy may coexist with informal directions, delayed approvals and political appointments. |
| Accountability and control | Identify multiple principals and objectives: owner, ministry, legislature, auditors, consumers and employees. Ask whether targets and responsibilities are clear enough for fair evaluation. |
| Liberalisation; privatisation | Distinguish competition, disinvestment, strategic sale, corporatisation and privatisation. A change in legal form need not change public ownership; a minority share sale need not transfer control. |
The relevant comparison is between feasible governance arrangements, not an ideal private enterprise and a poorly run public one. Commercial profitability, universal service and strategic resilience may pull in different directions. Make public obligations explicit and assess how they are financed.
Paper I: organisations, principal-agent problems, NPM and accountability. Example: corporatisation can change accounting, boards and managerial incentives while retaining government ownership. Assess these channels before calling it privatisation.
How can a public enterprise have greater managerial autonomy and stronger public accountability at the same time?
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