Chapter private-public-and-global-enterprises: Private, Public and Global Enterprises Case Study Questions | business studies Class 11 CBSE

Chapter private-public-and-global-enterprises: Private, Public and Global Enterprises Case Study Questions | business studies Class 11 CBSE | ByteNotes.in

Case Study

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Case Set 1

Case Analysis

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Ramesh owns a medium-sized textile company that has been operating for 15 years. Recently, he noticed that the Indian Railways, a government-owned enterprise, was facing operational challenges but continued to function due to government support. He also observed that a new private courier company had entered the market and was offering faster services than the Post and Telegraph Department. Ramesh became curious about how government-owned enterprises differ from private ones. He learned that India operates as a mixed economy where both private sector businesses (like his own firm) and public sector organisations (like Indian Railways) coexist. He wanted to understand the significance of this arrangement and how each sector contributes to the national economy.

Question 1: What is meant by a mixed economy? Give one example from the passage.

A mixed economy is one where both private and government enterprises are allowed to operate side by side.
Example: India is a mixed economy where private firms like Ramesh's textile company and public enterprises like Indian Railways coexist.

Question 2: How does the public sector differ from the private sector in terms of ownership and control?

The public sector consists of organisations owned and managed by the government, either partly or wholly by central or state government.
The private sector consists of businesses owned by individuals or groups of individuals such as sole proprietors, partners, or companies.

Question 3: Why did private courier companies gain an advantage over the Post and Telegraph Department? Analyse the limitations of departmental undertakings that contributed to this situation.

Departmental undertakings like the Post and Telegraph Department lack flexibility, which is essential for smooth business operations.
Employees and heads of such departments cannot take independent decisions without ministerial approval, causing delays.
These organisations are generally insensitive to consumer needs and do not provide adequate services.
Red tapism and bureaucratic conservatism prevent them from capitalising on business opportunities, giving private competitors an edge.

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Case Set 2

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The Government of India set up 'AirIndia Corporation' through a Special Act of Parliament. The Act clearly defined its powers, functions, rules for employees, and its relationship with government departments. The corporation was financially independent and could raise funds through borrowings and revenues from operations. Its employees were not governed by civil service rules but by the provisions of the Act itself. The corporation could sue and be sued, enter into contracts, and acquire property in its own name. However, critics pointed out that in practice, government and political interference often occurred in major decisions, and corruption was rampant in public dealings. A parliamentary committee was set up to review its functioning.

Question 1: What type of public enterprise is 'AirIndia Corporation' as described in the passage? State any two features that identify it.

It is a Statutory Corporation, as it was brought into existence by a Special Act of Parliament.
Two features: (i) It is financially independent and can raise funds through borrowings and revenues. (ii) Its employees are governed by the provisions of the Act, not civil service rules.

Question 2: State two advantages of a statutory corporation over a departmental undertaking.

Statutory corporations enjoy independence in functioning and a high degree of operational flexibility, free from undesirable government regulation.
Since their funds do not come from the central budget, the government generally does not interfere in their financial matters, unlike departmental undertakings.

Question 3: Despite being called autonomous, why do statutory corporations often fail to achieve true operational independence? Critically examine using the passage and your knowledge.

In reality, all actions of statutory corporations remain subject to many rules and regulations, limiting the flexibility they claim to have.
Government and political interference routinely occurs in major decisions, especially where large funds are involved.
The government often appoints advisors to the Corporation Board, curbing freedom in contracts and decisions; disagreements are referred back to the government, causing further delays.
Corruption in public dealings and lack of accountability to Parliament further undermine their effectiveness.

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Case Set 3

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Steel Authority of India Limited (SAIL) is a company where the Central Government holds more than 51% of the paid-up share capital. It was incorporated under the Companies Act and competes with private steel companies in the open market. The shares are held in the name of the President of India. SAIL can file lawsuits, enter into contracts, and acquire property. Its auditors are appointed by the Central Government and the Annual Report is presented in Parliament. SAIL follows its own Memorandum and Articles of Association for employee recruitment and service conditions. It also raises funds from private shareholders and the capital market.

Question 1: Identify the form of public enterprise SAIL represents and state the minimum government shareholding required for this classification.

SAIL is a Government Company.
A government company requires not less than 51% of the paid-up capital to be held by the Central Government, State Government, or partly by both.

Question 2: How is the appointment of auditors and reporting of annual accounts of a government company different from a departmental undertaking?

In a government company, the auditor is appointed by the Central Government and the Annual Report is presented in Parliament or the State Legislature.
Departmental undertakings are subject to the standard government accounting and audit procedures applicable to all government departments.

Question 3: Why is the government company form preferred over other forms of public enterprises? Discuss its advantages and any two limitations.

It can be established simply by fulfilling requirements of the Companies Act without a separate Act of Parliament.
It has a separate legal entity and enjoys autonomy in management decisions, allowing it to act on business prudence.
It can control the market and curb unhealthy practices by offering goods and services at reasonable prices.
Limitations: (i) When the government is the sole shareholder, the Companies Act provisions lose practical relevance. (ii) It evades constitutional responsibility as it is not directly answerable to Parliament.

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Case Set 4

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After Independence, India faced the challenge of building a strong industrial base from scratch. The private sector was unwilling to invest in heavy industries with long gestation periods and huge capital requirements. The government therefore set up public sector enterprises to develop infrastructure such as railways, road transport, power plants, and steel plants. Four major steel plants were deliberately set up in backward regions to promote regional balance and employment. The government also ensured that fertiliser and pharmaceutical industries received public investment during the second and third Five Year Plans to reduce dependence on imports. These initiatives were aimed at accelerating industrialisation and achieving self-reliance.

Question 1: Why was the public sector given priority in infrastructure development after Independence?

The private sector was unwilling to invest in heavy industries that required huge capital and had long gestation periods.
Only the government could mobilise the massive capital needed to develop rail, road, air, and sea transport and other infrastructural facilities.

Question 2: How did the public sector contribute to maintaining regional balance in India?

The government deliberately located public sector enterprises in backward regions to accelerate economic development and provide employment.
Steel plants and other industries were set up in underdeveloped areas to develop ancillary industries and prevent concentration of industry in already advanced zones.

Question 3: Discuss how the public sector served the objective of import substitution and check on concentration of economic power before 1991.

During the second and third Five Year Plans, India aimed at self-reliance by setting up public sector units in heavy engineering to reduce dependence on imported machinery and equipment.
Companies like STC and MMTC helped expand exports while reducing the need for costly imports.
By investing in heavy industries requiring large capital, the public sector prevented wealth from getting concentrated in the hands of a few private industrial houses.
This sharing of income among large numbers of employees and workers helped reduce income inequality and discourage monopolistic practices.

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Case Set 5

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In 1991, the Government of India introduced radical changes to industrial policy. The number of industries reserved exclusively for the public sector was reduced from 17 to 8, and eventually to just 3 — atomic energy, arms, and rail transport. The government decided to disinvest shares in several public sector enterprises by selling equity to the private sector and the public. All sick public sector units were referred to the Board of Industrial and Financial Reconstruction (BIFR) to decide on restructuring or closure. A National Renewal Fund was established to retrain and rehabilitate retrenched workers. The Memorandum of Understanding (MoU) system was introduced to give public sector managements greater autonomy while holding them accountable for specific targets.

Question 1: What is disinvestment? State any one objective of disinvestment introduced under the 1991 policy.

Disinvestment involves the sale of the equity shares of public sector enterprises to the private sector and the public.
One objective: To raise resources and encourage wider participation of the general public and workers in the ownership of these enterprises.

Question 2: What is the Memorandum of Understanding (MoU) system introduced for public sector units? What does it aim to achieve?

The MoU system is an agreement between a public sector unit and its administrative ministry that defines their relationship, targets, and operational autonomy.
It aims to grant managements greater freedom while holding them accountable for specified results, thereby improving performance and efficiency.

Question 3: Critically evaluate the four major reforms introduced for the public sector under the 1991 Industrial Policy. What challenges remained after implementation?

Reduction of reserved industries from 17 to 3 allowed private sector competition but also exposed public enterprises to competitive pressures they were unprepared for.
Disinvestment aimed at releasing locked resources, reducing public debt, and introducing corporate governance, but required careful implementation to avoid worker exploitation.
Referring sick units to BIFR for restructuring or closure was a significant step, but many workers faced retrenchment and the National Renewal Fund lacked sufficient resources for Voluntary Retirement Schemes.
The MoU system provided autonomy and accountability but ensuring that managements actually met targets in a competitive environment remained a challenge.

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Chapter sections

Chapter private-public-and-global-enterprises: Private, Public and Global Enterprises | Case Study Questions

Passage

Question 1: What is meant by a mixed economy? Give one example from the passage.

Question 2: How does the public sector differ from the private sector in terms of ownership and control?

Question 3: Why did private courier companies gain an advantage over the Post and Telegraph Department? Analyse the limitations of departmental undertakings that contributed to this situation.

Passage

Question 1: What type of public enterprise is 'AirIndia Corporation' as described in the passage? State any two features that identify it.

Question 2: State two advantages of a statutory corporation over a departmental undertaking.

Question 3: Despite being called autonomous, why do statutory corporations often fail to achieve true operational independence? Critically examine using the passage and your knowledge.

Passage

Question 1: Identify the form of public enterprise SAIL represents and state the minimum government shareholding required for this classification.

Question 2: How is the appointment of auditors and reporting of annual accounts of a government company different from a departmental undertaking?

Question 3: Why is the government company form preferred over other forms of public enterprises? Discuss its advantages and any two limitations.

Passage

Question 1: Why was the public sector given priority in infrastructure development after Independence?

Question 2: How did the public sector contribute to maintaining regional balance in India?

Question 3: Discuss how the public sector served the objective of import substitution and check on concentration of economic power before 1991.

Passage

Question 1: What is disinvestment? State any one objective of disinvestment introduced under the 1991 policy.

Question 2: What is the Memorandum of Understanding (MoU) system introduced for public sector units? What does it aim to achieve?

Question 3: Critically evaluate the four major reforms introduced for the public sector under the 1991 Industrial Policy. What challenges remained after implementation?

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