in Public Sector Industrial Units By it was clear that public sector enterprises were facing severe problems. While on the whole they were showing a profit, nearly half of the profit was contributed by the petroleum units. Many were making continuous losses. Part of the problem lay in the expansion of the public sector into non-strategic areas like tourism, hotels, consumer goods (for instance, in the 1970s, television sets were produced only by public sector companies) and so on.
There were many factors which contributed to the poor performance of public sector enterprises. Decisions on location were made for political rather than efficiency considerations. Delays in construction resulted in cost overrun, so that the units were overcapitalized. Administrative prices were not always economical and did not make sense when the intermediate goods produced in the public sector were used as inputs in the private sector.
Public sector units were also overstaffed, though the technology of heavy industries did not require so many workers. This increased the operating cost of the units. Bureaucrats were entrusted with the management of public enterprises, leading to inefficiency in management. Recognising all these problems, petroleum companies, banking and insurance services.
Private entrants have been allowed into some of these activities only in recent years. (b) Public Sector There were only five public sector enterprises in India in . By , this number had increased to . The capital investment increased from ` crores in to .
lakh crores in . The setting up of public sector enterprises in heavy industry was again dictated by two considerations. First, at the ideological level, the government was committed to a socialistic pattern of development which involved a high degree of state control over the economy. But at a more practical level, the government had to take over the responsibility for the establishment of heavy industrial units which required a very high level of investment.
These were known as “long gestation” projects, that is, it would take many years before such units would be able to start production. In the 1950s, the private sector did not