Class 11 Business Studies Notes

Chapter 3: Private, Public and Global Enterprises (CBSE)

Chapter Overview

This chapter explains:

Private Sector and Public Sector
Forms of Public Sector Enterprises
Changing Role of Public Sector
Global Enterprises (MNCs)
Joint Ventures
Public Private Partnership (PPP)

1. Private Sector and Public Sector

Private Sector

The private sector consists of businesses owned and managed by individuals or groups of individuals.

Forms

Sole Proprietorship
Partnership
Joint Hindu Family Business
Cooperative Society
Company

Objective

Earn profit
Customer satisfaction
Business expansion

Public Sector

The public sector consists of enterprises owned and managed by the Government.

Ownership may be:

Central Government
State Government
Joint ownership of Central and State Governments

Objectives

Public welfare
Balanced regional development
Employment generation
Infrastructure development
National security

Mixed Economy

India follows a Mixed Economy, where both:

Private Sector
Public Sector

operate together.

2. Forms of Public Sector Enterprises

There are three forms:

Departmental Undertaking
Statutory Corporation
Government Company

A. Departmental Undertaking

Meaning

A departmental undertaking is directly controlled by a Government ministry.

Examples

Indian Railways
India Post

Features

Owned by Government
Managed by Government departments
Employees are Government servants
Financed through Government budget
Revenue goes to Government treasury
Subject to Government accounting and audit

Merits

High public accountability
Parliamentary control
Suitable for national security
Government earns all revenue

Limitations

Lack of flexibility
Red-tapism
Political interference
Slow decision-making
Poor customer service

B. Statutory Corporation

Meaning

A statutory corporation is created through a Special Act of Parliament.

Examples include organizations established by specific legislation.

Features

Created by Parliament
Separate legal entity
Can sue and be sued
Financial autonomy
Own employees
Independent management

Merits

Operational flexibility
Financial independence
Government support
Helps economic development

Limitations

Political interference
Corruption
Government control in major decisions
Delay in approvals

C. Government Company

Meaning

A Government Company is registered under the Companies Act, 2013.

Government must hold at least 51% of the paid-up share capital.

Features

Separate legal entity
Managed like a company
Can own property
Can enter contracts
Raises funds from Government and public
Employees are not Government servants

Merits

Easy to establish
Better management flexibility
Professional administration
Market competition

Limitations

Government interference
Less Parliamentary control
Companies Act has limited relevance where Government is sole shareholder

Comparison of Public Sector Enterprises

Basis	Departmental Undertaking	Statutory Corporation	Government Company
Formation	Ministry	Special Act	Companies Act, 2013
Legal Status	No separate entity	Separate entity	Separate entity
Ownership	Government	Government	Government (51%+)
Employees	Government servants	Own employees	Own employees
Flexibility	Very Low	Moderate	High

3. Changing Role of Public Sector

Initially, the Public Sector was established to promote economic development.

Major Roles

1. Development of Infrastructure

Examples:

Railways
Power
Petroleum
Steel
Airways

2. Regional Balance

Industries are established in backward areas to:

Reduce regional inequalities
Increase employment

3. Economies of Scale

Government sets up industries requiring:

Huge investment
Large-scale production

Examples:

Steel
Petroleum
Electricity

4. Prevent Concentration of Wealth

Public sector prevents monopolies by reducing concentration of economic power.

5. Import Substitution

Produces goods domestically to reduce imports.

Examples:

Heavy machinery
Engineering goods

4. Industrial Policy 1991

The New Industrial Policy introduced four major reforms:

1. Revive profitable PSUs

Improve efficiency of potentially viable Public Sector Undertakings.

2. Close loss-making PSUs

Close enterprises that cannot be revived.

3. Reduce Government ownership

Government equity reduced in non-strategic enterprises.

4. Protect workers

Provide compensation, retraining and voluntary retirement schemes.

Major Changes

A. Reduction in Reserved Industries

Earlier:

17 industries

Then:

8 industries

Now:

3 industries

Reserved industries:

Atomic Energy
Arms and Defence
Rail Transport

B. Disinvestment

Meaning:

Sale of Government shares in PSUs.

Objectives:

Raise funds
Improve efficiency
Increase public participation

C. Sick Units

Loss-making PSUs were referred for:

Restructuring
Closure

D. Memorandum of Understanding (MoU)

Agreement between:

Government
PSU Management

Purpose:

More autonomy
Better accountability
Performance targets

5. Global Enterprises (MNCs)

Meaning

Global Enterprises or Multinational Corporations (MNCs) operate in more than one country.

Examples include large international companies with worldwide operations.

Features

1. Huge Capital Resources

Can raise funds from:

Banks
Investors
International markets

2. Foreign Collaboration

Collaborate with Indian companies through:

Technology transfer
Licensing
Brand sharing

3. Advanced Technology

Use:

Modern machinery
High-quality production
Latest technology

4. Product Innovation

Continuous research and development.

5. Strong Marketing

Global brands
Massive advertising
Effective promotion

6. Worldwide Market

Operate through:

Subsidiaries
Branches
Affiliates

7. Centralised Control

Head office controls worldwide operations while allowing local day-to-day management.

6. Joint Venture

Meaning

A Joint Venture is an agreement between two or more businesses to work together for a common objective.

Resources, risks and profits are shared.

Types of Joint Venture

1. Contractual Joint Venture (CJV)

No separate business entity
Agreement only

Example:

Franchise arrangement

2. Equity Joint Venture (EJV)

Separate jointly owned business created
Shared ownership
Shared management
Shared profits

Benefits of Joint Ventures

Increased resources
Better capacity
Access to new markets
Access to technology
Product innovation
Lower production cost
Established brand name

7. Public Private Partnership (PPP)

Meaning

PPP is a partnership between Government and Private Sector for infrastructure and public service projects.

Features

Shared investment
Shared risks
Better efficiency
Public ownership with private expertise

Strengths

Faster project completion
Better technology
Efficient management

Weaknesses

Possible conflicts
Limited private finance in some projects

Example

Kundli–Manesar Expressway

Important Definitions (Exam-Oriented)

Private Sector: Businesses owned by individuals or groups.

Public Sector: Enterprises owned and managed by Government.

Departmental Undertaking: Government department carrying out business activities.

Statutory Corporation: Corporation created through an Act of Parliament.

Government Company: Company in which Government owns at least 51% of paid-up capital.

Disinvestment: Sale of Government shares in Public Sector Enterprises.

Global Enterprise: Company operating in many countries.

Joint Venture: Two or more businesses working together for a common objective.

Public Private Partnership (PPP): Partnership between Government and private sector for infrastructure and public services.

Quick Revision Table

Topic	Key Point
Mixed Economy	Public + Private Sector
Forms of Public Enterprises	Departmental, Statutory, Government Company
Government Company	Government owns ≥51% shares
Departmental Undertaking	Direct ministry control
Statutory Corporation	Created by Act of Parliament
Industrial Policy 1991	Liberalisation, Privatisation, Globalisation
Disinvestment	Sale of Government shares
MNC	Operates in many countries
Joint Venture	Shared ownership/resources
PPP	Government + Private partnership

Important Exam Questions

Very Short Answer (1 Mark)

Define Public Sector.
What is Disinvestment?
What is a Government Company?
Define Joint Venture.
What is PPP?

Short Answer (3 Marks)

Explain the features of Departmental Undertakings.
State the merits of Statutory Corporations.
Explain Government Companies.
Features of Global Enterprises.

Long Answer (6 Marks)

Explain the changing role of the Public Sector.
Discuss the Industrial Policy of 1991.
Explain the benefits of Joint Ventures.
Compare the three forms of Public Sector Enterprises.

These notes cover all major NCERT concepts in Chapter 3 and are suitable for CBSE Class 11 Commerce revision.