What are Public Enterprises? – Origin and Importance

The public enterprises came into existence as a result of the expanding scope of public administration. The advent of the concept of welfare state after the Second World War and the increasing developmental initiative undertaken by Government across the world, the system of public enterprises was developed.

The government sells goods and services to the common people through the means of a state owned enterprise system which incorporates the characteristics of both public and private enterprises. For e.g. the metro train facility for commuting in big cities, developed, managed and run by the government.

The government operates in the areas which are of basic or strategic importance and also the areas that require huge investments beyond the scope of private enterprises. The public enterprises in India have been on a steady rise since their big show in the Third Five Year Plan and have engaged themselves in a number of economic activities like advancing loans, regulating trade and commerce, heavy machine manufacturing, chemical drugs and fertilizers, oil drilling etc.

The government of India boasts of five Maharatnas and nine Navratnas (ratna meaning gems) public enterprises which are engaged in myriad of economic and developmental activities in the country, e.g. The Steel Authority of India, Hindustan Aeronautics Limited, National Thermal Power Corporation etc.

The state owned enterprises play an important political, economic and developmental role in their respective countries. The public enterprises of the erstwhile Soviet Union comprised of 85% of the workforce of the country.

The growth of public enterprises also has its roots in the colonial pasts of the countries of Asia and Africa. The Government sector, the public administration and ultimately the public enterprises in these countries have been greatly influenced by the colonial powers that ruled them. India is a good example of this trend where even today the Railways are the biggest example of a successful public enterprise.

Even the countries with no colonial history like Iran and Turkey, the public enterprise was used a tool to bring about economic, political and social changes, particularly in Turkey after the demise of the Ottoman Empire and formation of the modern Turkey.

The history of public enterprises in the USA dates back in the nineteenth century and was characterized by the state chartered banks in which the Federal Government has significant portion of the stocks. The formation of the Panama Rail Road Company in 1904 was another victory of the public enterprise system.

The growth of public administration and enterprises reached its peak under Franklin D Roosevelt and the Tennessee Valley Authority became the most emulated model of public corporation.

There are several factors that have contributed the growth of public enterprises in the recent times. The governments have used it to guide and command the economy; they own the strategic industries, functions and agriculture and also try to fill the inadequacies of the private sector.

Public enterprises are also essential in bringing about national development. They are also used as political instrument to maintain political stability, prevent unrest and provide employment.

Public enterprises have also helped the earlier colonized and now developing economies of the world to decrease their dependency on other nations and become self sufficient. Monopoly, freedom to chose profitable projects; no taxes etc are other factors that have led to their growth.