Short essay on the Control of public sector enterprises

There is no need to justify the rationale of control over public enterprises as it is ingrained in the word ‘public’. In India, three types of control are exercised in this regard, namely, parliamentary control, ministerial control and Audit control.

The parliamentary control over public enterprises is needed for fulfilling the constitutional responsibility of the parliament in respect of these enterprises like protection of capital invested, safeguarding public interests in running of these enterprises, formulating general policy in regard to public enterprise operations, maintaining uniformity in such policies, along with monitoring and implementing such policies, effecting control over ‘state capitalism’ and civil servants, approving statutes regulating the public enterprises and appointing committees like committee on public undertaking and other ad-hoc committees.

From the empirical analysis, it is obvious that the degree of parliamentary control over public enterprises in India has been too much, sometimes shackling the management initiative in individual enterprise.

The ministerial control over public enterprises is highly significant and effective. From the very inception of a public enterprise, the minister is associated in one way or the other with its operations and management. In the Indian context, the ministerial control is more real than is admitted.

The ministers have been following a variety of methods to affect control over public enterprises. It is both formal and informal taking the explicit directional shape and tacit directives like consultations discussions or other informal contracts respectively.

There are various factors, which affect the complex issue of ministerial control over public enterprises in India exerting varying degree of influence.

The dominant factors include:

(1) The attitude of the government of the day towards economic planning

(2) Nature of the present policy

(3) Assumption and interpretation of the ministerial responsibility

(4) Competent managerial human resource availability

(5) Assigned role to public enterprises and their mode of financing

(6) Existence of strong pressure groups

Effective Audit Control is imperatively necessary in case of public enterprise, as the investments made in them do not belong to the people who manage these enterprises.

Cause

Constitutionally, the Comptroller and Auditor General of India is empowered to exercise over public enterprises. A separate comprehensive Comptroller and Auditor General (Power and Conditions of Service) Act, 1971 was passed by the Indian parliament to regulate the duties and powers of the CAG.

Under the Act, the audit of public enterprises in India is not restricted to finance and compliance audit only but it extends to efficiency, economy and effectiveness of enterprises and operations as well. It covers propriety audit also which scrutinizes the management decisions involving expenditure.

Besides the CAG, the internal audit is performed by the enterprise itself to scrutinize the financial expenditure and to ensure the financial canons.

The problem with external audit, as it operates in the country, is that of delay. The audit takes a long time and legislature is left with no other option but to perform a post-mortem exercise and condemn or censure the government to the maximum.

Secondly, audit has become a routine and followed like any other routine, exercise, thus losing its importance as a watchdog of the public expenditure. Sine

The purpose of control over public enterprises is as follows:

(1) To ensure policy directives are implemented

(2) Operations and policies of public enterprises are consistent with and in furtherance of basic objectives established by the government

(3) Public enterprises and non-business programmes operating within the same area of subject matter and having the same major purpose are effectively coordinated

(4) Operations are conducted with maximum efficiency and economy and in accordance with laws

(5) Sufficient information is provided to enable appropriate authorities and the public to appraise the effectiveness of operations.

Efficiency

Indian public enterprises are criticized bitterly for their poor performance and lower efficiency. A large number of them have, of course, been running in losses in terms of financial returns. There are valid the reasons for the poor state of affairs of the public enterprises in the country.

(1) Absence of clear-cut well laid-out objectives of the public enterprises.

(2) Financial constraints in terms of overcapitalization, large overhead expenditure, rigid financial control, unsound capital structure and depreciation policy of the enterprises.

(3) Managerial problems in terms of lack of competent manpower, secondment of civil servants to the public enterprises who are apprentice in commercial operations frequent transfer of these civil servants from the top management public enterprises.

(4) Personnel factors like inappropriate personnel policy, overstating, dearth of skilled and expert employees, low performance, lack of sincerity and dedication on the part of the employees to the organisation.

(5) Weak industrial relations leading to strikes, gheraos, lockouts, sit downs, tools down, work to rule, agitations, demonstrations and disturbances affecting the production and sales substantially.

(6) Low capacity utilisation

(7) The absence of a sound pricing policy; the government has not come out with the clear-cut pricing policy and there are multiple agencies of price fixation as well.

(8) Excessive control both formal and informal, which inhibits the initiative of the management affecting efficiency adversely.

(9) Policy agitations resulting in loss of property and man days affecting the productivity and sales of public enterprises.