ASSIGNMENT FIRST SEMESTER 2017

Course Code MS - 92 Course Title Management of Public Enterprises Assignment Code MS-92/TMA/SEM - I/2017 Assignment Coverage All Blocks

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School of Management Studies INDIRA GANDHI NATIONAL OPEN UNIVERSITY

MAIDAN GARHI, NEW DELHI – 110 068

1. Briefly discuss the various organizational forms which a Public Sector Enterprise can take?

The organization provides the ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ organizational forms of the public enterprises.

The participation of Government in economic and business sectors requires some kind of organizational structure to operate.

As the public sector grows, a vital question ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------major role to play. But the government acts through its employees, its people, its offices who they take conclusions and decisions on behalf of the government. In order for the government to participate in the economic activities of ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------in today's liberalized, competitive world. These public enterprises are owned by the public and are answerable to the public through the Parliament. They are characterized by public accountability, public ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------may take any particular form of organization. The aptness of a specific form of ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------performance productivity and quality standards.

(a) Departmental ----------------------------------

It was, at one point of time, the ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------framework of one of its already existing departments. Secondly, in the initial stages of developmental ------------------------------------------------------------------------- functions was small.

The major characteristics of Departmental enterprises are

(a) The enterprise is financed --------------------------------------------------------------------- revenues are paid into the treasury. (b) The enterprise is subject to ----------------------------------------------------------------------------------------- activities. (c) The permanent staffs of ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ordinarily the same as for other civil servants. (d) The enterprise is ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------the department. (e) Wherever this applies in ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------of the government. (b) Public Corporation

It is an autonomous form of the ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------of USA, given while discussing the Tennessee Valley Authority.

Public Corporation may be ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------department and company legislation.

1. It is ---------------------------------------------------------------------------------------------- the State.

2. It is generally created by, ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------departments and ministries.

3. As a corporate ---------------------------------------------------------------------------------- and acquire property in its own name.

4. Except for --------------------------------------------------------------------------------------------------- independently financed.

5. It is generally exempted from --------------------------------------------------------------------------------------- funds.

6. It is ordinarily not ----------------------------------------------------------------------------------------------- agencies.

7. In majority of cases, ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------itself determines.

8. It may ------------------------------------------------------------------------------------- the State.

9. Every public ----------------------------------------------------------------------------------------------- enactment.

10. Some of the restrictive ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------also be imposed on public corporations.

11. Some of the ---------------------------------------------------------------------------------------- be from the civil services.

(c) Government Company

The joint stock company is another organizational form of public enterprises. The 'company form' which may also be called a 'government company' is ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------per cent of equity capital.

Advantages of Government Companies are as follows.

1. A government company is far easier to ----------------------------------------------------------------------------------------------------------------------------------------------------------------------get a company, registered under the Companies Act in India.

2. The company form enables the ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------reducing its share capital to less than 50 per cent.

3. The creation of a company form ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- to private sector enterprise.

4. The company form of organization of ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------with the enterprise is concerned.

(d) Joint Enterprise

State participation ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------is known as joint enterprise.

Public sector undertakings:

Factors ----------------------------------------------- Enterprises

1. Government's will to set up joint ------------------------------------------------------------------------- situations:

(a) Lack of initiative to ------------------------------------------------------------------------------------------- participation; or (b) Government ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- more fields in the public sector.

2. The government's decision to ------------------------------------------------------------------------------- the following situations:

(a) For ------------------------------------------------------------------------------------ capital (b) For regulating the -------------------------------------------------------------- a private enterprise; (c) For --------------------------------------------------------------------- of a private enterprise (d) For governing ------------------------------------------------------------- enterprise; (e) For continuation of ------------------------------------------------------------------ enterprise; and (f) For limiting cost ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- world over, especially in the wake of privatization wave. (e) Development Corporation

It is difficult to exactly ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------agency in the public sector, primarily to promote, rather than to operate, economic activities through a system of subsidizing. The promotional activity of a Development Corporation is as follows.

(1) It promotes an ---------------------------------------------------------------------- into existence.

(2) It accelerates an activity ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------orally unbalanced manner.

(3) It promotes a desired pattern ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------of certain economic activity in the desired region, etc.

2. Explain the ideal way in which the Government should interact with Public Enterprises to facilitate their operations in public interest. Corporate Governance can be defined as a systematic process by which companies are directed and controlled to enhance their wealth generating capacity. Since -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------a manner that meets stakeholders aspirations and societal expectations.

Governments control the business activities ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------in a more direct way. These are as follows:

Controlling what to produce - In order to safeguard the interest of the community government may ban or limit the production of certain goods and services. For example, selling of ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------in many countries, e.g. aerosol cans that use CFCs which has been banned because of their damaging effect on the ozone layer.

Employees Protection legislations - ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------no unfair discrimination on the basis of Race, religion, sex, age, or colour.

Legislations for health and Safety at work:

To protect ------------------------------------------- machinery. Workers should be -------------------------------------------- and clothing. A reasonable --------------------------------------------------- for workers. Proper hygienic ----------------------------------------------------- provided. Workers get ---------------------------------------------- between shifts.

Protect employees against unfair dismissal - Business ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------otherwise it will be treated as unfair dismissal.

Ensure fair wages for the employees - In many ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------and other necessary details regarding working conditions. Minimum wages paid to different types of workers are also determined by the government.

Consumer Protection legislations - ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- consumers: A few examples are

Weight and Measures Act: goods ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------used to measure goods.

Trade Description Act--------------------------------------------------------- is illegal.

Consumer Credit Act: According to ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------taking a loan.

Sale of Goods Act: It is illegal to --------------------------------------------------------------------- to the description provided.

Environment protection - In the recent years ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------, making it mandatory for businesses to treat their wastes etc.

Location decisions

Government often influences location of business through

Planning controls involve ------------------------------------------------------------------------------- in certain areas. Provide regional assistance to ------------------------------------------------- regions of the country.

The government exercises control over its enterprises in various ways. Some of the important methods of Government control are discussed below:

1. Power to Appoint the Board of Directors: The ------------------------------------------------------------------------------------------------------------------------------------------------------------------------- has often not been in the best interest of PEs.

2. Prior Approval for Important Matters: The Government as owner has reserved many matters to itself, on which

decisions can be taken ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------them in respect of statutory corporations.

In practice, the Government approval is required for many more matters than stated in the Articles or the Acts of Parliament. The Department of ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------approval of the Government. Two examples where prior approval of the ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------of the chief executive of a PE abroad.

3. Government’s Power to Issue ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------. The directives could be general or specific. Two important examples of general directives are: i) Reservation ---------------------------------------------------- and Tribes and ii) For ex------------------------------------------------------ killed in action.

Example- The NTPC was once asked not to enforce service agreement bonds against seven executive trainees who had abandoned the service of the ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Barauni refinery and--------------------------------------- office at Silchar. In most cases, the ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------companies is as follows: “The President may, from time to time, ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------. The directors shall give immediate effect to the directives so issued”.

4. Circulars and Office Orders Issued by the Government: Government PE relationship is also regulated through circulars issued by the Department of Public ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------of the wish of the owner, they are given due weight by PEs. Moreover, Government directors on the Board often insist on compliance with these circulars.

Hundreds of circulars, semi-official letters----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------of a book by the Bureau of Public Enterprises and published by the Standing Conference ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------of Public Enterprise”, A few examples of the matters covered in these circulars are: i) Avoidance of --------------------------------------------------------------- are introduced ; ii) Policy --------------------------------------------------------- revision; iii) PEs not to present --------------------------------------------------- Meeting of the Company ; iv) Details of ---------------------------------------------------------- adopted by PEs; v) Delegation of powers -------------------------------------------------------- by the Board of an enterprise; vi) Instruction to PEs to effect economy in ----------------------------------------- lines as in the Government; vii) Details of ------------------------------------------------------------------------ payable to consultants;

viii) Advice to PEs to ----------------------------------------------------------- control system.

5. Report and Returns Obtained from PEs: The Government ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------prescribed for this purpose. The Government does not make the best of the report received by it because it lacks sufficient manpower/and expertise to analyze the data received and to take the ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------except for statistical purposes.

REASONS FOR EXCESSIVE GOVERNMENT CONTROL-

The main reasons why ------------------------------------------------------------------------- from its enterprise are: i) PEs are often centres of large power and ------------------------- of their operations are high in many cases.

ii) PEs are important ---------------------------------------------------- of public policy.

iii) The Government therefore --------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------with private enterprise.

Conclusion-

There is a need to be clear about the role of the Government in respect of its enterprises. The ten principles stated above may be a useful guide in this regard. Most ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------itself from PEs. But it is necessary that PEs have adequate managerial autonomy to operate successfully. How ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- of PE management. All PEs are under one or the other ministry of the Government called the administrative ministry. In addition, PEs have to interact with the department of Public Enterprises, Ministry of Finance, Vigilance Agencies and various other departments.

3. What is the need for setting up of State Level Public Enterprises (SLPEs)? Discuss in detail with reference to any SLPE of your choice. In 1947, when India became independent, there were various socio-economic problems confronting the country which needed to be dealt with in a planned and ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------facilities. There existed considerable inequalities in income and levels of employment, glaring regional imbalances in economic development and lack of trained manpower. As such, the State's intervention in all the sectors of the economy was ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------with large, long-gestation investments. Among the imperatives before the Government at that time were:

Rapid economic ---------------------------------------------------------------- infrastructure for economic development Removal of poverty and equitable --------------------------------------------------------------------------------------------------

--------------------------------------------------------- its concentration in a few hands Generation --------------------------------------------------------------------- opportunities Removal ------------------------------------------------------------------------- Accelerated growth of agricultural and industrial production Better ------------------------------------------------------------------------ resources Assist the --------------------------------------------------------------------- industries Promote ------------------------------------------------------------- substitutions Save and ------------------------------------------------------------ for the economy

Given the type and range of ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------for self-reliant economic growth. The dominant consideration for the continued ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------sectors like Railways, Telecommunications, Nuclear Power, Defense etc. and to provide a springboard for the economy to achieve a significant degree of self-sufficiency in the critical sectors. The rationale for setting up public ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------promote emerging areas like tourism, etc. A large number of enterprises were created out ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------created to operate in national and international trade, consultancy, contract and construction services, inland and overseas communications, etc. The overall constitution of public sector ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------, industries engaged in trade and services etc. To support my answer I am referring here Bharat Heavy Electricals Limited (BHEL) ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------BHEL is India's largest power plant equipment manufacturer. The company has been earning profits continuously since 1971-72 and paying dividends uninterruptedly since 1976-77.

BHEL is engaged in the design, ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------the economy, viz. power, transmission, industry, transportation, renewable energy, oil & gas and defence.

It has a network of 17 manufacturing units, 2 repair units, 4 regional offices, 8 service centres, 8 overseas offices, 15 regional centres, 7 joint ventures, and infrastructure ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------equipment to address the growing demand for power generation equipment.

BHEL has retained its market leadership position ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------/synchronization of 15059 MW of power plants in domestic and international markets in -------------------------------------------------------------------------------------------------------------------------------------------------------------------exceeded 170 GW installed base of power generating equipments.

It also has been exporting its power and industry segment products and services for over 40 years. BHEL's global references are spread across over 76 countries across ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------countries including Malaysia, Oman, Iraq, UAE, Bhutan, Egypt and New Zealand. Their physical exports range from turnkey projects to after sales services.

Awards and recognitions-

Appreciation shield-------------------------------------------------------------------------------------------------------------------------------------------------------------------------Bharati for successful commissioning of Salma Dam project in Afghanistan.

BHEL wins India ---------------------------------------------------------------- in Heavy Industries. It is the --------------------------------------------------------------------------------------- in the world. BHEL was adjudged --------------------------------------------------------------------- by CBIP The company ---------------------------------------------------------------------- & Technology Development BHEL received the -------------------------------------------------------------------- Innovative Enterprises In 2014, BHEL ------------------------------------------------------------------------------ ninth consecutive year. BHEL received two ------------------------------------------------------------------------- President of India. In the year 2011, it ---------------------------------------------------------------------------- magazine Forbes. The company won the prestigious ‘Golden Peacock -----------------------------------------------------------------------------

---------------------------------------- achievements in the field of Occupational Health & Safety. It is also ---------------------------------------------------------------- Fabulous 50 List of 2010. BHEL wins MoU ----------------------------------------------------- growth rate in Market Capitalization.

Research and development

BHEL's investment in R&D is amongst the largest in the corporate sector in India.

During the year 2012-13, the ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------and improvements in existing products for cost competitiveness, higher reliability, efficiency, availability and quality etc. To ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------as through acquisition of new technologies from leading engineering organizations of the world. The IPR (Intellectual Property Rights) capital of BHEL grew by 21.5% in the year, taking the total to 2170.

The Corporate R&D division at ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------product group at the manufacturing divisions play a complementary role. BHEL has established Centres of Excellence for Simulators, Computational Fluid Dynamics, Permanent Magnet Machines, Surface ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Laboratory at Corporate R&D; Centre of Excellence for Hydro Machines at Bhopal; ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Research Centre at Tiruchirappalli.

BHEL has established four specialized institutes, viz., Welding Research Institute (WRI) at Tiruchirappalli, Ceramic Technological Institute (CTI) at Bangalore, -------------------------------------------------------------------------------------------------------------------------------------------------------------------------at Gurgaon pursues R&D in Photo Voltaic applications.

Significantly, BHEL is one of the only four --------------------------------------------------------------------------------------------------------------------------------------------------------------------------companies which are the biggest spenders on R&D in the world.

4. Describe the Composition of the Board for the Management of Administration of Public Enterprises. Examine how does it enjoy wider responsibilities than the Boards of Private Sector Enterprises? Public Enterprises in India are managed by the management boards. The board is the top management organ responsible for implementing the objectives of an ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------and administration. The functions of the Board include appointment of the Chief Executive and the principal officers, the drawing up of programmes, plan for development and reorganization, policies regarding finance ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------improve production, processing or marketing, training, education, etc, research and development. The management of administration of public ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------, they are entrusted with responsibilities towards consumers, employees, Government, Parliament and the Nation. These boards are expected to formulate policies for running the enterprise and to work towards ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------enterprise conform to the overall government approach and policies in various matters. Hence, the success or failure of an enterprise ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------men at the highest level of management-the governing board or board of directors the likelihood of success is very little…….Negatively, the composition should not be such as to obscure the essential condition of autonomy----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------composition of the Board should be such as to subserve only one purpose, ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------that we can secure” and for this “we must insist upon all the members being persons of business ability and capacity.” In India, there is generally a paucity of ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------non-officials drawn from different walks of life are also given representation on the management boards as they bring in vast experience of business, accounting and management. The Estimates Committee has criticized ------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------to the post of duty.” This bureaucratic approach to the organizational and functional problems defeats the very purpose of constituting a company. The Estimates Committee, therefore, ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------a wide sphere than that at present and more technical experts, experienced men from public life and from various non-official sources be appointed on the board, though care would have to be taken that no one with a direct --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- favour of the appointment of official directors on the boards of public enterprises. According to him “the appointment of officials on the board of directors tends to secure -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------boards of management.” The presence of official directors on ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------for running the enterprise and dealing with its day-to-day administration. This arrangement also ensures coordination between the Government and the enterprise. This link can be used as a two way communication channel ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------also facilitate horizontal coordination between several such enterprises by virtue of their being a member on these enterprises. Prof. Robson is not particularly enthused with members of the board being drawn from ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------that interest and this cannot but affect adversely the harmonious functioning of the Board.” Wider responsibilities of the Board for the Management of Administration of Public Enterprises- Managing public sector efficiently in ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------manner, which could enable the public enterprise to perform under the overall guidance and patronage of the government, while at the same time be autonomous enough to carry out activities which would ensure that the ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------responsibilities. Sick private industries were also taken over by Government and converted into public sector enterprises, obviously to safeguard employment. This increased the role of the public sector from managing ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------for public sector enterprises underwent changes with changes in portfolios. Experience of industrially developed countries has shown ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------and he, in turn, cannot be successful unless he is backed by a very professional and competent board of directors. Since public enterprises have to deal with delicate questions of policy which affect the ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------who are not only competent but also wise, the organization is bound to suffer. ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- the future of the country. Effectiveness of the management boards ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------by adequate delegation and decentralization of authority and non-interference in the day to day affairs of the company by government. There should be clear enunciation of the level of authority that the board would have along ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------the enterprise, grant of licences/sanctioning of tenders etc. Government nominees on the boards of public sector enterprises attend meetings without adequate brief and frequently stall ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- could not be taken in the board meetings.

5. What are the benefits from privatization? Explain how change of ownership improves efficiency? Benefits from privatization-

Privatization has been a key ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- and foster economic growth, as well as reduce public sector borrowing requirements through the elimination of ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------that managers of state-owned enterprises pursue----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------the budget constraints they face are also softened.

The soft-budget constraint emerges from the fact that ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------financial distress. Empirical evidence shows a robust corroboration of theoretical implications: privatization increases profitability and efficiency in both competitive and monopolistic sectors. Full ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------in productivity, which reflects their market power. From the macroeconomic perspective---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- trends are favorable.

Many reasons explain the movement by ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- into the delivery of state services in order to provide services to citizens in a more-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------, privatization can:

1. SAVE ---------------------------------------------' MONEY

2. INCREASE -------------------------------------------

3. IMPROVE -------------------------------------- QUALITY

4. INCREASE ------------------------------------ INNOVATION

5. ALLOW ------------------------------------------- STEER, RATHER THAN ROW

6. --------------------------------------------- GOVERNMENT

7. IMPROVE ---------------------------------------

SAVE TAXPAYERS' MONEY

By applying a ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------programs can reduce program costs.

Over 100 studies have documented ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------nding on the service. For some services, such as prison construction and operation, ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------are crucial to sustained cost savings.

States can also realize large one--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------government-run operations.

Privatization also creates a steady stream of new tax revenues from private contractors and corporations who pay taxes and license fees, while state units do not.

INCREASE FLEXIBILITY

Privatization gives state ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------during peak periods, or downsize as needed.

IMPROVE SERVICE QUALITY

A number of surveys have ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------responding reported better services as a result of contracting out.

If competitive bidding is instituted for a ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------service providers to provide quality services in order to keep complaints down and keep the contract.

Service quality is not assured, however, by privatization. ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------of the contractor's performance through customer surveys and on-site inspections must also be performed by government in its oversight role.

INCREASE EFFICIENCY AND INNOVATION

Private management can ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------, and simplified procurement.

Private ownership can stimulate --------------------------------------------------------------------------------------------------------------------------------------------------------------keep contracts. These incentives, for the most part, do not exist in the public sector.

ALLOW -----------------------------------------------, RATHER THAN ROW

Privatization allows state ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------efficiently delivered.

STREAMLINE --------------------------------------------- GOVERNMENT

Privatization is one tool to make bureaucracies smaller and more manageable. Large private corporations often sell off assets that are underperforming or ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------governments can replicate this experience.

IMPROVED MAINTENANCE

Private owners are strongly ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------to political considerations, increasing overall long-term costs.

Privatisation gives birth to a number of benefits. Not only does bleeding of continuously loss-making SOEs stop, and capital receipts accrue as a result of ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------with change of ownership. In the UK, most privatized enterprises showed enormous profits after privatisation. Utilities such as telecommunications, gas and electricity showed drastic reductions in prices charged after ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------were contributed by the privatised companies by way of share sales, tax receipts and dividends, while ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------and subventions towards losses. Privatisation also helps in developing the stock market. For example, in Jamaica, ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------by developing the stock market. Hence, privatisation should be assessed by more than simply its effects on the enterprises themselves. Privatisation helps in stabilizing the economy ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------were used to retire domestic public debt, hence interest rates went down. Large sums were ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------, as in the case of privatisation of Mexicana. Privatisation can be a boon for citizens and employees too. In the UK, nearly 11million shareholding public (nearly 25% of the population) were benefiting from regular, increasing ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------benefited from increased profitability through increases in quantum of bonuses and rise in share prices. For example, in 1994-95, the bonus in British Airways was around 94 million pounds (which was 42% ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------. Privatized companies benefited because productivity went up. How change of ------------------------------------ efficiency- Many theories of ownership change have been ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------argued that corporate takeovers promote economic natural selection. Efficient firms survive (that is, they remain autonomous) while inefficient companies are taken over. The threat of takeover causes managers to try ----------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------managers. In a similar vein, Michael Jensen asserted that mergers increase the efficiency of ---------------------------------------------------------------------------------------------------------------------------------------------- that management will act to maximize shareholder wealth. Michael Gort's theory of economic disturbance ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------income-producing assets. Mergers, he argued, are caused mainly by divergent expectations: the acquiring and acquired firms have vastly different perceptions of the present value of the target company's stock, -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------bull markets or rapid technological change. Efficiency also improves with ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------drastic reductions in prices charged after privatisation, and even the quality of services improved. Government was a major beneficiary of privatisation, since nearly 8 billion pounds a year were contributed by the privatised companies by ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------of interest on borrowings and subventions towards losses. In Chile, net benefits from privatisation and ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------stock market. For example, in Jamaica, privatisation of National Commercial Bank (NCB) and ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------assessed by more than simply its effects on the enterprises themselves.

6. Write short notes on the following:- (a) Navaratna Dispensation Navratna dispensations means to ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Enterprises (PSEs) identified by the Government of India in 1997 as "public sector companies that have comparative advantages", giving them greater autonomy to compete in the global market so as to "support in their drive to become global giants"

Originally, the term Navaratna ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------emperor Akbar, where the Navaratnas were a group of nine extraordinary men in their respective courts.

List of Current Navratna Dispentions

Bharat -------------------------------- Limited

Bharat ------------------------------ Limited

Hindustan --------------------------------Limited

Hindustan ---------------------------------- Limited

Mahanagar -------------------------------------- Limited

National ---------------------------------------- Limited

National -------------------------------------- Corporation Limited

Neyveli --------------------------------- Limited

Oil India --------------------------------

Power ----------------------------------------------- Limited

Power Grid ----------------------------------------- Limited

-------------------------------------- Nigam Limited

Rural ---------------------------------- Limited

Shipping ------------------------------------ Limited

(b) Performance of Ports

Ports/Terminals are complex ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------link in the chain. Examples of these complexities include:

Operating in different -----------------------------------------------------------, Free Trade Zones to name a few.

The structure of ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------of these, which varies considerably.

The volumes of cargo expected to be handled by a port are ever increasing and the need for flexibility is creating a new set of challenges.

Ports will soon need to ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------becomes an added pressure.

Technology - be it ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------in a dangerous environment.

A growing need to ----------------------------------------------------------- on the environment

There are 12 major ports and 184 minor / intermediate ports along the 5560 km coastline of India. The major ports are Kolkata / Haldia, Mumbai, Jawaharlal Nehru ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------. A new major port, Ennore port, has started functioning near ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------the remaining 25 per cent. Ports are a key component of ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------as the delay at ports. However performance lags international standards. Private ---------------------------------------------------------------------------- from captive users. The performance of ports has shown the following improvement over the years:

There has been an --------------------------------------------------------------------------- at major ports.

There has been an ---------------------------------------------------------------------------------------------------------------------

-------------------------------------------------------------------years (2002- 2003).

There has been an ---------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------day, average per-berthing time)

Productivity indicators vary ---------------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------could be adopted in other ports.

The major initiatives taken for improvement in performance of ports can be summarised as follows:

Corporatisation of Major Ports: The functioning -----------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------due to delays inherent in

the decision making process. Steps are thus being taken by the Government towards corporatisation of major ports.

Private sector participation: The areas ------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------etc; leasing of equipment for cargo

handling; pilotage; captive facilities for port based industries.

Joint ventures: The objective ------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------alliances with minor ports and enhance

confidence of private sector in funding of ports.

Tariff policy: Currently, the tariff -------------------------------------------------------------------------------------------------

---------------------------------------------------------------------, the improvement in productivity and efficiency needs to

be taken into account. It needs to be ensured that the users do not pay for the inefficiencies of the ports.

Development of Hinterland / port connectivity: ------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------railways, highways,

inland, water transport and even pipelines is essential.

(c) Labour Redundancy Redundancy may occur when an ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------terminations of employment of workers in the industry. Redundancy can ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------amalgamation causes:

(a) Severance of the legal ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------down, arrangement or amalgamation, and

(b) As a result of and in addition ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------the terms and conditions of employment.

Countries as diverse as Argentina, Japan, ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------necessary for governments to do so if an enterprise is to be sold, since investors shy away from surplus labour and the problems of tackling redundancy. Moreover, governments are usually better able than private investors to ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------severance payments, banning strikes, and reducing the power of labour unions through various measures. The prospect of political unrest arising from ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------at an early stage in discussion of the SOEs targeted for privatisation, both to listen to labour’s ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------process, especially if it is accompanied by a well-planned educational campaign on the need to ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------of achieving it. Labour unions distrust of privatisation is ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------are ‘phantom workers’, i.e. workers who do not work but are paid, and therefore, reduction in labour force might only mean elimination of ‘phantom workers.’. Sale to the private sector would almost certainly result in reduction in ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------chances of job loss are greater, since productivity could be maintained or improved ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------since services of skilled workers cannot be easily duplicated or dispensed with. An employer who --------------------------------------------------------------- should:

Provide in writing to the Chief ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------reason for any termination, the number and categories of workers likely to be affected and the period within which any termination is to be carried out; and

Consult the trade union concerned ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------such as finding alternative employment.

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