Essay, Paragraph or Speech on “Should Public Sector Enterprises enjoy more Autonomy?” Complete Essay, Speech for Class 10, Class 12 and Graduation and other classes.

Should Public Sector Enterprises enjoy more Autonomy?

Massive investments were required in infrastructure sector like power, communications. roads, ports and irrigation; all this investment will have to be made by the public sector for which functional autonomy is a must.

In this era of globalisation and privatisation greater operational autonomy to the PSU boards is required to enable them to compete with the private sector and multinationals. Indeed, true operational autonomy is an important factor to keep pace with the changing world.

As a part of its plan to promote autonomy in the public enterprises the government is encouraging the listing of public sector enterprises on the stock markets as this would unlock the true value of a company, improve its corporate governance standards and help it in raising resources for funding future expansion plans as well. As far as sick and loss-making organizations are concerned, the government has made efforts to restructure and revive them, wherever this is possible. The government will continue to take steps to strengthen the public sector to enable it to play the role expected of it in a modern, fast growing economy.

The emerging scenario calls for a change in the Government’s attitude to give commercial freedom to this sector for expansion, diversification and joint venture operations.

The United Nations Organization recently listed the freedoms to be enjoyed by public enterprises:

1. Freedom from annual appropriation process, at least for operating expenses.
2. Freedom to receive and retain operating revenues.
3. Freedom to apply operating revenues to operating expenses.
4. Freedom from general government restrictions, particularly in the field of expenditure.
5. Freedom from normal government appropriation accounting.
6. Freedom from normal government audit’ operations.
7. Freedom from central purchasing and contracting requirements.
8. Other related freedom includes borrowing money, freedom to hire and fire, freedom to pay salaries at the discretion of the enterprises and freedom to control its long-term planning.

One of the main reasons why the public enterprises need to be autonomous of government is that the former have to undertake activities and make decisions which are entirely different in nature from the activities undertaken or the decisions made by the latter. The machinery of government and the procedures adopted in government departments which may be suitable for the work done therein are not necessarily adopted for the requirements of commercial and industrial undertakings. In government, for instance, a great deal of importance has to be attached to rules, regulations and precedents for the simple reason that the government decisions must follow a recognizable pattern which should have uniform application to or repercussions on all the citizens. In commercial or industrial undertakings, the emphasis is not on uniformity, but on certain other accepted criteria, such as profitability. Besides, the objectives of the policies pursued are more clearly definable and issues involved are less complex in nature in the public enterprises, than in the government. The room for differences of opinion and, therefore the need for detailed examination and consultations are less in the former than in the latter.

Public enterprises are granted certain amount of autonomy. The autonomy was sought for enabling the enterprises to function on the pattern of commercial concerns unlike government departments, where rules rule men and matters. Autonomy is freedom to make decisions related to operation and strategic management without governmental interference. This autonomy is based on a recognition of the fact that certain decisions can better be taken by the enterprises than by the State, by the administrative machinery or legislature, and that if such decisions are continually questioned, the responsibility for achieving the results would be blurred and performance adversely affected.

The comparatively elaborate system of examination and consultations prior to decision-making prevalent in government is redundant and indeed time-consuming for the public enterprises. Therefore, neither the machinery of government nor procedure followed in government are really suitable for decisions in industrial and commercial concerns which have to be made in an entirely different context. That is why it was pointed out that the usual political machinery of government is unsuited to manage commercial enterprises on business principles.

New business qualities, greater professional competence and commercial skill were required of executives to man the public enterprises or business lines. In India, the Second Five-Year Plan stated that the general policy is to confer upon the managements of public enterprises, the large measure of financial and administrative autonomy, consistent with the overall responsibility of government and accountability to parliament. The industrial policy resolution of 1956 also emphasised the largest possible measure of freedom to public enterprises. The Third Plan noted that if an enterprise does not have real autonomy. it is not likely to be effective.

But the autonomy cannot be absolute. The public sector enterprises have to work within the national policies and framework of a comprehensive plan for economic development. On the other hand, an unbridled autonomy of the responsible boards of management might lead the nation to the quicksand of managerial society. Autonomy does not mean complete independence. If maximum autonomy has to be granted to an enterprise, there is no point in keeping it in the performance of public enterprises. Excessive autonomy has been considered a serious cause of poor performance of State-owned enterprises as observed in Brazil, Argentina, the Philippines and other countries. Autonomy is a device for the better management of the enterprise and not an inexorable principle by itself.

In a democratic set-up, legislature cannot remain unconcerned about the working of the public enterprises. However, merely because the system makes them autonomous, it does not follow that the system can take away the jurisdiction of the Parliament in having a full probe in the administration of that autonomous body. The motives behind the creation of public sector enterprises are promotion of distributive justice, social welfare and economic growth. No government can afford to sacrifice these principles for the sake of autonomy of the public sector enterprises. When an enterprise goes wrong, the government cannot take shelter behind the autonomous status of public enterprises or be ignorant or innocent about the goings-on in them.

However, a certain amount of control is recommended to ensure the efficiency of the public sector undertaking. The control is intended to see that: (i) the operations and policies of public enterprises are consistent with and in furtherance of basic objectives established by the government; (ii) policies and directions of the government are implemented; (iii) public enterprises and non-business programmes operating within the same major framework are effectively co-ordinate; (iv) operations are conducted with maximum efficiency and economy; and (v) sufficient information is provided to enable appropriate authorities and the public to appraise the effectiveness of operations.

Thus, in public enterprises, there is a problem of reconciling operating and financial flexibility for the successful conduct of business with the need for controls to ensure public accountability and consistency with public policy. Public enterprises have a commercial mandate as well as public policy. They are intended to achieve both business flexibility and public accountability. So, both autonomy and control are indispensable to public enterprises. The autonomy on the one hand and the control on the other are fundamental prerequisites for the effective functioning of a public enterprise. They are to be viewed as complimentary to each other. The ultimate objective of both control and autonomy is the same—improved performance in terms of intended goals. Autonomy and control are the two sides of the same coin. Hence, there should be an ideal compromise between the autonomy of public enterprises and the State control over them. Autonomy and control should go hand in hand.

If we accept that both autonomy and control are imperative for public enterprises, then another question arises: How much of autonomy and how much of control? It is very difficult to determine the degree of control which, if it is too much, can destroy the commercial nature of the enterprises, whereas too much of autonomy takes them outside the democratic regime. It is not a question of less control and more autonomy or more control and less autonomy. It is certainly a question of good control and good autonomy.

Hence, the key problem is to strike a balance between the requirements of relevant autonomy and efficient administration on the one hand and effective control over them on the other. To balance control and autonomy is no easy task and the extent to which the right system of checks and balances has been yet built up is a matter of debate.

The Administrative Reforms Commission also emphasised the need for evolving management control in respect of public enterprises which would strike a right balance between autonomy and control. A method of work is to be devised which will enable the government to acquire necessary information without constantly harassing managers and reducing them to a state of chronic indecision. Thus, there is a need to evolve a kind of relationship between the public sector and the government so as to optimize the concepts of autonomy and control.

On the whole; the question of wielding control over public enterprises is quite a ticklish one and as yet we have not been able to evolve any suitable methods so that a proper balance between control and autonomy may be maintained. To a great extent the establishment of just balance between autonomy and control is possible only through the development of appropriate conventions and understanding.

Various institutional devices have been created in many countries over time to shield the public enterprises against undue control and interference from the Government. Public sector autonomy and control continues to be a focal subject because of its ramifications. Signing of memoranda of under-standing and creation of holding company structures in India, performance contracts in France and signaling system in Pakistan are some of the examples of these devices. These are intended to achieve increased managerial autonomy and reduce government control. There seems to be a pendulum swing between autonomy and control. This swing will never stop.

Adequate financial autonomy is a necessary condition for the successful working of public enterprises. This autonomy should not only flow from the government but it should further percolate from the top to the bottom in the public enterprises themselves. The financial controls are an important phenomenon in a democratic set up. These controls should not, however, be regressive.