NCERT Notes Class 11 Business Studies Chapter 3: Private, Public and Global Enterprises (Free PDF)

This chapter discusses various forms of business organisations in the private and public sectors, along with global enterprises. It covers departmental undertakings, statutory corporations, government companies, the changing role of the public sector, global enterprises, joint ventures, and public-private partnerships. These notes summarise key concepts from Chapter 3 of the NCERT textbook Business Studies for effective revision. You can also download the free PDF for quick reference.

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Introduction  

All types of organisations are doing business in the country, whether they are public, private or global. In neighbourhood markets, there are shops owned by sole proprietors or big retail organisations run by a company. There are partnership firms providing services like legal and medical. Railways are wholly owned and managed by the government. The post office is owned by the Post and Telegraph Department, Government of India. Private courier services operate in bigger towns. Global enterprises operate in more than one country.

• Examples: Shops by sole proprietors, retail by company, partnership firms for services, government-owned like Railways and post office, private couriers, and global enterprises.  
• Privately owned: Sole proprietorship, partnership, company.  
• Government-owned: Railways, post office.  
• Global: Operate in more than one country.

Private Sector and Public Sector  

The private sector consists of businesses owned by individuals or a group of individuals. The various forms of organisation are sole proprietorship, partnership, joint Hindu family, cooperative and company. The public sector consists of various organisations owned and managed by the government. These organisations may either be partly or wholly owned by the central or state government. They may also be a part of the ministry or come into existence by a Special Act of Parliament. The government participates in the economic activities of the country through these enterprises.

• Private sector: Owned by individuals or a group; forms – sole proprietorship, partnership, joint Hindu family, cooperative, company.  
• Public sector: Owned and managed by government; partly or wholly by central/state; part of a ministry or by Special Act of Parliament.  
• The government defines areas for the private and public sectors through industrial policy resolutions.  
• Industrial Policy Resolution 1948: Defined roles, oversight through Acts.  
• Industrial Policy Resolution 1956: Objectives for the public sector, importance, and mutual dependency.  
• 1991 policy: Disinvestment, greater freedom to the private sector, invited foreign direct investment, and the entry of multinational corporations.  
• Coexistence: Public sector units, private sector enterprises, global enterprises.

Forms of Organising Public Sector Enterprises  

The government’s participation needs an organisational framework. Public enterprises are formed to participate in economic activities and contribute to development. Owned by the public, uses public funds, accountable to the public through Parliament. Form depends on the nature of operations and the relationship with the government. Suitability based on requirements. Ensure performance, productivity, and quality standards.

• Forms: (i) Departmental undertaking, (ii) Statutory corporation, (iii) Government company.  
• Characteristics: Public ownership, public funds, public accountability.

Departmental Undertakings  

This is the oldest and most traditional form of organising public enterprises. Established as departments of the ministry, an extension of the ministry. Not autonomous or independent institutions, no independent legal entities. Act through government officers, employees are government employees. Under the central or state government, the applicable rules. Examples: Railways, the post and telegraph department.

Features  

Here are the features of Departmental Undertakings:

(i) Funding directly from the Government Treasury, annual appropriation from the budget, and revenue paid into the treasury.  

(ii) Subject to accounting and audit controls applicable to government activities.  

(iii) Employees are government servants; recruitment, conditions same as other government employees; headed by IAS officers, civil servants are transferable.  

(iv) Major subdivision of a government department, subject to direct control of the ministry.  

(v) Accountable to the ministry, management directly under the concerned ministry.

Merits  

Here are the merits of Departmental Undertakings:

(i) Facilitates Parliament to exercise effective control over operations.  

(ii) High degree of public accountability.  

(iii) Revenue goes directly to the treasury, a source of income for the government.  

(iv) Suitable where national security is concerned, under direct control and supervision of the ministry.

Limitations  

Here are the limitations of Departmental Undertakings:

(i) Fail to provide flexibility essential for the smooth operation of the business.  

(ii) Employees/heads are not allowed to make independent decisions without ministry approval, which leads to delays.  

(iii) Unable to take advantage of business opportunities; bureaucrats are over-cautious, conservative.  

(iv) Red tape in day-to-day operations.  

(v) Political interference through the ministry.  

(vi) Insensitive to consumer needs, do not provide adequate services.

Statutory Corporations  

Statutory corporations are public enterprises brought into existence by a Special Act of Parliament. The Act defines powers, functions, rules, and regulations governing employees, relationships with government departments. A corporate body with defined powers, financially independent, and control over a specified area or commercial activity. A corporate person acts in its own name. Power of government, operating flexibility of private enterprises.

Features  

Here are the features of Statutory Corporations:

(i) Set up under an Act of Parliament, governed by provisions; the Act defines objects, powers, and privileges.  

(ii) Wholly owned by the state; the government has ultimate financial responsibility, appropriates profits, and bears losses.  

(iii) Body corporate; can sue and be sued, enter into contracts, and acquire property in its own name.  

(iv) Independently financed; funds by borrowings from government/public, revenues from sale of goods/services; authority to use revenues.  

(v) Not subject to the same accounting and audit procedures as government departments; not concerned with the central budget.  

(vi) Employees not government/civil servants; conditions governed by the Act; some officers on deputation.

Merits  

Here are the merits of Statutory Corporations:

(i) Independence in functioning, high operational flexibility; free from undesirable government regulation/control.  

(ii) Funds not from the central budget; the government does not interfere in financial matters.  

(iii) Autonomous; frames its own policies/procedures within powers by Act; some matters need prior ministry approval.  

(iv) Valuable instrument for economic development; the power of the government with the initiative of private enterprises.

Limitations  

Here are the limitations of Statutory Corporations:

(i) In reality, not as much operational flexibility; actions are subject to rules/regulations.  

(ii) Government and political interference in major decisions or huge funds.  

(iii) Rampant corruption when dealing with the public.  

(iv) Government appoints advisors to the board; curbs freedom in contracts/decisions; disagreement referred to government, delays action.

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Government Company  

A government company is established under the Companies Act, 2013, registered and governed by provisions. For purely business purposes, compete with the private sector. According to section 2(45), a company in which not less than 51 per cent paid up capital is held by the central government, or state government, or partly, includes a subsidiary. May be private limited or public limited. Shares purchased in the name of the President of India.

Features  

Here are the features of the Government Company:

(i) Created under the Companies Act, 2013 or the previous Company Law.  

(ii) Can file suit in court against a third party and be sued.  

(iii) Can enter into a contract, acquire property in own name.  

(iv) Management is regulated by provisions of the Companies Act, like other public limited companies.  

(v) Employees appointed according to their own rules in the Memorandum and Articles of Association.  

(vi) Exempted from accounting and audit rules/procedures; auditor appointed by the Central Government; Annual Report presented in Parliament/State Legislature.  

(vii) Funds from government shareholdings, private shareholders, are permitted to be raised from the capital market.

Merits  

Here are the merits of the Government Company:

(i) Established by fulfilling the requirements of the Indian Companies Act; no separate Act in Parliament.  

(ii) Separate legal entity apart from the government.  

(iii) Autonomy in management decisions, actions according to business prudence.  

(iv) Provide goods/services at reasonable prices; control market, curb unhealthy practices.

Limitations  

Here are the limitations of the Government Company:

(i) Provisions of the Companies Act are not much relevant where the government only shareholder.  

(ii) Evades constitutional responsibility; not answerable directly to Parliament.  

(iii) Management and administration in the hands of the government; the main purpose is defeated.

Changing Role of the Public Sector  

In Independence, the public sector plays an important role by direct participation or catalyst. Build infrastructure, invest in key areas. The private sector is unwilling to make heavy investments, long gestation periods. The government developed infrastructural facilities, provided essential goods/services. In the post-1990s, liberalisation, privatisation, and globalisation required, public sector to actively participate, compete, accountable for losses/returns. If losses, referred to BIFR for overhauling/shutdown.

• Objectives: (i) Development of infrastructure, (ii) Regional balance, (iii) Economies of scale, (iv) Check over concentration of economic power, (v) Import substitution.  
• Infrastructure: Prerequisite for industrialisation; transport, communication, fuel, energy, heavy industries; government mobilised capital, coordinated, trained workforce.  
• Investments in: Core sector (steel, power, aviation, railways, petroleum); lead where private not functioning (fertilisers, pharmaceuticals); direction to future (hotels, textiles). 
• Regional balance: Develop all regions, remove disparities; set up in backward areas; four major steel plants.  
• Economies of scale: Large industries with huge capital, power plants, gas, petroleum, and telephone. 
• Check concentration: Prevent monopolies, inequalities; share benefits with employees/workers.  
• Import substitution: Self-reliant; heavy engineering; STC, MMTC for exports.  
• Government policy since 1991: Restructure viable PSUs, close non-revivable, reduce equity to 26% or lower in non-strategic, and protect workers.  
• Reduction in reserved industries: 1956 – 17; 1991 – 8 (atomic energy, arms, communication, mining, railways); 2001 – 3 (atomic energy, arms, rail transport).  
• Disinvestment: Sale of equity to private/public; raise resources, wider participation, improve performance, financial discipline; release resources for social priorities, reduce debt, transfer risk, free from control, corporate governance; benefits to consumers (choices, lower prices, quality). 
• Sick units: Same as private; referred to BIFR; revival or close; National Renewal Fund for retrain/redeploy, compensation, voluntary retirement.  
• MoU: Greater autonomy, accountable for results; clear targets, operational autonomy.

Global Enterprises  

MNCs have played an important role in the Indian economy. Gigantic corporations operate in a number of countries. Huge size, large products, advanced technology, marketing strategies, network worldwide. Extend industrial/marketing operations through branches in several countries. Operate in several areas, multiple products, strategy across a number of countries.

Features  

Here are the features of Global Enterprises:

(i) Huge capital resources: Possess huge financial resources, raised from different sources; equity, debentures, bonds; borrow from institutions, international banks; credibility.  

(ii) Foreign collaboration: Agreements with Indian companies for technology sale, production, brand names; restrictive clauses on technology transfer, pricing, dividends, control by technicians; big houses gain patents, resources, but growth of monopolies.  

(iii) Advanced technology: Technological superiorities in production; conform to international standards; industrial progress, exploit local resources; computerisation, inventions.  

(iv) Product innovation: Sophisticated R&D for new products, superior designs; huge investment.  

(v) Marketing strategies: Effective, aggressive; reliable market information; effective advertising, sales promotion; well-known brands.  

(vi) Expansion of market territory: Beyond own countries; international image, brands; network of subsidiaries, branches, affiliates; dominant position.  

(vii) Centralised control: Headquarters in home country; control over branches/subsidiaries; limited to policy framework; no day-to-day interference.

Joint Ventures  

When two businesses agree to join for a common purpose and mutual benefit, it gives rise to a joint venture. May be private, government-owned, or foreign. Flexible for long-term relationships or short-term projects. Requirements stated in the agreement. Maybe between businesses in different countries, they adhere to government provisions. Pooling of resources, expertise, risks, and rewards is shared. For expansion, new products, and new markets, especially in another country. Strategic alliances for complementary capabilities, resources.

• In India, treated as domestic companies; no separate laws.  
• Types: Contractual joint venture, Equity-based joint venture.

Types of Joint Ventures  

Here are the mentioned types of joint ventures:

(i) Contractual Joint Venture (CJV): No new entity; agreement to work together; exercise some control; not share ownership; example – franchisee. Key elements: Common intention, each brings inputs, some control, and a longer duration.  

(ii) Equity-based Joint Venture (EJV): Separate entity jointly owned; in accordance with the agreement. Key: Joint ownership; form – company, partnership, etc. Agreement to create new or join existing shared ownership, management, responsibilities, profits/losses. Based on the MoU highlighting basis; terms discussed, negotiated, considering the cultural, legal background, state governmental approvals/licences.

Benefits  

Here are the benefits of Joint Ventures:

(i) Increased resources and capacity: Adds to existing; grow, expand quickly, efficiently; pool financial, human resources; face challenges, new opportunities.  

(ii) Access to new markets and distribution networks: Vast market; products at saturation sold in new markets; use established channels; avoid expensive own outlets.  

(iii) Access to technology: Advanced production techniques; superior quality; save time, energy, investment; efficiency, reduce costs.  

(iv) Innovation: New, creative products; foreign partners bring ideas, technology.  

(v) Low cost of production: Lower in India; quality products; low raw materials, labour, qualified workforce, professionals.  

(vi) Established brand name: Benefit from goodwill; no spend on brand, distribution, ready market; save investment.

Public Private Partnership (PPP)  

Public-Private Partnership allocates tasks, obligations, and risks optimally among public and private partners. Public partners: Government entities (ministries, departments, municipalities, state-owned enterprises). Private partners: Local/foreign businesses, investors with expertise. Includes NGOs/community-based organisations as stakeholders. Relationship for infrastructure, other services. The public sector ensures social obligations, reforms, and investment. 

• Government contribution: Capital, assets transfer, social responsibility, environmental awareness, and local knowledge. 
• Private sector: Expertise in operations, managing, innovation; run efficiently.
• Sectors: Power generation/distribution, water/sanitation, refuse disposal, pipelines, hospitals, schools, stadiums, air traffic control, prisons, railways, roads, IT systems, housing.

Important Definitions in NCERT Notes Class 11 Business Studies Chapter 3: Private, Public and Global Enterprises  

This section lists key terms for clarity and revision:

• Departmental Undertaking: Oldest form; departments of the ministry, extension of ministry; no independent legal entity. 
• Statutory Corporation: Created by a Special Act of Parliament; defines powers, functions; financially independent, corporate person.  
• Government Company: Under Companies Act, 2013; ≥51% paid-up capital by government; separate legal entity.  
• Global Enterprises (MNCs): Huge corporations; operations in multiple countries; huge size, advanced technology, and network.  
• Joint Venture: Two businesses join for a common purpose, mutual benefit; pool resources, expertise; share risks, rewards.  
• Public Private Partnership: Relationship between public and private entities for infrastructure/services; optimal allocation of tasks, risks.

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