It involves all those business, trade and industrial activities which are carried on under the ownership and management of the government. It is desired by every Govt. for the purposes of safeguarding the public interest. It is regarded most essential to promote the welfare of the country. The state enterprises are conducted by government or semi-government organization and public or statutory corporation. All the public utility programs are particularly served by the state ownership undertaking.
Many investors hesitate to invest their capital where heavy expenditure is required but the return is not so in the near future. On the other side, the government spend a large sum of money on such projects without any motive of profit.
Public Utilities Services
Government contract over some enterprises with a view to providing utility services to the public. All corporations, municipalities and district councils are supervised by the government which render valuable services in providing public amenities.
State intervention is also required for the national interest. It is always considered most essential to protect defence and other key industries in every case.
Establishment of Monopoly
Government undertakes some enterprises to hold strict control over them Railway electric and water supply, communication is directly managed by the govt. for the public interest.
Promotion of Welfare
This is the major motive behind the growth of state ownership that govt. wants to achieve rapid economic development in order to promote the welfare of the public.
Government control over certain industries in order to give equal importance to all the regions of the country. Some enterprises are started in undeveloped areas of the country for the purpose of reducing of goods and its prices.
Protection of Consumer
This is required to ensure that there is no exploitation of consumers by monopoly powers. State ownership is, therefore, desired to protect the consumer from selfish hands with a view to regulating the supply of goods and its prices.
Maximum Utilization of Sources
There are certain natural sources which cannot be utilized to the maximum but by the government Oil, gases, minerals and sea resources are allocated optimum for the best interest of the public.
Various departments and enterprises are controlled by the govt. on account of the fact that centralized management is required for the object of coordinating and saving in the expenses of management.
Major Forms of State Enterprises
The following are the major forms of enterprises which are owned and managed by the state.
- Municipal Corporation or District Council
- Department Organization.
- Government joint stock company
- Statutory corporation
- Special organization
Municipal Corporation or District Council
Public utility concerns are generally operated by local authority i.e. Municipality or District Council. It is conducted by paid officers and activities are; supervised by the elected members. These corporations are empowered to impose certain types of taxes, in order to pay their heavy expenditure.
Government enterprise is organized separately to its nature of the function. Such as railway, irrigation, telephone and telegraph departments. These regarded as ‘government employees. Their activities are supervised by the concerned secretariat. These departments perform valuable services for achieving the social and economic objects of the state.
Government Joint Stock Company
Government Joint Stock Company is registered under the Companies ordinance (Govt.) Companies Provisions. It is formed for the accomplishment of specific business and commercial objectives. Its majority of shares are controlled over by the govt. Management is conducted by the Board of Directors whose chairman and members are nominated by the government. This form of state enterprises is from rigid financial rules and possess features of flexibility, adaptability and all autonomy.
Such a corporation is formed under the special act of legislature or parliament or by the order of the head of state. Its monopolistic powers are laid down in the special act of the legislature under which it is formed. It is managed by the Board of Directors who are appointed by the govt. for a specific period, It is a corporate body which is free from government intervention.
Some times govt. arrange specific board or committee for the particular type of business operating contracts and control Board are quite suitable for defence services and river valley projects respectively. The government determines the rights and power of the members of such an organization at the time of its formation.