Public Sector vs Private Sector

Notes

The public sector consists of enterprises owned and managed by the Government; the private sector consists of enterprises owned by individuals or companies for profit. India has a mixed economy.

Public sector

Forms: departmental undertakings (Railways, Posts), statutory corporations (LIC, FCI) and government companies (at least 51% government shareholding under the Companies Act, 2013).
Central Public Sector Enterprises (CPSEs) are classified as Maharatna, Navratna and Miniratna (categories I and II), which give financial and operational autonomy; Navratna started in 1997 and Maharatna in 2009.
Industrial Policy Resolution 1956: Schedule A (17 industries exclusive to the State), Schedule B (12 industries, progressively State-owned, with private participation) and Schedule C (the rest for the private sector); the public sector held the commanding heights.
Objectives: build infrastructure and heavy industry, balanced regional development, employment, control of private monopolies, supply of essential goods and social objectives.

Comparison

Basis	Public sector	Private sector
Ownership	Government	Individuals and companies
Objective	Social welfare and development, with profit	Profit
Efficiency	Often lower (overstaffing, political interference, soft budget constraints)	Generally higher
Accountability	Parliament, CAG, CVC, RTI	Shareholders and regulators
Finance	Budget support and borrowing	Market and private capital
Social obligations	High (reservation, remote areas)	Limited

Issues and reforms

Chronic losses (BSNL, Air India earlier), delays, and political interference. Reforms: the MoU system (1986), autonomy, disinvestment, and the New Public Sector Enterprise Policy (2021), which kept only a few strategic sectors (atomic energy; space and defence; transport and telecom; power, petroleum, coal and minerals; banking, insurance and financial services) with a minimum presence of public enterprises, and called for privatising the rest.
Joint sector combines the two.

Key Points

Public sector: government-owned; private: profit-driven.
IPR 1956: Schedules A, B and C.
Maharatna, Navratna and Miniratna categories give autonomy.
Public sector is accountable to Parliament, CAG and CVC.
2021 policy: a minimum presence in strategic sectors, privatise the rest.

MCQs

Q1. The Industrial Policy Resolution of 1956 reserved how many industries exclusively for the State (Schedule A)? (a) 8 (b) 12 (c) 17 (d) 25 Ans: (c).

Q2. A government company is one in which the Government holds at least: (a) 26% (b) 40% (c) 51% (d) 75% Ans: (c).