CBSE Class 11 Business Studies Chapter 3: Private, Public and Global Enterprises NCERT Solutions

Solution: The definition of a government company, as per the Indian Companies Act, specifies that the government must hold a minimum of 51 per cent of its paid-up capital. This ensures substantial government control over the company's operations and policies.

Answer: (b) 51 per cent

Solution: Multinational Corporations (MNCs) operate across various countries but maintain a unified strategic direction. Centralized control means that major decisions regarding operations, finance, and policy are typically made at the company's main headquarters, which then directs its various branches and subsidiaries worldwide.

Answer: (c) Headquarters

Solution: PSE stands for Public Sector Enterprise. By definition, these are organizations that are owned and operated by the government, whether at the central, state, or local level. This ownership structure distinguishes them from enterprises owned by private individuals, families, or foreign entities.

Answer: (b) Government

Solution: When public sector units (PSUs) become financially unhealthy or 'sick', a specialized body is often established to manage their reconstruction and revival. The Board for Industrial and Financial Reconstruction (BIFR) was the agency responsible for this task, aiming to diagnose problems and propose rehabilitation schemes.

Answer: (c) BIER (Board for Industrial and Financial Reconstruction)

Solution: Disinvestment is a strategic move by the government to reduce its stake in public sector enterprises (PSEs). This typically involves selling off a portion of the government's equity shares to private investors, other companies, or the general public. The aim is often to raise funds, improve efficiency, and encourage private sector participation.

Answer: (a) Sale of equity shares to private sector/public

Solution: The business world is broadly divided into two main sectors based on ownership and control: the Private Sector and the Public Sector.

Private Sector: This sector comprises business organizations that are owned, managed, and controlled by private individuals or groups. The primary motive for these enterprises is to earn profits. Examples include sole proprietorships, partnerships, Hindu Undivided Family (HUF) businesses, cooperative societies, and companies (both private limited and public limited) not owned by the government. They operate based on market demand and competition.

Public Sector: This sector consists of business organizations that are owned and managed by the government, either wholly or partly. The government's involvement can be through direct ownership by ministries, or through entities established by special acts of parliament or state legislatures. The objectives of the public sector often extend beyond profit, including social welfare, providing essential services, and promoting economic development. Examples include departmental undertakings, statutory corporations, and government companies.

In essence, the key differentiator lies in who owns and controls the enterprise and what their primary objectives are.

Solution: The private sector encompasses a variety of organizational structures, each with its own characteristics regarding ownership, liability, and management. The main types include:

1. Sole Proprietorship: This is the simplest form, owned and controlled by a single individual who bears all the profits and risks.
2. Hindu Undivided Family (HUF) Business: A business owned and managed by the members of a Hindu Undivided Family, governed by Hindu law.
3. Partnership: An association of two or more individuals who agree to share the profits of a business carried on by all or any of them acting for all.
4. Cooperative Society: A voluntary association of persons who join together for mutual benefit, typically operating on the principle of 'one member, one vote'.
5. Joint Stock Company: A business entity that is legally separate from its owners (shareholders) and has a continuous existence. It can be a private limited company or a public limited company.
6. Multinational Corporations (MNCs): These are large companies that have operations and business interests in more than one country, often with a central headquarters controlling subsidiaries globally.

Solution: The public sector includes several forms of organizations established and controlled by the government. These are designed to fulfill public needs and objectives. The primary kinds are:

1. Departmental Undertaking: This is the most traditional form, functioning like a government department. It is directly managed by government officials, and its activities are controlled by the concerned ministry, which is accountable to the legislature. Examples include the postal service or railways in some countries.
2. Statutory Corporation: These are autonomous bodies created by a special Act of Parliament or state legislature. They have a separate legal identity, can sue and be sued, and operate with a degree of independence from direct government control, though their objectives are set by the government. Examples include the Reserve Bank of India or LIC of India.
3. Government Company: As defined by the Companies Act, a government company is one where at least 51 per cent of the paid-up share capital is held by the government (central or state, or both). These companies operate under the Companies Act but are effectively controlled by the government. Examples include Bharat Heavy Electricals Limited (BHEL) or Steel Authority of India Limited (SAIL).

Solution: Here are some examples of enterprises operating under the public sector, classified according to their organizational type:

1. Departmental Undertakings:

• Indian Railways (a division of the Ministry of Railways)
• Postal Services (part of the Department of Posts)

2. Statutory Corporations:

• Life Insurance Corporation of India (LIC) - Established by the LIC Act, 1956.
• Reserve Bank of India (RBI) - Established by the RBI Act, 1934.
• Oil and Natural Gas Corporation (ONGC) - While now largely a government company, its origins and some functions align with statutory bodies.

3. Government Companies:

• Bharat Heavy Electricals Limited (BHEL) - A major manufacturer of power plant equipment.
• Steel Authority of India Limited (SAIL) - A leading steel producer.
• Hindustan Petroleum Corporation Limited (HPCL) - An oil and gas company.
• Coal India Limited (CIL) - The largest coal producer in the world.

These examples illustrate the diverse range of industries and services managed by the public sector in India.