Question

Mention any three demerits of Public Sector Enterprises.

Answer 1

The main demerits of public sector enterprise are:

1. Lack of initiative: Public enterprises are not subject to competition, and their employees are not motivated to increase profits, innovate, or reduce losses.
2. Political Interference: Due to frequent political and bureaucratic interference in the free and frequent transfer of staff from one location to another, public sector firms confront numerous challenges in their day-to-day operations.
3. Underutilization of capacity: Due to the underutilization of capacity, a huge number of public sector firms are losing money. The cost of production rises as a result of the underutilization of capacity. A huge proportion of government-owned businesses operate at less than half of their installed capacity.