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Question
Losses incurred by public sector enterprises are to be met out of the public budget. Do you agree with this statement? Discuss.
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Solution
Yes, I agree to some extent. When a public sector enterprise suffers continuous losses and requires financial support from the government, that support ultimately comes from public funds. This can reduce the money available for areas such as education, healthcare and infrastructure. Therefore, continuously loss-making enterprises should be improved, restructured or reviewed. However, a PSU should not be judged only by profit because some of them provide essential services and fulfil important social objectives. Thus, public money should support a PSU only when there is a strong economic, strategic, or social reason.
