Question

Mention two problems faced by public sector enterprises in India.

State two drawbacks of state enterprises.

Answer 1

Problems faced by public sector enterprises in India are:

1. Under-utilisation of Capacity - Public sector enterprises are suffering from the problem of under-utilisation of installed plant capacity. It leads to an increase in the average cost of production and adversely affects their profit-earning capacity and thus results in low profitability.
2. Administered Price Policy - PEs do not function purely on the basis of commercial considerations. Lack of commercial approach by their executives leads to wastages, inefficiencies and resultant lower productivity. The prices of the products of public sector enterprises are generally kept low, keeping in mind the needs and purchasing power of the general people. Thus, they are not profit-making enterprises and generally suffer losses.