Q.3:- Can the public sector companies compete with the private sector in terms of profits and efficiency? Give reasons for your answer.
It is difficult though not impossible for the public sector companies to compete with the private sector in terms of profits and efficiency due to following reasons
(i) Difference in Objective Private sector firms operate with the objective of profit maximization while public sector companies have social welfare as the prime objective and hence they cannot be completely profit oriented.
(ii) Difference in Ownership The government is the sole or major shareholder in public sector companies. The management and administration of these companies therefore rests in the hands of the government which may not make economically sound policies due to political considerations.
(iii) Difference in Management Public sector companies are managed by government officials who may not be professionally trained while private sector companies are run and managed by professional managers. This leads to higher efficiency in private sector.
(iv) Difference in Area of Operation Private sector operates in all areas with adequate return on investment while public sector operates mainly in basic and public utility sectors where returns are not very high.