In every country. there are many public undertakings run by Central or State Governments or local bodies. Postal and telegraph arrangements are generally under the Central Government: and public utility services like water supply. gas. electric supply or tram or bus services are managed by municipal corporations.
The organisation of State enterprise is on the same lines as private enterprise with the usual paraphernalia of general manager. foremen, works manager, accountants, treasurer. departmental heads. and so on. The work is done generally in the same manner as in a joint-stock company.
In under-developed countries like India. the State has a special role to play in creating an infrastructure of overhead capital like the development of means of transport and communications. These enterprises require large amounts of capital and are generally not sufficiently productive (in the narrow sense of the term) to yield enough profits to attract private capital. Yet they are crucial for the future development of the country. Hence. government has to step in to establish these enterprises. From this point of view. public enterprise assumes a greater importance in underdeveloped countries than in the developed countries.
Moreover. a modern state is called upon to reduce inequalities in income and wealth. The traditional weapons of fiscal policy and progressive taxation. however, have serious limitations in being used as an instrument of bringing about greater equality. Therefore. there are many people.
Further. government is in a position to command the best talent Government service attracts first-class brains. There is a certain glamour about government service. Thus. from the point of view of the human factor. too. the State enterprise is favorably placed. The state enterprise is generally a monopoly. It has all the advantages of monopoly. The custom is assured. Expenditure on publicity is unnecessary. Better service at cost is the usual rule in a government undertaking,