Public Enterprise

Industrial, commercial, and other economic activities operated by the government or the state are called public enterprises. Public enterprises are also known as public institutions.

Public enterprises are established to provide necessary goods and services to the public at affordable prices, to increase economic development and public welfare.

For example, the currently existing Dairy Development Corporation, Hetauda Cement Industry, Nepal Oil Corporation, Nepal Airlines Corporation, Gorkhapatra Corporation, etc., are major public enterprises established in Nepal.

These enterprises are established with objectives such as boosting the state's economic growth, mobilizing public savings, providing employment, controlling the monopoly of the private sector, reducing distributional disparities in society, and utilizing and conserving national resources and heritage. The establishment, ownership, and control of these enterprises are by the government or the state.

Nepal has been adopting a mixed economy with the coexistence of the private and public sectors. The beginning of public enterprises in Nepal coincided with the development of the First Five-Year Plan in 2013 BS. By the Seventh Five-Year Plan, a total of 75 public enterprises had been established in Nepal. 

However, the Government of Nepal has adopted a policy of not establishing new public enterprises and gradually privatizing the existing ones. As a result, some public enterprises in Nepal have been privatized, and the remaining 37 public enterprises are in operation.

Main Characteristics of Public Institutions

(a) The financial management of public enterprises is done by the government. These enterprises are either fully owned by the government, or the government has invested in at least 51 percent of the shares. 

(b) The management of public enterprises is done by the government. 

(c) Providing service to society is the main objective of public enterprises. 

(d) Public enterprises often have monopolistic tendencies. 

(e) The government implements its economic policies and plans through public enterprises. 

(f) Public enterprises are economically independent. This means that these institutions do not depend on the government for their daily needs.

Importance of Public Enterprises

(a) Public enterprises help make the government's presence effective in activities such as the development of banking and financial services, infrastructure development, distribution of basic goods, drinking water, electricity, petroleum products, and other food items, and promotion of employment. 

(b) Public enterprises play an important role in the development of physical infrastructure for sustainable development. 

(c) Public enterprises provide goods and services to the public at affordable prices, freeing them from the exploitation of the private sector. 

(d) Public enterprises play an important role in the industrial development of the country. 

(e) Public enterprises help the government implement its policies, programs, and plans. 

(f) Public enterprises help the government achieve its objectives related to production, employment, and distribution. 

(g) Public enterprises help in promoting entrepreneurship, preserving and promoting traditional arts and culture, and developing and expanding infrastructure sectors. 

(h) Public enterprises play an important role in distributing essential goods during national disasters and controlling artificial shortages and black marketing that may occur in the market, as well as strengthening the supply system.

Problems of Public Enterprises

(a) The objective for which public enterprises were established has not been achieved. In other words, these enterprises have not been able to provide effective services to the public according to their objectives. 

(b) Public enterprises are operating at a loss, due to which the government is bearing a heavy burden. Mainly, only some enterprises that do not have competition from the private sector and have a secure market are profitable. Most enterprises that have to compete in the open market are at a loss. 

(c) It is seen that while creating positions and appointing employees in public enterprises, people are hired based on personal connections rather than the needs of the enterprise. This has had a negative impact on operations. 

(d) It is seen that employees in public enterprises are actively involved in political activities. Due to this, activities such as strikes, closures, protests, and sieges have increased, which has had a negative impact on the productivity of the enterprise. 

(e) Due to political interference in public enterprises, management cannot make decisions in a professional manner. Misuse of resources and funds of these enterprises is seen, along with the promotion of corruption and leakage. 

(f) Physical infrastructure, machinery, tools, and technology of public enterprises have not been modernized according to the times. Therefore, the goods produced by these enterprises are expensive but of poor quality. Such goods cannot capture the market.