Question

Explain three demerits of public corporation

Answer 1

Answer:

Difficult to manage.

Risk of producing inefficient products.

Financial burden.

Political interference.

Misuse of power.

Consumer interests ignored.

Expensive to maintain and operate.

Anti-social activities, i.e., charging too much for a product.

Explanation:

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Answer 2

The following are some of the disadvantages or demerits of public corporations.

1. Political interference: Public corporations are a State enterprise. Though autonomy in functioning is said to be one of the strong points of public corporations, the reality is otherwise. They suffer from continued political interference and have to act according to the wishes of the political masters. For e.g. even after the steep increase in oil prices in global markets, ONGC is not able to increase its prices in the domestic markets, because of political interference.

2. Misuse of power: It enjoys immunity from parliamentary inquiry into its day-to-day functioning. Such immunity might induce some officials to misuse their power and indulge in corrupt practices. It takes considerable amount of time and effort to unearth corrupt acts and the corporation loses valuable resources.

3. Financial burden: When a public corporation incurs losses, the government provides subsidies to make good the loss. Such provision of subsidies on a regular basis places a great strain on government finances, more-so in the case of a developing economy like India.

4. Consumer interests ignored: Many public corporations operate as monopolies. Absence of competition leads to lethargic functioning, reduced focus on efficiency improvements and innovation and poor customer service with the result that consumer interests are ignored