Question

Why should Public sector invest more ?

Answer 1

Central public sector enterprises or Union government-owned companies are not exactly known for running a tight ship, and therefore, rarely rank among the most efficient businesses.

But, many operate in sectors that are of strategic importance such as oil and gas, coal, minerals and mining and have access to natural resources that are not available to private businesses or are made available with stringent conditions.

Some of these government-owned companies such as Coal India have the advantage of being a monopoly.

A number of these public sector enterprises make large profits despite operating at sub-optimal level, and a lot of these profits, remain unutilised as the companies are slow to make fresh investments or acquire assets.

So, every time the Union government faces a fiscal crunch, it falls back on the public sector enterprises to bridge the shortfall. It does this by seeking higher annual dividend as well as special dividend from these enterprises.

In doing so, government-owned companies have to dip into their cash and free reserves.

While such dividends benefit the government as the largest shareholder in the public sector enterprises, other shareholders, including small investors, also stand to benefit. This is because these enterprises, like any company registered in India, cannot pay dividends to one set of equity shareholders and deny it to another set.

Answer 2

The aim of public sector is public welfare, it is controlled and managed by govt. ,this sector provides basic facilities like education, health, food, and security to the people. so to safeguard the poor people public sector should invest more. they work not to gain profit. example:Indian railway, post office, and BSNL