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A note on ‘Private sector’ & ‘Public sector’

Introduction:

Most of the times, public sector and public limited companies are mistaken, one for the other. Perhaps the
common word ‘public’ could be the reason for this confusion. This note attempts to put public sector and public
limited companies in proper perspective.

Public or private sector:

This indicates whether the control over the enterprise is in the hands of Government or private. Here the word
private would include individuals, companies or other bodies. If the government, either the central or state
government in India has control over an enterprise, then it is a public sector enterprise. As regards ownership of
the government in such an enterprise, it has to be 51% (as recently clarified by the Central government
spokesperson). For example, BHEL or BEML are public sector companies. This means that these are under the
control and direction of the Union government of India; whereas Reliance Industries is in private sector. This is
under control and direction of Mukesh Ambani group.

Structure of a public sector enterprise:

It will either be a corporation like Life Insurance Corporation or a public limited company like BHEL, ONGC etc.
It is learnt in fact that the principal officer under the Company Law Board (CLB which is responsible for
administration of ‘The Companies’ Act’) does not allow registration of a limited company, be it in public sector or
private sector with the word corporation as a part of its name. Please recall the following to reinforce this point.
Hindustan Petroleum Corporation has now become Hindustan Petroleum Company Limited; similarly Bharat
Petroleum Corporation has now become Bharat Petroleum Company Limited.

The public sector undertakings or enterprises (PSUs or PSEs as they are known) which have not been registered
under the Companies’ Act as limited companies are often times referred to as corporations. These enterprises
could be at the centre such as LIC or at the state level. For example in Maharashtra, we have the following
corporations (these are only examples; they do not form the exhaustive list of PSUs in Maharashtra which are not
limited companies):
 Maharashtra state finance corporation
 State industry corporation of Maharashtra
 Maharashtra state road transport corporation
 Maharashtra state farming corporation
 Maharashtra Krishna valley development corporation
These PSUs are born mostly out of relevant Acts that have been passed in the Parliament or state legislatures.

It is possible that among the PSUs, there are public limited companies which have not gone to public at all for
resources. A typical example is BSNL that is not listed. However the distinction between a corporation and a limited
company should be clear to the reader. While BSNL is not a corporation and hence it is a public limited company, it
has not yet gone to public. Please recall Maruti Udyog Limited and ONGC before they became public in the year
2003.
It should be borne in mind that any government cannot start a private limited company as this means that
government’s wealth that is public can be owned by some private individuals or corporations etc.

Examples of public sector public limited companies:


BHEL, BPCL, BEML, NTPC, IOCL, MUL & all public sector banks
Number of private sector public limited companies that are listed: Around 10,000, BSE & NSE inclusive.
Besides the above, in the private sector there are unlisted public limited companies and private limited companies.
The writer does not have the exact numbers of such companies.

Summing up the different kinds of undertakings, both in public and private sectors, there are:

Public sector:
 Corporations that are not registered under The Companies’ Act, either at the centre or at the state
 Public limited companies that have not gone to public for resources
 Public limited companies that have gone to public for resources and are listed

Private sector:
 Public limited companies that have gone to public for resources and are listed
 Public limited companies that have not gone to public for resources and hence are unlisted &
 Private limited companies that cannot go to public for resources

*** End of document ***

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