You can envisage the Joint Sector as an engagement between the public and the private sector. Here, the state can effectively take part in management and decision-making. The concept of the Joint Sector is in sharp focus thanks to the radical shift in Government policy. It satisfies the Basic socio-economic objectives of the country by having the features of both public and private sectors. Further, it seeks to eliminate the evils of both.
The purpose behind the evolution of this sector was for the Public financial institutions to meet a large proportion of cost in the units. In this article, You will get an in-depth idea of Joint Sector Enterprises. Keep reading ahead to learn about its features, advantages, disadvantages, and examples.
Did you know? The adoption of the concept of mixed economy introduced the Real seeds of Joint Sector Enterprises.
Understanding the Function Of Joint Sector Enterprises
The Joint Sector Enterprise is an industry wherein private entrepreneurs and a Government jointly participate in ownership, control, and management. Private entrepreneurs look into the day-to-day management of the Enterprise. A Government's participation is through its representatives functioning as the Board of Directors.
It is easy to analyze the logic behind the joint sector. The concept of the Joint sector came into existence to help the private sectors grow more. Thus, mutual trust and confidence are the pillars on which one can base this Idea.
The Joint Sector is an open corporate structure that provides a departure from exclusive Private Ownership while keeping Intact the advantages of private Enterprise and initiative. The Joint Sector needs encouragement since it plays a crucial role in promoting industrial growth, mobilization of resources, and social control of private industries.
Features of Joint Sector Enterprises
The Joint Sector can come into being in any of the following ways:
1. The Central Government and the private entrepreneurs may join Hands to set up new enterprises. Sometimes, the Central Government and one or more State Governments, in partnership with the private sector, may jointly set up these enterprises.
2. The State Government, including its industrial development corporation, and the private entrepreneurs, through equity participation, may jointly set up new enterprises.
3. The public financial institutions may convert enterprises that the private entrepreneurs promote. They can do this through equity participation or by converting debentures into equity.
4. The Government or Government enterprises can transform the existing private enterprises into joint-sector Industries. It would be possible through holding a part of the equity or fresh equity participation.
5. Converting the existing public sector enterprises into Joint sector enterprises. It is through selling some equity shares to private entrepreneurs or outsiders.
Role of Joint Sector Enterprises
Let us bring into light the role of Joint Sector Industries. These are:
Sound Industrial Growth
Since the public enterprises initially incurred losses year-by-year, they did not have many resources to grow themself. On the other hand, the private sector failed to mobilize resources, thereby lacking in promoting the development of the capital goods Industry and the heavy and Basic goods industry. Hence, both these sectors combined their strengths to Establish joint enterprises. Thus, it led to better industrial growth.
Social Control over Industries
The Establishment of Joint sector industries is an effective way to control monopoly and economic power. Besides, such enterprises can help a Government fulfil many other social objectives. These objectives are to increase employment opportunities, eliminate regional inequalities, and the development of the export sector.
The Broad-Basing of Entrepreneurship
People believe that the participation of a government in a particular industry will broaden the scope of industrial entrepreneurship in the country. It is possible by providing financial support, equipment, and machinery to small and medium enterprises. It will give confidence to these enterprises in setting up new industrial units, thus increasing the industrial growth rate in the country.
The Growth with Welfare
The growth and expansion of the joint sector do not give rise to the concentration of economic power. Thus, the agency of this sector can readily achieve growth with Welfare. The most crucial formula is to run the joint sector on business lines by strongly emphasizing the community's Welfare.
The Promotion of a Mixed Economy
The Idea of a mixed economy directs all the productive forces of the surrounding community towards economic development. It accelerates the process. Similarly, through a Mixed economy, the state can avail the benefit of voluntary savings in society. This saving helps serve the purpose of investment to increase the resources that will mobilize the said purpose. The joint sector promotes the concept of a mixed economy.
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Government Policies regarding the Joint Sector Enterprises
The Central Government has laid down the following guidelines regarding the joint sector projects that involve the partnership of the State Government and private entrepreneurs:
1. If the Private Enterprise is from one of the big houses or a foreign majority company, it should take permission from the Central Government.
2. In the presence of foreign participation, the State Government should hold 25% equity, and Indian entrepreneurs should acquire 20% equity. On the other hand, the foreign investor and the investing company should have an equity holding of 20% and 35%, respectively.
3. In the absence of foreign participation, the equity holding for the State Government should be 26%. For private entrepreneurs, it should be 25%. While for the general public and financial institutions, the holding needs to be 49%.
4. Any single party can hold more than 25% of the paid-up capital only after the prior permission of the Central Government.
Examples of Joint Sector Enterprises
A well-managed joint sector can eliminate state capitalism with its risk of bureaucratization. Besides, it is also a viable alternative to private capitalism that creates inequality in the distribution of income and wealth.
1. Indian Synthetic Rubber Limited
The company specializes in a rubber project in Panipat and the operation of Styrene Butadiene. The Trimurti Holding Corporation and the Indian Oil Corporation Ltd jointly hold it.
2. Green Gas Limited
The joint holders of this company are GAIL(India) Ltd and the Indian Oil Corporation Ltd. This company has the authority to supply natural gas in Agra and Lucknow.
3. Delhi Aviation Fuel Facility Pvt Ltd
The Bharat Petroleum Corporation and the Delhi International Airport Limited jointly established this company on 28th March 2010. The company is involved in the operation of maintenance, modernization, and design.
Some other examples of Joint Sector Enterprises include:
- Indo Cat Pvt Ltd
- Avantika Gas Limited
- Ratnagiri Gas and Power Private Limited
- Mahanagar Gas Limited
- Indian Oil Petronas Pvt Ltd
- IoT Infrastructure & Energy Services Limited
Problems in the Joint Sector Enterprises
The joint sector involves three specific problems:
1. The guidelines regarding the roles of the Government and the private entrepreneurs in running and controlling the joint sector are unclear. Thus, the private partners are uncertain of their role in the control and management of the joint sector enterprises.
2. The main objective behind setting up the joint sector projects was the development of backward regions and reduction in the concentration of economic power. However, often Joint sector projects fail to achieve these objectives. Through Joint sectors, private entrepreneurs can promote large enterprises involving less equity participation. They also get concessions that are not available for projects in the private sector.
3. Both the Government agency and the private entrepreneurs have different purposes. Government agencies have completely Separate commitments and responsibilities. However, the main motive of a private group is purely commercial profitability. Thus, the interfacing between the two is not always smooth and easy.
The Idea of a joint sector focuses on extending the concept of a mixed economy where the private and public sector enterprises function separately. This sector is a good ground for forming a Stronger economy. A Government should liberalize the policies of the Industrial Enterprise, hence solving the problems in the joint sector. We can say that the concept of the Joint sector is part of a national plan.
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