1.Lack of initiation and efficiency: Lack of profit motive leads to inefficiency and slow working. Therefore decision making is not so quick in public sector like in private enterprises. Public Enterprises are managed like Government offices, thus efficiency cannot be seen in public enterprises.
2.Lack of selection of goods: It is a kind of monopoly under the control of Government. Consumers have no choice of selection of goods. Because of the monopolistic attitude of the Government, the buyers lose the right of choice.
3.Political interference: Due to undue influence of politicians, the public sectors cannot function smoothly and effectively. It hampers the efficient conduct of operations.
4.Slow growth: Public enterprises have little scope for expansion and modernisation as they take a long period to establish and the return on investment is also less.
5.Poor management: Due to excess interference by the Government and political parties, the public enterprises cannot be managed on sound lines or as per the plans laid out. Further the financing of public sector is fully in the hands of the Government, which restricts the scope for development.
6.Lack of flexibility: There is a lack of flexibility in public enterprises. This is due to slow decision making habit of the state. Implementation of the decision also takes a long time in public enterprise.
7.Lack of Innovations : Innovations are essential for economic development. Public enterprise lacks it due to monopoly or lack of competition. The private sector is always busy with innovating new techniques, new production methods etc.
8.Under Utilization of Capacity : Public enterprise is facing the problems of underutilization of their installed capacity. Thus, the capital resources are not fully utilized by public enterprise.
9.Problem of Autonomy and control : Public funds are invested in public enterprise and govt. Is responsible for the optimum utilization of public funds. At present, control is exercised by the finance minister and the minister in charge of the undertaking and the parliament to check misuse of public funds. Parliamentary control over the operations and capital development plans of public enterprises tends to become quite rigid.
10.Problems of Price Policy : Profit earning is not the main object of public enterprises. They are operated for social welfare. If they indulge themselves in profit-making activities then there will be no difference left between public enterprise.
11.Lack of Motivation : There is a lack of motivation in public enterprises. Employees get fixed salaries and other perks. There is no reward for good work and no punishment for bad. Thus, efficient and innovative employees are not motivated to do hard work.
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Urban Development Policies Study notes for M. plan Sem-II
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