Can the public sector companies compete with the private sector in terms of profits and efficiency? Give reasons for your answer.

It is difficult for a public sector undertaking to compete with a private sector undertaking in terms of profits due to following reasons: 

1. Motive of public sector is not profit: Public sector works not for profit but for social welfare. It gives first priority to social welfare then it is almost impossible for it to compete with private sector enterprise on the basis of profit which mainly works for profit only. 

2. Public sector takes care of strategic industries: Public sector invests in strategic areas even when these industries have low return generating capacity and long gestation period. These industries do not give monetary returns but if we consider their return in development of our economy otherwise their return is really high. 

3. Public sector provides many facilities free of fast to the weaker section of society: We can’t expect a government hospital or a government school to generate profits. Many public sector undertakings provide many facilities for free or at a very low cost due to the benefits that it gives to other sectors of the society. 

It is difficult for a public sector undertaking to compete with a private sector undertaking in terms of efficiency due to following reasons: 

1. Dependence on authorities for taking minor decisions: Public Sector undertakings follow a protocol for everything. It leads to delay in decision making and inefficiency in operations. 

2. Job security: Workers of Public Sector enjoy job security. It reduces their performance as they know that in spite of bad performance there is no fear of losing job. 

3. Red tapism and bureaucracy: In public sector undertakings there is red tapism and bureaucracy. It leads to inefficiency in operations.

It is difficult though not impossible for the public sector companies to compete with the private sector in terms of profits and efficiency due to following reasons:

(i) Difference in Objective . Private sector firms operate with the objective of profit maximization while public sector companies have social welfare as the prime objective and hence they cannot be completely profit oriented.

(ii) Difference in Ownership The government is the sole or major shareholder in public sector companies. The management and administration of these companies therefore rests in the hands of the government which may not make economically sound policies due to political considerations.

(iii) Difference in Management Public sector companies are managed by government officials who may not be professionally trained while private sector companies are run and managed by professional managers. This leads to higher efficiency in private sector.

(iv) Difference in Area of Operation Private sector operates in all areas with adequate return on investment while public sector operates mainly in basic and public utility sectors where returns are not very high.