Comprehension : Comprehension

Q 328 / 466

UPSC CSE Prelims 2014

Net profits are only 2.2 per cent of their total assets for central public sector undertakings, lower than for the private corporate sector. While the public sector or the state-led entrepreneurship played an important role in triggering India’s industrialization, our evolving development needs, comparatively less-than satisfactory performance of the public sector enterprises, the maturing of our private sector, a much larger social base now available for expanding entrepreneurship and the growing institutional capabilities to enforce completion policies would suggest that the time has come to review the role of public sector.
What should the portfolio composition of the government be? It should not remain static all times. The airline industry works well as a purely private affair. At the opposite end, rural roads, whose sparse traffic makes tolling unviable, have to be on the balance sheet of the state. If the government did not own rural roads, they would not exist. Similarly, public health capital in our towns and cities will need to come from the public sector. Equally, preservation and improvement, of forest cover will have to be a new priority for the public sector assets.
Take the example of steel. With near-zero tariffs, India is a globally competitive market for the metal. Indian firms export steel into the global market, which demonstrates there is no gap in technology. Indian companies are buying up global steel companies which show there is no gap in capital availability. Under these conditions, private ownership works best.
Private ownership is clearly desirable in regulated industries, ranging from finance to infrastructure, where a government agency performs the function of regulation and multiple competing firms are located in the private sector. Here, the simple and clean solution—government as the umpire and the private sector as the players is what works best. In many of these industries, we have a legacy of government ownership, where productivity tends to be lower, fear of bankruptcy is absent, and the risk of asking for money from the taxpayer is ever present. There is also the conflict of interest between government as an owner and as the regulator. The formulation and implementation of competition policy will be more vigorous and fair if government companies are out of action.
The author prefers government as the umpire and private sector as players because:

EXPLANATION

Correct Option (A)

The author prefers the government to act as an umpire and the private sector as players because this model ensures that the government establishes and enforces the rules of fair competition and conduct within regulated industries. The passage explicitly states that in such sectors, "a government agency performs the function of regulation and multiple competing firms are located in the private sector," and that "government as the umpire and the private sector as the players is what works best." This role involves prescribing norms for fair play, ensuring a level playing field, and avoiding conflicts of interest that arise when the government acts as both owner and regulator.

Incorrect Options:

  • Option (B) government is the ultimate in policy formulation. While the government is responsible for policy formulation, the metaphor of "umpire and players" specifically highlights its regulatory and enforcement role in ensuring fair competition, rather than its general policy-making authority. The passage emphasizes the government's function in setting and enforcing rules for market conduct.

  • Option (C) government has no control over private sector players. This statement contradicts the passage's central argument. The role of an "umpire" inherently implies control and oversight, where the government actively regulates and enforces competition policies to ensure fair play among private sector entities. The passage advocates for vigorous and fair implementation of competition policy by the government.

  • Option (D) None of the above statements is correct in this context. As Option (A) accurately reflects the author's reasoning presented in the passage, this option is incorrect.