Group No 4

Sonali Suryawanshi 09110

Mansee Killedar 09116

Suruchi Bansal 09112

Rohan Desai 09111

Nilesh Shinde 09113

Nihar Bhimanwar 09114

Pooja Pawar 09108

Megh mody 09115

Mit Parekh 09107

 INDEX
Topic Page No

1. Origin, Evolution and Rationale of the Joint Sector (3)

2.

3. Scope of Joint Sector ()

4.

5. Patterns of Ownership and Management of J.S. ()

6. Growth Prospective ()

7. Financial Institution and management of J.S. ()

8. Disinvestment ()

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 Origin, Evolution and Rationale of the Joint Sector
In pre-independent period, several industrial enterprises were set up in the princely
States of Mysore and Hyderabad with public participation in equity. Soon after
independence, the Tatas created Air India. But the seeds of joint sector are to be found in
the concept of the Indian Economy envisaged by the Industrial Policy Resolution of
1956, which classified all industries into the categories, viz, A, B and C schedule of
industries.

Schedule A industries being the exclusive responsibility of the state.

Schedule B industries being progressively state-owned.
Schedule C industries left ordinarily for the initiative and enterprise of the private
sector.

About schedule B industries, the resolution of 1956 stated: “Private enterprise will
also have the opportunity to develop either on its own or with the state participation.”
About schedule C industries, the 1956 resolution stated: “In suitable cases state may also
grant financial assistance to the private sector. Such assistance, especially when the
amount involved in substantial, will preferably be in the participation of equity capital
though it may also be in part in the form of debenture capital”. The resolution of 1956 did
not use the term “joint sector” explicitly. Government’s intention to participate in equity
capital of private sector industrial unit “to promote a socially determined pattern of
growth”.

Soon after the policy resolution of 1956, a number of companies were

floated by the Government of India in collaboration with the private sector by sharing
ownership, management and control.

Since the Dutt committee report appeared in 1969, the number of state
government and state Industries Development Corporations produced licenses for
Industrial project for a wide range of products and promoted companies with private
participation in ownership and management.

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 Scope of the Joint Sector
The basic problem is: What does the Government propose to achieve through the
development of the joint sector? What is the rationale and scope of the joint sector
enterprises?
(1) Social control over industries. The Dutt committee’s recommendation of
joint sector was based on :
a) The industrial licensing policy of the government and the tremendous
financial assistance provided by the public sector financial institutions (such
as IFC and IDBI) were responsible for the emergence of large industrial
houses and concentration of economic power contrary to state policy.
b) The time was not ripe for outright nationalization of the units managed by
large industrial houses.
(2) Failure Of Private and Public Sector. Both private and public sectors as
visualized in the Indian concept of mixed economy have shown certain
limitations. The private sector had a failure to mobilize adequate funds .The
public sector was given exclusive responsibility in certain sectors but its
performance too has been above criticism .Hence the mix of two sectors in the
joint sector is advocated.
(3) Acceleration Of Economic Growth. For a number of reasons, private
investment slackened after the mid-sixties and there has been poor
performance of the country on the industrial front. By providing public
support and patronage, the joint sector may encourage small and medium
entrepreneur. This is the only way to ensure that medium sized private sector
companies contribute increasingly to industrial growth and regional
development. Hence ,the joint sector may be used as an “Instrument of
industrial growth”.
(4) State Sponsored Industrialization. The Joint sector may be regarded as a
part of the strategy of the state sponsored industrialization. The government
decides on the choice of projects which are desirable from a social point of
view and persuades private parties to join hands.
(5) Extension Of Public Control. The join sector may b used to remove the
contradictions involved in the Indian concept of mixed economy in which the
public sector has the responsibility to make heavy investment wit little or no
return and the private sector is allowed to function in those industries which
yield larger returns with little investment. The joint sector is a via media
between private ownership and outright nationalization.

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 (6) Mobilization Of Financial Resources. The rate of savings in the country has
been low and the saving of those persons and groups which could be invested
are not forthcoming due to constraints on industrial investment.

Patterns of Ownership and Management of Joint sector

The nature of ownership pattern will depend upon whether the project is planned and
initiated by the private sector partner or the government, whether the private sector
partner is a leading industrial house with large finance as well as managerial resources,
whether technologically the project is highly complex or not, whether it is highly
profitable or not, etc. The Government may normally seek partnership with an established
company or with a large business house, whenever substantial amount of capital and
technological competence are required.

Patterns of Management

Management Involves two major functions:

1} Policy making
2} Operational management

The role of policy-making in the joint sector rests generally with the Board Of Directors.
While the operational management rests with the managing director or his team of
managers.

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 Growth Prospective
Joint sector has a few definite growth prospective.

1. Growth of a mixed economy

Joint sector can be viewed as a tool for social control over industry without resort
to outright nationalization
2. A Complement to growth
In a emerging joint sector, the government was apparently looking for a model or
an apparatus that could be pieced together as a functional mechanism for
equitable and egalitarian economic growth and to supplement the public and
private sector.
3. To widen the spectrum
It was expected that the joint sector would widen the scope of industry scenario.
Thus a new embryonic entrepreneurship would be encouraged. Not only a wider
range of industry will be covered, the industry firmament would thus become
more extensive, labor absorbent, employment generative and broad based.
4. promotion of technology and finance.
Once the joint sector got going, it was expected that frozen cash and treasure
would be canalized by the private sector into government supported joint sector
enterprise.

JOINT SECTOR IN INDIA

According to annual survey of industries for 1978-79 joint sector concern

constituting of total enterprises for that year. These 1.6% of the factories in the
join sector possessed 5.5% of fixed and 5.8% of productive capital, 5.1% of
employee, 7.5% of gross output of the value added. In absolute term the joint
sector factories posses Rs1263 crore of fixed asset and Rs1832 crore of
productive capital. There were two categories in the joint sector according to the
survey of industries 1978-79i.e a private enterprise with central government and
other is jointly enterprise with state and local government.
Of 1385 factories in a joint sector, 321 to the first category and 1064 to the second
category. Thus the bulk numbering of 1064 belongs to mainly partnership
between state government and private enterprise. The relative of the two category
eas proportionate with regard to other characteristic like capital employment and
value added. For instance second category possessed 3.8% of fixed capital and
productive in the entire factory sector.3.6% of employment, 4.2% of gross output
and 3.1% of value added.
The latest data on joint sector is available for the year 2001-02. according to this
the no of factory in the joint sector is 2048 .These factories posses only 2.1% of
fixed capital and provide employment to 4% of labour. Their share to gross output

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 was only 3.2% in 2001-02 and 3% in value added. This shows that joint sector is
only a small part of industrial structure in India.

Financial Institution and Management Of Joint Sector

Financial institutions such as LIC and UTI and term lending institutions such as
IFCI and IDBI will be involved inequity participation of the joint sector. However they
cannot play an active role in setting up the management of these enterprises as the
Government and private partners can. They are likely to hold the shares of too many
companies. LIC and Uti can buy and sell shares depending upon the market conditions.
They may not have interest in the joint sector unlike the government and private partners.

On the other hand, the equity holdings of the financial institutions in join
enterprises may be used to strengthen the Government in exercising proper control over
the enterprises. The directors nominated by the government must ensure that the
management of the enterprises fulfills the objectives which were set up.

The success of joint enterprise will depend upon the initial selection of the
managers with functional skills for managing important positions, training and
development of managerial skills, evolution of skills and practices.