Pricing in the public sector

THE convention of public enterprises which opened in Delhi on Tuesday has set itself the task of defining and assessing the role of the public sector in meeting the socio-economic challenges facing the country. Everybody seemed to agree that profits or the return on invested capital was a good test for judging a public enterprise. Dr Ajit Majumdar, Chairman of the Bureau of Public Enterprises, said that the rate of return in 1974-75 was 8 per cent and 10 per cent, respectively, for manufacturing and trading enterprises. He thought that basic industrial prices, such as those of coal, oil and steel, should be on the basis of 8-10 per cent return after covering long-terms costs rather than on import parity. For finished products, he said, these should be market prices rather than those fixed on costs requiring controlled distribution. RC Dutt, Chairman of the Indian Ore Board, visualised the public sector's role as one of fulfilling state policy and bringing about social change, but not without making a profit for capital formation for future investment. The Chairman of the State Trading Corporation, Vinod Parekh, wanted clearly defined norms of profitability and social objectives for each public enterprise and the assessment of its performance only on the basis of the set norms. PL Tandon, Director-General of the National Council of Applied Economic Research, said that with the increasing freedom of public enterprises from financial dependence on the government, the time had come for a move away from the state sector to a true public sector through the state divesting itself of its shares and allowing then to be held by employees who would be assured of a fair price when they cease to be in service.