Passage

Passage – 2 Net profits are only 2·2% 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 competition 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 shows 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 tax payer 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.

According to the passage, rural roads should be in the domain of public sector only. Why ?

(a) Rural development work is the domain of government only.
(b) Private sector cannot have monetary gains in this. ✓ UPSC's answer
(c) Government takes money from tax payers and hence it is the responsibility of government only.
(d) Private sector need not have any social responsibility.

Why the answer is (b)

• The passage states that rural roads have 'sparse traffic' which makes 'tolling unviable'.

• Because tolling is not viable, the private sector cannot generate revenue or monetary gains from these assets.

• The text argues that if the government did not own them, they would not exist, implying the lack of private financial incentive.

• Therefore, the specific reason given for public sector ownership is the absence of monetary viability for private players.

• This aligns with option (b), which states the private sector cannot have monetary gains in this domain.

Why the other options are wrong

(a) Rural development work is the domain of government only.: The passage does not claim that rural development is exclusively the government's domain, but rather that the specific economic conditions of rural roads make private investment unviable.
(c) Government takes money from tax payers and hence it is the responsibility of government…: While the passage mentions the risk of asking for money from taxpayers in the context of legacy government ownership, it does not cite this as the reason why rural roads must be public; the reason is the lack of tolling viability.
(d) Private sector need not have any social responsibility.: The passage does not discuss the social responsibility of the private sector as a reason for public ownership of rural roads; it focuses on the economic unviability of tolling due to sparse traffic.

Asked in the CSAT Paper II of the UPSC Civil Services Preliminary Examination 2014, held on 24 August 2014. Question and answer key: Union Public Service Commission. Explanation: UPSC Answer Check.