Question

Assertion (A): Public sector organisations primarily focus on providing goods and services to the general public at relatively lower costs compared to private sector organisations.
Reason (R): The capital for public sector organisations is primarily sourced from tax collections, excise duties, and government-issued bonds.
Select the correct answer from the codes given below:

• A. Both (A) and (R) are true, and (R) is the correct explanation of (A)
• B. Both (A) and (R) are true, but (R) is not the correct explanation of (A)
• C. (A) is true, but (R) is false
• D. (A) and (R) are false

Answer 1

Answer:

B. Both (A) and (R) are true, but (R) is not the correct explanation of (A)

Understanding Public Sector Organizations

• The Assertion (A) states that Public Sector Organizations (PSOs) primarily focus on providing goods and services to the general public at relatively lower costs compared to private sector organizations. This statement is true.
• Public sector organizations are established with a primary objective of social welfare, equity, and public service, rather than profit maximization.
• They often operate in sectors considered essential for the well-being of the populace, such as healthcare, education, public utilities (water, electricity), and public transport.
• Their pricing strategy is often influenced by the government's mandate to make essential services accessible and affordable to all citizens, including economically weaker sections. This may involve subsidies from the government.

Funding Mechanisms of Public Sector

• The Reason (R) states that the capital for public sector organizations is primarily sourced from tax collections, excise duties, and government-issued bonds. This statement is also true.
• Governments finance public sector operations through various revenue streams:
  • Tax Collections: Income tax, corporate tax, Goods and Services Tax (GST) or Value Added Tax (VAT), customs duties, and excise duties are significant sources of government revenue.
  • Government-issued Bonds: Governments borrow money from the public, financial institutions, and international bodies by issuing bonds, which are a form of debt. These funds are then utilized for various public expenditures, including financing public sector enterprises.
  • Other sources may include fees for services provided, profits from public sector undertakings, and grants.

Relationship between Assertion and Reason

• While both Assertion (A) and Reason (R) are individually true, Reason (R) is not the correct explanation for Assertion (A).
• The fact that public sector organizations source their capital from taxes and bonds (R) explains how they are financed, but it does not directly explain why they offer goods and services at lower costs (A).
• The lower cost in public sector services (A) is a consequence of their public service mandate and the government's policy of prioritizing social welfare and accessibility over profit. The government uses the capital sourced from taxes and bonds (R) to subsidize these services, thereby enabling them to be offered at lower costs.
• In essence, R describes the funding mechanism, while A describes the objective and operational strategy driven by public policy. The funding (R) enables the strategy (A), but it is not the *reason* for the strategy itself. The strategy (A) stems from the government's role in addressing market failures and ensuring equitable distribution of essential services.