Efficiency In Public Enterprises

In any sphere  of activity, efficiency is defined as the rate of return or rate of result obtained to the means used. In simple term it is the ratio of  achievement to the means used. Similarly, it can be defined as a measure of time, cost and effort,  with comparison to productivity. Measuring of efficiency includes goods or services, time of processing, the functionality of the solution etc.  Laxmi Narain defines efficiency in public enterprises as "efficiency is the ability to produce the designed effect with minimum of effort, expenses or waste". It is important to decide that whether or not strict rules to adopt for measuring efficiency in public enterprises. Public enterprises have legitimate reasons to treat efficiency as secondary in some cases. 

Criteria of Efficiency Measurement

• Profit or loss:- Efficiency, very rigidly, can be measure through the analysis of annual profit and loss of the public enterprise. This approach is suitable in private sector and in some public companies. But when the legitimate reasons are there to consider profit as a secondary in public sector, this approach will only be rigid means.
• Contribution to National Economy:- Share of involvement in national economic activities may be another means to measure efficiency of public enterprises.  Contribution to the national economy through developmental activities or through tax can be measured. 
• External Auditing:- Independent and fair auditing is mostly used and widely accepted method of measuring efficiency in public enterprise. 
• Minimization of Wastage:- This refers to the minimum impact to the economy. If functioning of the enterprises do not add burden to other sector of the economy, efficiency may be low. But in contrary, when the enterprise do not put burden to the economy efficiency may be higher. 
• Social Responsibility:- Efficiency of public enterprise producing public and basic essential goods or service and the public enterprises set up for commercial purpose can't be measured with same indicators. 

Some other criteria are:-

• Productivity
• Financial ratio analysis

(Written with the purpose of helping MPA, TU students appearing Examinations)