Pricing Policy In Public Enterprises - Edubirdie

University:
California State University, Northridge
Course:
BUS 104 | Introduction to Business
Academic year:

2023
Views:

304

Pages:

2
Author:

JJIssac

PRICING POLICY IN PUBLIC ENTERPRISES Profit-making Pricing  Introduction The pricing policy of public enterprises has been extensively debated. Issues include whether they should earn profits, the appropriate level, exploiting market power versus social concerns, and pricing approaches like marginal cost, average cost or no profit-no loss. Theories of Pricing Indian Public Sector and Profit Objective  Public sector expected to generate surpluses for development.  12% return considered reasonable. Higher for commercial undertakings.  Pricing should promote growth and investment per experts. Marginal Cost Pricing  Price equals marginal cost of production. Helps consumers under decreasing costs.  Deficit covered by taxing the rich. Increases welfare.  Practical difficulties in calculating marginal costs. Fluctuating prices. Influences Pricing  Price equals average cost including normal profit. Ensures recovery of full costs. Fair as consumers pay for what they consume. Useful where marginal cost hard to calculate.  Price equals total cost without profit. No need for subsidy or cross-subsidization. Consumers pay actual costs. No extra burden on nonconsumers. Guidelines on Nature of business, market situation etc affect pricing.  Guidelines by Administrative Reforms Commission and Bureau of Public Enterprises.  Competitive conditions critical. Pricing Practices  No Profit-No Loss Pricing  and  Average Cost Pricing  Price provides surplus over costs. Needed to finance investments in developing countries. Administered prices, no profitno loss prices, cost-plus pricing, competitive prices, parity pricing, subsidized prices etc followed. Conclusion  Combination of commercial surplus and social objectives desirable.  Reforms have introduced greater competition and market orientation.

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