What are Public Utilities?
“Public utilities are meant for serving the consumers. The supply of necessities by government saves consumers from exploitation by profit seeking businessmen. ”
Public utilities are those business accomplishments that provide necessary services to the society. The undertakings dealing with the supply of electricity, gas, power, water, transport etc. are all covered under public utility services. These are dominant in the developing countries.
All the above-mentioned things are needed in every day life of people. The undertakings dealing with public utilities require large-scale capital investments. It is also expected from them that the services are provided at reasonable rates.
Public utilities tend to be monopoly concerns. The entry of other entrepreneurs in these fields is generally barred by the government. The purpose of making public utilities as monopoly concerns is to serve the consumers in a better way and to provide services at cheaper rates.
Certain special privileges are also given to these concerns with a view to improve their working. The privileges and special powers that are given to public utilities are helpful in maintaining regular and satisfactory supply by them.
The privileges and special powers are conferred by the legislative authorities of a particular country. Public utility concerns may acquire and use public property, if necessary.
Public utilities are meant for serving the consumers. The supply of necessities by government saves consumers from exploitation by profit seeking businessmen.
In case of railways, for example, large amounts are spent on providing railway lines, purchase of engine and wagons and constructing railway stations. In the same way electricity concerns require large investments for various purposes.
Public utility undertakings are generally created by parliament or state legislatures by passing special acts. In many countries railways are set up by the act of parliament and electricity boards are set up by different state legislatures.
The demand of a public utility always remains high. So there is no risk of any kind of fall in demand. There is no fear of competition because of its monopolistic character. The demand of these services is both direct and derived.
The nature of demand and laws of returns also affect the price. These concerns operate under decreasing cost conditions. So, they should charge reasonable prices. The pricing policy of these undertakings is also generally guided by the government for public welfare.
Author - DeeKay
Tags - Finance, Economy
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