Here is an essay on ‘Public Utility’ for class 9, 10, 11 and 12. Find paragraphs, long and short essays on ‘Public Utility’ especially written for school and college students.

Essay on Public Utility


Essay Contents:

  1. Essay on the Peculiarities of Public Services
  2. Essay on the Price Policy in Respect of Public Utility
  3. Essay on Cost Service Principle
  4. Essay on the Value of Service Principle
  5. Essay on the Problems of Public Utility Price Policy
  6. Essay on the Public Utility Prices Tribunals


Essay # 1. Peculiarities of Public Services:

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In every state there are public utility services which provide to the citizens. These services include supply of water, electricity, telephone, transport and communication etc. Obviously while deciding pricing policy of these services, profit cannot be the sole motive. But before we actually discuss pricing policy in this regard, we must not forget that these services have certain peculiarities.

These are:

(i) Public utility services may either be services or product of services and as such it is essential that their supply be regular to avoid serious dislocation for the society as a whole.

(ii) Being ‘Service’ in nature these can’t be stored. Either the service must be provided to the society, or the service will go waste. In case any attempt is made to store the services that ‘will be so costly that the society will not be in a position to afford that and also their storage might create instability in the market.

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(iii) The demand for these services can increase and decrease according to time, season and occasion. A transport service may be under heavy pressures at the time of festivals; postal departments during Christmas or Diwali or when news about election results is to be communicated and so on.

(iv) Essential public utility services e.g., water, gas, railways etc. are needed for all the 24 hours of the day. Their disruption at any hour can result in many problems particularly in hospitals, factories etc.

(v) There can be no variation in the supply of services to different customers in the same areas Thus the water must flow from the same pipe line and serve the locality uniformally, whether in that the people having different political ideology or economic status and standard are living and using that.

(vi) The service supplied, by a public utility organisation is not transferable.

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(vii) Since public utility services are to be uniformally supplied and it is to be ensured that these are available during all the 24 hours of the day, these are to be supplied under monopoly situations. This monopoly may either emerge of its own or might be encouraged by the State. Thus there can be deliberate attempt for encouraging monopoly. Any competition in the supply of these services is bound to create many problems.

(viii) Since the services are provided under monopoly conditions, sometimes, the cost to be paid is higher and the services may not to be available according to the satisfaction of the consumer. The quality of the services, in some cases may also come down.


Essay # 2. Price Policy in Respect of Public Utility:

Obviously when question of price policy in respect of public utility services arises, that cannot be on commercial lines and care will have to be taken that state is responsible for providing these essential services to the society.

While fixing price another consideration always is that there are both large and small consumers and services. Obviously the water and electricity to be consumed will be much more in the factories where the people living in the palatial buildings than by the hut dwellers.

Still another consideration is that there are some kinds of services which exclusively are used of a section by society e.g. telephones. This is a service which is used only by well to do and not the poor people. Then we find that transport facilities for transporting goods from one place to the other either by rail or by road are used by business community.

Therefore, there is strong and powerful section of the society which believes that there must be some discrimination between the rates to be charged by those who are bulk consumer of services, and by those who are not.

Their main line of argument is that since out of the capital which is invested for providing these services, major benefit is taken by the bulk users, they must pay higher price. On the other hand there is equally a powerful section which argues out that there should be no discrimination, According to them it is the duty and responsibility of the state to provide these services.

The state is to invest in any way. It is for the society to see that it takes advantage of the facility being provided to the consumers. In case a section of the society does not take advantage of the facility, why should the other section, suffer or pay heavy charges for that. This controversy is still continuing.


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Essay # 3. Cost Service Principle:

Accordingly for price fixation different principles have been suggested, which may briefly be discussed as under:

According to this principle, it is believed that the price of a service should be fixed in proportion to the cost. In other words, if the cost is more, then the price should be higher and if less, it should be low. But this principle has its own difficulties e.g.,

(a) The services which will be supplied at difficult approaches e.g. the hills or deserts, will definitely be costlier, as compared with the plains, Obviously there people will be required to pay more. In actual practice and reasonably these people should be required to pay less, on the principle of social welfare, but if this principle is adopted, they will be expected to pay more.

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(b) If cost principle is to be taken into accounts then some of the social utility services, will become so costly that common man may not be in a position to afford. Milk and vegetables as well as fruit to metropolitan cities are brought from far off distances and that too in air conditioned coaches etc. In case cost principle is applied here, then their cost of transportation will go up so high that common man may not be in a position to purchase the goods.

(c) Then another difficulty is that under this principle cost will have to be linked with the capital, investments and dead stocks. To be just and fair, depreciation will have to be taken into account, but in actual practice, it is difficult to take all these factors into consideration.

(d) In case this principle is accepted then the price for the same service will differ from one place to the other, which will mean price discrimination, which socially may not be justified.

(e) Reasonably, on this principle the cost of service depreciation and investment should broadly, be divided into two parts namely the one for those who are bulk or frequent users and the one those who are the usual or not bulk users.


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Essay # 4. The Value of Service Principle:

According to this principle each class of consumer is charged a price that it is able to pay according to its demands for the service. Thus if it requires a better service, it will have to pay higher price. We find that in the railways the passengers interested in travelling in first class or by air conditioned coach are required to pay higher rates than the passengers, who travel by second class.

Similarly, the passengers travelling by Deluxe Bus Coach will pay higher rates, as compared with the passengers travelling by ordinary bus. We also find that the business men using electricity for commercial purposes are required to pay more as compared with those who want electricity for domestic use. In actual practice highest price for a service is charged where the elasticity of demand is the lowest. Obviously under this principle there are two major conditions; firstly paying capacity of the consumer and secondly the availability of substitutes.

In so far as first consideration is concerned, it is believed by the society that since, the person or section of society wants to have -better service therefore he or they have the capacity to pay. As regard, second consideration the agencies responsible for fixing the price are to see that the price is fixed after taking into consideration the availability of alternatives. In case the alternatives are available at cheap rates the people will switch over to the alternatives.

Then in this case the authorities also will have to take into consideration the rates of the peak hours and off hours. We find that the rates of telegrams and trunk calls are different between the peak hours and off hours. During peak hours, if the consumer is to contact party on trunk rates payable will be higher, as compared off hours.


Essay # 5. Problems of Public Utility Price Policy:

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We have already said that in public utility price policy, the most serious problem is whether the price should be fixed to earn profits or to provide service. But it is not the only problem. There are many other problems. Sometimes an attempt is to be deliberately made to charge higher rates, while at other times lower rates are to be deliberately charged.

When the service it to be given at peak-hours, where there is little capacity, deliberately an attempt is made to charge high rates, so that the people are discouraged to use that service and there is no extra loading. At other times an attempt is made to charge low rates because the service is to be promoted and the people are to be approached. At places railways charge much less than they should ordinarily charge because it is believed by the state, that the people of that region are to be approached.

These are to be linked with other parts of the country. Some times as we find that fare and travel concessions are given to the public to encourage them to go on excursions, pilgrimages and attend certain functions. Similarly the students are given travelling concessions to go and see the country and those parts of the land, which ordinarily they will not like to visit.

In some colonies water is supplied at most lower cost and in some cases only nominal fixed annual rates are charged. In some cases public hydrants are provided and the public is not at all charged for that. Similarly we find that while fixing rateable value of a house, locality and paying capacity of the people is always taken into consideration and so is the case while allocating market cities to the people. At places the markets are provided at very low rates to protect the interests of weaker sections of society.

Is Price Discrimination Inevitable?

All societies must have both the weaker as well as rich sections in it. The weaker sections must be provided concessions and charged at lower rates, as compared with the strong who must pay at higher rates. The rich and the poor cannot be charged at the same rates and as such while fixing prices for public utility services price discrimination will have to be maintained and in fact that is a must.


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Essay # 6. Public Utility Prices Tribunals:

Public utility services must be provided by each state. It is another matter that in some cases the state provides more, while in others less. In modern times more and more pressure is being exerted on each state to provide better public utility services. Since these are provided under monopoly conditions it is essential that effective measures should be taken to ensure that there is no exploitation of the consumers.

Aims of Public Utility Prices Tribunals:

The aim and object of Public Utility Prices Tribunals primarily is to suggest to the Government and the agencies responsible for providing services, such reasonable prices of the services that the consumer is not exploited and at the same time the service does not become a heavy and unreasonable liability on the tax payer. The task is a cobweb of difficulties and problems.

Problems of Public Utility Prices Tribunals:

Had it been simply a profit and loss statement and assessing the price of the goods after taking into consideration depreciation, it would not have been a very difficult task. But the problems are many.

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Some of the serious problems which a tribunal is likely to face, or which it usually faces are as under:

(1) The basic idea of providing a service-is that the consumer should not be exploited and at the same time, there should be a marginal profit, so that the tax payer is not heavily over-burdened. Now question arise as to what is reasonable margin of profit and whether in calculating such a margin original investment of capital or the book value of the goods at the time, when the service is to be provided should be taken into consideration.

In case the prices of the material have fallen down and the consumer is required to pay according to original investments, then he will be sufferer and that will mean his exploitation. On the other hand if value of the goods used has fallen down and the consumer is required to pay low prices, then the agency providing services will suffer serious losses.

(2) Still another difficulty with these tribunals is that the servicing agencies will never provide a correct picture of the cost or service. These agencies will always show higher costs. This is done through many ways.

There can be on paper high cost of purchase or heavy depreciation charges, costly transport charges, losses in transit and so on and so forth. Though the tribunals may try to assess the figures on the low side, keeping margin for the higher costs which the industry may show, yet it cannot be sure of the extent to which the costs on, the higher side have been shown.

(3) Then another difficulty for tribunals is that the prices proposed cannot be uniform all the year round. There can be good years when the services may not be under any strains and affected or influenced by the upheavals. On the other hand there may be bad years, when the services may come under heavy strains.

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(4) In price fixation process human element is also involved. The agencies loaded with the responsibility of providing service will always try to corrupt the members or the tribunal. In case the members get bribes or succumb to other temptations, then the price is sure to be fixed on the high side.

(5) Prices can reasonably be fixed only when there is correct assessment of the margin of profit. No agency will provide correct figures about profits, and there is no other alternative to that. Unless correct assessment of profit is available, there cannot be any realistic price fixation.

(6) Still another difficulty is that these tribunals are required to fix the price of the same commodity differently for different consumers. Thus they are to see that a section of the society pays according to its paying capacity and also keeping in view the extent of the services which the society is otherwise obliged to provide.

We know that in India water supply to the urban people living in big cities is provided after making them pay something, but it is considered social responsibility of the state to provide immediately drinking water to the tribunals living in remote corners of the country. The pricing policy of the two obviously cannot be the same. These tribunals are to go into the system of both and decide the price to be charged.