To prevent accentuation of regional imbalances, the role of public enterprises in backward region is well recognized in most developing countries. However the exact processes through which such a development could match the expectation of rural poor in these regions remains ambiguous. The growth centre bias in such policies is strongly disputed in this paper. In part one, the dynamics of backwardness with specific reference to semi-arid drought prone regions is discussed. The key ecological characteristics of such regions along with various risk-adjustment efforts of peasants are mentioned. In next part the contradictions between public policies implemented though state enterprise and the household characteristics are discussed. Major problems listed are: Inappropriateness of demand based organization in regions where very feeble demand base exists; sedentary organizations ill equipped to deal with mobile populations, absence of popular protest misinterpreted as a sign of popular tolerance or satisfaction etc. Specific illustrations of commercial Bank Branch Expansions policy, viability norms for milk routes in dairy development policy, inequitous cost sharing norms of cooperative services, uniform agricultural extension personnel for regions with different population