Why Govt is not offering software development services for a reasonable fees? I believe it will be great beneficial for small businesses.
For the same reason the government isn't involved in every other sphere covered by private enterprises. The government doesn't have any secrets of cost-efficiency. So, such services by the government will necessarily be more expensive than from the private sector. So, what you ask is why software development isn't subsidised.
The government just tells the software companies what to put in the software so they can stalk you. They don't need to make the software directly. If they made it directly they would not be allowed to do what they do.