Friday, 11 March 2022

The two forms of public sector enterprises

A public sector enterprise plays a vital role in the development of the nation. The engagement of government in the corporation and economic sector of the nation needs to more organized body to function. The last few years have seen a rapid growth in public sector business. The government has a vital role in the establishment of public sector business. But the government is not directly acting in these organizations. The government takes action through its people, its administrative officers, employees, and they are allowed to decide on behalf of the government.

One of the major motives of public enterprises was formed by the government to take part in the economic activities of the nation. They estimate to contribute to the economic development of the nation in the Morden era and help in more flexible for liberation and competing with the world. These public sector businesses are run by the public and are responsible to the nation by the legislature. 

A public enterprise may change its form of organization; it depends upon the nature of business and its connectivity with the government. The sustainability of public businesses will depend upon their productivity, performance, and quality standards. 

  1. Departmental undertaking
  2. Statutory corporation

Departmental undertaking

The departmental undertaking is one of the oldest and traditional forms of public organization. These enterprises are set up as departments of the ministry and are considered as part of an extension of the ministry itself. The government does all the work by these departments and several services provided by these departments to the national. The government appoints ministers as heads of the department, but they are not permanent heads of a particular department. They are considered officers and known as government employees. 

Features of developments 

There are many features of departments, here several points of undertaking departments are highlighted as below.

  1. The capital of public business comes directly from the government reserves and every year announced in the governments budget. The profits earned by these departments are directly going into the treasury of the government. 
  2. The employees of these departments are government servants. Indian administrative service and civil servants are the head of the department. They got expertise in every department so that they can transfer from one ministry to another. 
  3. The accountability of such business to ministry since their management is directly under the particular ministry. 
  4. The major ministry decisions are taken by the appointed minister and some of the decisions are taken under government control. 


There are several benefits under department undertakings which are followings.          

  1. These department undertakings are directly linked with the government, they facilitate to parliament to exercise effective control over their operation. 
  2. The revenue of these departments directly goes into the government treasury, since these departments are major sources of government income. 
  3. These undertakings play a vital role in many areas like national security, financial, external, and many more. All these departments


 Are directly concerned with the suitable ministry.


Every organization has some pros and cons. The department undertakings are also suffering from serious drawbacks, some of the drawbacks are listed below.

  1. Departmental undertakings do not have flexibility, which is a big problem for the smooth operating of the business. 
  2. The employees and head of the department of such a department do not have the right to take an independent decision. This leads to delays in taking prompt decisions for business where required. 
  3. These enterprises are not allowed to take several business opportunities. Because the administrators do not want to take a risk and sometimes time taking formalities this leads to laps of opportunity. 
  4. There is a lot of bureaucratic paperwork for the daily operation of the organization and no action can be taken until it goes through the proper channel of authority. 
  5. There is a lot of political interference in ministries. 

Statutory Corporation

Statutory corporations are a public enterprise that comes into the existence by a particular act of parliament. Under this act, it defines its power, function, rules, and regulation of the statutory body. 


Statutory corporations have certain distinct features, which are discussed below.

  1. Statutory Corporations are not only set up under an act of parliament but also governed by the provision of the act. The act defines the objects, privileges, and powers of a statutory corporation as well. 
  2. Generally, the state has ownership of this type of organization. The government has all the control that why the ultimate financial responsibility and has right over the profits of statutory corporations as well. 
  3. A statutory corporation is a body corporate and can act as an individual entity.
  4. This type of enterprise has flexibility in finance. It can obtain funds from the financial market and the revenue of the organization.
  5. The employees of these enterprises are not civil servants or the government. The government is not imposing rules and regulations on the employees of the enterprise. The recruitment of employees depends on the provision of the act itself. 
  6. The statutory corporations have freedom of internal management and decision regarding the important operation of the corporation. But they are answerable to the state or government legislative.      


The statutory corporations are enjoying a certain advantage in their working, which is below. 

  1. The statutory corporations are not only enjoying independence in their function, but also a high degree of operational flexibility. This will help in quick decision-making. 
  2. A statutory corporation can raise funds at a low-interest rate because the state government provides full support to the organization. As they can raise funds through issuing bonds at a low-interest rate, take borrow at low interest, and many more.
  3. Since statutory corporations are autonomous organizations, they can frame their policies. But they need to take prior permission or approval of a particular ministry and the act of parliament.


There are several limits of a statutory corporation. 

  1. In reality, the state government has a certain power in the decision-making of the statutory corporation. There are several rules and regulations on all actions taken by the statutory corporation. This impacts the flexibility of the statutory corporation. 
  2. The complex process of forming a statutory corporation because it needs several documents, approvals, and complicated formalities. 
  3. The statutory corporation faces political interference, which will impact the efficiency of the corporation.      












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