Public Sector

Enterprises
By- Green Group
Public sector Enterprises
The public sector consists of various organizations
owned and managed by central or State or by both
governments. The government participates in
economic activity of the country through these
enterprises. The various forms of public organisation
are:

❖ Departmental Undertaking
❖ Statutory Corporation
❖ Government Company
 Departmental Undertaking
● They are most oldest and traditional
form of organization.

● They are established as department

of ministry and are considered part
or an extension of the ministry itself.

● Examples of departmental
undertaking are- Railways, post and
telegraph, All India radio,
Doordarshan etc.
 Features Of Departmental Undertaking

01
It is financed by annual
02
They are subject to strict
budget allocation of the auditing & accounting
govt. and all its earnings rules.
goes to govt. treasury

03
Its employees are govt. employees
& are recruited & appointed as per
04
These are accountable to
the concerned ministry.
government rules.
Merits of Departmental undertaking

➢ It is more effective in achieving the objective laid down by govt. as it is

under the direct control of govt.

➢ It is a source of govt. income as its revenue goes to govt. treasury.

➢ It is accountable to parliament for all its actions which ensures proper

utilization of funds.

➢ It is suitable for activities where secrecy and strict control is required like
defense .
Limitations of Departmental Undertaking

➢ It suffers from interference from minister and top officials in their working
due to which there is delay of decision making.

➢ It lacks flexibility which is essential for smooth operation of business.

➢ It suffers from red tapism in day to day Work.

➢ These organizations are usually insensitive to consumer needs and do not

provide goods and adequate service to them.

➢ Such organization are managed by civil servants and govt. officials who may
not have the necessary expertise and experience in management.
STATUTORY
CORPORATION
It is established under a special Act passed in the
Parliament. Its objectives, powers and functions
are clearly defined in the special Act.

Examples: RBI ( Reserve Bank Of India)

SBI( State Bank Of India)
Food Corporation of India
Life Insurance Corporation
 Features of Statutory Corporation
➢ It is established under a special Act which defines its objects, powers and
functions.

➢ It is wholly owned by the State and has financial responsibility.

➢ It is a body corporate and has a separate legal entity.

➢ It has its own staff, recruited and appointed as per the provisions of Act.

➢ This type of enterprise is usually independently financed. It obtains funds by

borrowing from govt. or from public or through earnings.

➢ It is not subject to same accounting & audit rules which are applicable to govt.
department.
 ➢ It has a high degree of operational
Merits of flexibility free from undesirable
government regulation and control.

statutory ➢ The government generally does not

interfere in their financial matters,
including their income and receipts.
Corporation ➢ It frames their own policies and
procedures within the powers assigned to
them by the Act.

➢ It has the power of the government,

combined with the initiative of private
enterprise
Limitations of Statutory
Corporation
In reality, there is not much operational flexibility. It is subject to many rules and regulations.

Govt. and political interference has always been there in major decisions
which lead to delay in decision making

we know that where there is dealing with government rampant corruption always
exists.

Advisors to the Corporation Board curbs the freedom of the corporation in

decision making and delays the work.
Government Company
• A government company is established under The
Companies Act, 2013 in which not less than 51% of the
paid up share capital is held by the central govt. or state
govt. or jointly by both.
• These are established for purely business purposes and
in true spirit compete with companies in the private
sector .
• The shares of the company are purchased in the name
of the President of India.
• Examples: Hindustan Insecticides Ltd., State Trading
Corp. of India, Hindustan Cables Ltd.
Features of Government Company
➢ It is created under the Companies Act 2013 or any previous Company Law.

➢ It can sue and be sued in the court of Law.

➢ It can enter into a contract and can acquire property in its own name.

➢ Management is regulated by the provision of companies Act.

➢ Employees are recruited and appointed as per the rules and regulations
contained in their Memorandum and Articles of Association.

➢ It is exempted from the accounting and audit rules and procedures. An auditor
appointed by the govt. present its report in the Parliament.

➢ The govt. Co. obtains it funds from govt. shareholdings and other private
shareholdings. It can also raise funds from capital market
 Merits of Government Company

1. It can be easily 2. It has a separate 3.It enjoys autonomy 4.It is able to

formed as per the legal entity, apart in management control the market
provision of from the decisions and takes by providing goods
companies Act. No and services at
Government. actions according to
reasonable prices
separate Act is business prudence and curb unhealthy
required. business practices
Limitations of Government Company

➢ In reality the ➢ The government being

➢ It evades constitutional the sole shareholder, the
provisions of the
responsibility which a management and
Companies Act does
company financed by the administration rests in the
not have much
govt. should have as it is hands of the government.
relevance as in some
not directly answerable to The main purpose of a
Govt. Companies,
parliament. government company,
Government is the
. registered like other
only shareholder.
companies, is defeated.
 THANKS!

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