Business Studies: Departmental Undertakings, Statutory Corporations, and Government Companies PDF

ss Studies: Departmental Undertaking, Statutory Corporation & Government Co **1. Departmental Undertaking** These are government-run businesses directly controlled by a specific ministry. They are treated like a part of the government. Real-Life Example: - Indian Railways (Ma...

ss Studies: Departmental Undertaking, Statutory Corporation & Government Co **1. Departmental Undertaking** These are government-run businesses directly controlled by a specific ministry. They are treated like a part of the government. Real-Life Example: - Indian Railways (Managed by the Ministry of Railways). - Post Office (Managed by the Ministry of Communications). Features: 1. Fully financed by the government. 2. Part of a government department. 3. Employees are government servants. 4. Complete control by the concerned minister. 5. Revenue goes directly to the government treasury. Merits: 1. Government Control: Ensures no misuse of public funds. 2. National Security: Best suited for sectors like defense. 3. Public Accountability: Managed directly under parliament. Demerits: 1. Lack of Flexibility: Slow decision-making due to government interference. 2. Bureaucratic Approach: Leads to inefficiency. 3. Red Tape: Excessive formalities delay work. **2. Statutory Corporation** These are special organizations created by passing an Act of Parliament. They enjoy independence in operations but are owned by the government. Real-Life Example: - RBI (Reserve Bank of India) - LIC (Life Insurance Corporation of India) Features: 1. Formed under a special Act of Parliament. 2. Fully owned by the government. 3. Separate legal entity. 4. Financial autonomy (freedom to manage finances). 5. Own rules for staffing and operations. Merits: 1. Flexibility: Operational decisions are taken independently. 2. Reduced Interference: Freedom from daily government control. 3. Economic Growth: Promotes efficient services in finance, insurance, etc. Demerits: 1. Government Interference: Still under government pressure for policies. 2. Red Tapism: Delays in action. 3. Rigid Structure: Fixed framework, difficult to change quickly. **3. Government Company** A company in which the government owns at least 51% of the shares but operates like a private business. Real-Life Example: - SAIL (Steel Authority of India) - BHEL (Bharat Heavy Electricals Limited) Features: 1. Registered under the Companies Act. 2. Managed by a Board of Directors nominated by the government. 3. 51% or more shares owned by the government. 4. Operates like a private company with some government control. Merits: 1. Easy Formation: Registered like any other company. 2. Independent Status: Operates efficiently with fewer restrictions. 3. Operational Autonomy: Decisions are faster than departmental undertakings. Demerits: 1. Limited Freedom: Controlled indirectly by the government. 2. Inefficiency: Can lead to misuse of funds if not managed properly. 3. Accountability Issues: Employees might lack commitment compared to private companies. Comparison Table: | Aspect | Departmental Undertaking | Statutory Corporation | Government Company | |-----------------------|--------------------------|-----------------------|------------------------ --| | Example | Indian Railways, Post Office | RBI, LIC | SAIL, BHEL | | Formation | Part of government dept. | Special Act of Parl. | Registered under Co. Act | | Control | Fully by government | Independent | Board of Directors | | Flexibility | Least flexible | Moderately flexible | Most flexible |