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Forms of Public Enterprises (Departmental Undertakings) - Coggle Diagram
Forms of Public Enterprises
(Departmental Undertakings)
Features of Departmental Undertaking
:star: Formation: Formed as government department by the government. Each government department is associated with a special ministry.
:star: Ownership: Their ownership lies compulsorily with the government.
:star: Management: These are managed by the ministry concerned. The Secretary of the department is their Chief Executive Ofiicer.
:star: Financing: Completely done by the government through general budget. They have no right to borrow from public. They draw money from the government treasury for their daily expenses. Their income is also deposited in the government treasury.
:star: Appointments: The appointment in these undertakings are made through Union Public Service Commission (UPSC) and Staff Selection Board (SSS). The employees of the departmental undertakings are the government employees.
:star: No separate existence: Do not have any existence of their own. They cannot have any property in their own name. They cannot file any court case against anyone without the permission of the government and nobody can sue them.
:star: Administrative autonomy: They do not have any administrative autonomy because they are in form of a government department. There is regular political interference in their operation.
Limitation of Department Undertakings
:!: Lack of Flexibility : There is lack of flexibility due to strict government rule whereas essential for the successful operation of an undertaking.
:!: Lack of Incentive : It may appear that the powers which officials enior spur them to work for earning the maximum for the undertakings. But in reality official the departmental undertakings have very limited powers.
:!: Lack of prompt action : centrally controlled management and excessive formalities can taken.
:!: Red tapism : Excessive paper work and the habit of not finish the work give rise to red tapism.
:!: More political interference: Departmental undertakings are run under the supervision of a minister. The minister, being a representative of the political party gives more priority to the benefits of the party than the benefits of the country.
:!: Increase in Tax Burden : The burden of heavy losses of departmental undertaking falls on government exchequer. The government levies taxes on the general public to compensate such losses.
:!:Lack of Competitive feelings: These undertakings do not pay special attention to ongoing losses for want of competitive feelings and lack of profit motive.
Definition:
:red_flag:Only those business organization are included in the public sector which are of public interest and which are controlled and managed by the government.
:red_flag: Owned by the government or their maximum ownership lies with government.
:red_flag: Public enterprises can both be incorporated and unincorporated category to be registered under the various organization, while the unincorporated enterprises can be started without any registration.
Three Different Forms of Public Enterprises
Departmental Undertaking
Statutory/ Public Corporation
Government Company
It is run as a part of government department under the direction of the minister concerned
For example, In India, The Indian Post and Telegraph Department (which is run by the Ministry of Communication)
Merits of Departmental Undertakings
:fire: Easy formation: Formed very easily as registration is not needed for their formation. They are established just by the administrative order of the government.
:fire: Effective control: The management of these undertakings work under the rules framed by the relevant ministry. Apart from that, the work is done by educated and trained officers. As a result, an effective control can be achieved.
:fire: Decrease in tax burden: Government puts taxes on the public to meet its expenditure. But this need is naturally fulfilled as soon as these departmental undertakings have their own income. As a result, the government lessens the burden of taxes on the public
:fire: Easy financing: Financing becomes very easy as it is managed by the government.
:fire: Proper utilization of funds: All the activities of these undertakings are done with the approval of the government and the officials have complete control over them can be no misutilization of funds.
Utility of Departmental Undertakings
:check: Where secrecy plays a vital role, for example, Defence Industry
:check: Where services for the public utility are to be made available and the contribution of the private.
:check: Where the complete control of the government is essential for public welfare
:check: Where heavy investment is involved without any guaranteed