A fantastic PPT on forms of public sector entreprises. The PPT contains a detailed description about the various forms of doing public sector business. It discusses the meaning, features, merits and demerits of each form.

1. Chapter - 3
Private, Public &
Global Enterprises

2. Introduction
● Every country has numerous small or large,
manufacturing, trading or service organisations ,
which are either privately owned or government
owned.
● All business organisations affect daily
economic like thus, are an integral part of an
economy.
● Indian economy has a combination of both
privately owned and government owned business
enterprises, thus it is called as Mixed Economy.

3. Forms of Public Sector
Enterprises
● Public sector enterprises are owned by
government sector, either wholly owned by the
Central or State Government.

4. I. Departmental Undertakings
● Departmental undertakings are established
under specific ministries.
● All activities are performed by these
departments are integral part of the ministries
thus have no independent identity.
● These are managed either by Central or State
government.
● These are the oldest & most traditional form
of public enterprises.
● Departmental undertakings are most suitable
for business activities of national importance,
public utilities and economic control.

5. Features of Departmental Undertakings
● The departmental undertakings receive funds
from the Govt. Treasury.
● The revenue earned by the departmental
undertakings is paid into the Govt. Treasury.
● The activities are subject to accounting and
audit controls as applicable to other Govt.
activities.
● The departmental organisations are run by
government servants, recruited directly by the
Govt.
● All the employees are headed by officers and
civil servants from IAS.

7. Merits of Departmental Undertakings
1. Easy Formation – It is very easy to form a
departmental undertaking as no registration is
compulsory.
2. Effective Control – The control on
departmental undertaking is very effective as it
is direct and centralised.
3. Optimum Utilisation of Funds - There is
proper utilisation of funds as financial matters
are subject to ministerial sanction, budget,
accounting and audit control.

8. 4. Accountability – There is direct parliamentary
control. The performance of departmental
undertakings can be discussed in parliament. So
there is public accountability.
5. Public Revenue – The revenue of departmental
undertakings is deposited in the treasury of the
Govt. So these undertakings help to increase the
Govt. revenue.
6. Secrecy – The activities, performance of the
departmental undertakings can be highly secret,
as govt. can avoid disclosure on the plea of
public interest. Due to secrecy only the most
sensitive area i.e. defence is operating as a
departmental undertakings.

9. Demerits of Departmental Undertakings
1. Inflexibility - Such organisations works under
strict parliamentary control. There is too much
interference of ministries and top officials.
2. Lack of Motivation – They have no power to
utilise their revenue as these are deposited in
the treasury. These is no incentive to maximise
the profit. There is no direct relation between
the efforts and rewards.
3. Lack of Financial Autonomy – They cannot
plan long-term investment projects. As they are
subject to budgetary control of govt., they are
not allowed to use their own revenue freely.

10. 4. Inefficient Management – The departmental
undertakings are managed by the govt. officials.
These officials are overburdened with the paper
work. As a result, they have less sense of
responsibility and efficiency.
5. Red Tapism & Bureaucracy – Red tapism and
bureaucracy refers to delay in decisions due to
too many formalities. The decisions in the
departmental undertakings are delayed due to
administrative formalities, paper work etc.
6. The undertakings do not focus on consumer
satisfaction, thus are not competitive in providing
services to consumers.

12. II. Statutory/ Public Corporation
● These are established and governed by a
Special Act of the Parliament or by the State or
Central Legislature.
● The Act defines the powers & functions, rules
& regulations governing its employees and its
relationship with government departments.
● The Corporations are financially independent,
with a clear control over a specified area or a
particular type of commercial activity.
● They are managed by Board of Directors
appointed by the government.
● It is suitable for projects which need huge
investments and are run on business lines.

13. Features of Statutory/ Public Corporations
● These are set up under an Act of Parliament or
Central or State Legislatures.
● The Act defines the objectives, powers and
privileges of a Statutory Corporation.
● It is wholly owned by the State.
● It is a separate legal entity. It gets incorporated
automatically when Act is passed in the Parliament.
● The financial records are audited by
Comptroller and Auditor General.
● The corporation has independent financial
structure. It prepares its own budget, retains its
earnings and utilises them for operations.

15. Merits of Statutory/ Public Corporations
1. Administrative Autonomy – A public
corporation can manage its affairs independently
and flexibly.
2. Quick Decision – Power to function
independently allows quick decision making and
flexibility in day to day operations.
3. Service Motive – The activities of public
corporation are discussed in parliament. Thus
ensures protection of public interest.
4. Efficient Staff – Public corporations can have
their own rules & regulations regarding

16. remuneration and recruitment of employees. It
can provide better facilities and attractive terms
of services to staff to secure efficient working
from its staff.
5. Professional Management – Its Board of
Directors consists of business experts and also
the representative of various groups such as
labour, consumers nominated by the government.
6. No undesirable government regulation and
control.
7. Corporations organise their funds, therefore
there is no government interference in financial
matters.

17. Demerits of Statutory/ Public Corporations
1. Autonomy on Paper Only - The autonomy &
flexibility of public corporation is only for name’s
sake. Practically ministers, government officials &
political parties often interfere with the working
of these corporations.
2. Lack of Initiative – Public corporations do not
have to face any competition and are not guided
by profit motive. So the employees do not take
initiative to increase the profit and reduce loss.
The losses of public corporation are made good by
the government.

18. 3. Rigid Structure – The objects and powers of
public corporations are defined by the Act and
these can be amended only by amending the
statute or the Act. Amending the Act is a time
consuming and complicated task.
4. Unfair Practices – The governing board of a
public corporation may indulge in unfair practices.
It may charge unduly high price to cover up
inefficiency.
5. Public dealings result in widespread corruption.
Note – Corporation works as an independent body
much interference of govt. Thus it works as an
Autonomous Body.

20. III. Government Company
A Government Company may be defined by the
Indian Companies Act, is:
● A company established, registered and governed
under the Indian Companies Act, 1956.
● A company established to conduct business, in
competition with companies in private sector.
● A company which has at least 51% of the paid up
capital held by the Central Government, or by any
State Government or partly by Central Government
and partly by one or more State Governments.
● A company whose shares are purchased in the
name of the President of India.

22. Features of Government Company
1. Formation – It is an organisation created by
the Indian Companies Act, 2013.
2. Separate Legal Entity – A Govt. company can
enter into a contract; acquire property in its own
name; file a suit in a court of law against any third
party and can be used by third party.
3. Management – The management is regulated
by the provisions of the Companies Act, like any
other public limited company. It is managed by the
Board of Directors nominated by the govt.

23. 4. Appointment of Employees – The employees of
the company are appointed according to the rules &
regulations as contained in the Memorandum and
Articles of Association.
5. Accounting & Auditing – Such companies are
exempted from the accounting and auditing rules
and procedures, as the annual accounts are
prepared by the auditor appointed by the Central
Government.
6. Financing – The company raises its funds from
Govt. shareholders, private shareholders and capital
market. At least 51% of the capital is raised by
issuing shares to the State or the Central Govt. The
shares are purchased in the name of President.

24. 7. Reporting – Government companies present
their annual reports in the Parliament or to the
State Legislature.
8. Suitability – A Govt. company is most suitable
for projects which are run on business lines, are in
direct competition. with private sector and may
need technical or financial support from private
sector.

25. Merits of Government Company
1. Easy to Establish – A govt. company is
registered under the Indian Companies Act, 2013
therefore there is no need for any separate Act
to be passed in the Parliament.
2. Separate Identity – A govt. company enjoys
separate legal entity. It conducts business
operations like any other private company.
3. Maximum Autonomy – A govt. company
functions according to business prudence and
enjoys autonomy in managing business operations.
There is no interference or control of the
government.

26. 4. Curbs Unhealthy Business Practices – Govt.
companies provide goods and services at
reasonable prices and thus control the market and
limit unhealthy business practices.
5. No Political Interference – Freedom from
political and administrative interference
facilitates government companies to function with
greater flexibility and efficiency.
6. Professional Management – The government
companies have the flexibility of appointing
professionals and expects to manage business
activities. This helps business to manage its
affairs more efficiently.

27. Demerits of Government Company
1. Provisions of Companies Act Irrelevant – The
govt. being the major shareholder, exercises control
over the management. This restricts the company to
enjoy special features of a registered company.
2. No Accountability – Due to the autonomous
status of the govt. company it is not answerable to
the Parliament. Thus it ignores constitutional
responsibility.
3. Policies Influenced by Personal Interest – Govt.
being a major shareholder controls the management,
therefore the ministers and govt. officials formulate
policies in their own interest.

28. Comparison Between Three Forms of
PSE’s

29. Presented by –
Ritvik Tolumbia
CS, CWA, M.Com (ABST),M.A (Eco), B.Ed