―Public administration is a comprehensive and peculiar field of activity, consisting of numerous activities, processes or functions performed by public officials working in public institutions, and aimed at producing goods and rendering services for the benefits of the community. Evades constitutional responsibility – It evades constitutional responsibility, which a company financed by the government should have. Law Enforcement 9. Financial independence – This type of enterprise is usually independently financed. The public sector means the organisations run by government that exist to provide a service for the population and communities. This leads to adoption of those strategies and policies which are relevant to the given business environment. Operations must be flexible for the smooth functioning of business. These personnel may be experts in their respective fields. Emergency Services 4. The revenue earned by these is also paid into the treasury. Formation – These are set up by the Special Act of the Parliament or State Legislatures. Once the coverage of the public sector is clearly defined, there is a need to classify public sector entities as either engaging in market or non-market production, i.e., as being in the public corporations sector or general government sector respectively. 3. (d) Joint Enterprise. Examples of Government companies are- Indian Oil Corporation Limited, Bharat Sanchar Nigam Limited, Gas Authority of India Limited, etc. Some of the types of public sector are:- 1. (ii) Partly owned government companies where government and public are joint owners but major part of the capital is provided by the government. Industrial Development Bank of India (IDBI), vi. Relaxation – Relaxations from the rules under Companies Act can be given to them provided it is authorised by the Parliament. TOS4. Finance – The government company obtains its funds from government shareholdings and other private shareholders. These companies are established for business purpose and these can compete with companies in private sector. When the activities are of national importance with a centralised control. It can sue and can be sued. Accounting and Audit – Accounting and audit functions of a departmental undertaking are undertaken on the same pattern which is relevant to other Government departments. v. Accountability – Since their management is directly under the concerned ministry and are accountable to the ministry. Difference Between Public And Private Sector Organization 740 Words | 3 Pages. The initial share capital is provided by the Government. These have a financial autonomy and prepare their own budgets. A statutory corporation has a service motive and not a profit motive, though in the process of doing business it may earn profit. 3. vi. South Africa’s public sector have suffered a lot of strikes across all sectors. Hindustan Machine Tools, Hindustan Steel and Hindustan Cables were set on this pattern. Privacy Policy3. iii. Retrieved June 10, 2017, from, This page was last edited on 12 January 2021, at 23:10. These corporations are no exception. Disclaimer Copyright, Share Your Knowledge The government does not interfere in their financial matters. 2. A statutory corporation (also known as public corporation) is defined as follows: A statutory corporation is an autonomous corporate body set up under a special Act of the Parliament or State Legislature. Examples of departmental undertakings are All India Radio, Doordarshan, Department of Posts, etc. 3. No Say of Minority Private Shareholders – The private shareholders are in minority. As a result, decisions are made in accordance with the needs of the business environment. It obtains funds by borrowings from the government or from the public through revenues, derived from sale of goods and services. It works almost like a government department with the help of officers from the Indian Administrative Services (IAS). Like, any other public limited company the management of the company is regulated by the provisions of the companies act. These have a separate legal existence and have to act in their own name. These are autonomous and independent in their functioning. iii. However, the Act provides for a few issues that require the prior approval of the particular ministry. Public sector institutions operate within a complex legislative framework. Lack of Competition – This has led to carelessness and lethargy in their activities. Misuse of Financial Autonomy – These take loans at high rate of interest to meet urgent requirements due to delay in projects. types of Public Sector organizations Public sector organizations may exist at any of four levels: International (multistate entities or partnerships). Easy Formation – Formation of a Government company is much easier as compared to a public corporation because the company is formed under the Companies Act. There is always a fear of loss due to slackness. This leads to increase in cost of projects. Usually, a statutory corporation undertakes business on a large scale. Freedom from Government Budgetary Provision – These are not concerned with budget of the government. There is no departmental interference by bureaucrats. They are not government or civil servants and are not governed by government rules and regulations but some of the officers of these enterprises are taken from government departments, on deputation, to head these organisations. In the private sector, there are four major types of businesses: sole proprietorship, partnership, Limited Liability Corporation and corporation. Legal entity – A statutory corporation is a body corporate and can sue and be sued, enter into contract and acquire property in its own name. Statutory Corporations 3. Annual Reports – The annual reports are presented to the Parliament. What is the Public Sector? It has the authority to use its revenues. Examples of these undertakings are railways, post and telegraph department. Parliament Interference – The directors are nominated by the government. The government is the majority shareholder in these enterprises and it exercises full control over paid up capital of the company. A statutory corporation seeks to combine the flexibility of a private enterprise with State ownership and public accountability. At times due to disagreement the matters are referred to the government for final decisions leading to delayed action. The various limitations of a statutory corporation are explained below: i. Accounting and audit – An auditor is appointed by the Central Government and the Annual Report is to be presented in the parliament or the state legislature however these companies are exempted from the accounting and audit rules and procedures. Features of a statutory corporation are as follows: A statutory corporation is a corporate body established through an Act of Parliament or State Legislature. It can hold property in its own name. These can sue and be sued. Appointments of Employees – Its employees are appointed according to its own rules and regulations as contained in its Memorandum and Articles of Association which contain objective and internal rules and regulations of company respectively. Limited freedom – The provisions of the Companies Act does not have much relevance since the Government is the only shareholder in some of the Companies. Public Accountability – A Government company has public accountability. There is a lot of political interference. Nominating these Directors sometimes becomes a political process. Infrastructure 8. It is a corporate body has the capacity of acting in its own name is financially independent with a clear control over a specified area or a particular type of commercial activity. The control is exercised in two forms- audit of accounts of the corporation by an auditor appointed by the Government and discussion of its performance in the Parliament or State Legislature. Healthcare 7. Business Management, Business, Public Sector Entreprises. The Government gets enough funds and there is little need for taxes. Rigidity – These are not flexible due to strict government rules and regulations. The directors who are chosen from various ministries, interfere in the operation of company. Protection of Public Interest – A Government company often works in a competitive environment. Electricity 3. 3. Personnel of a departmental undertaking have no motivation to put their maximum efforts in performing their jobs because of total control from above. Suitable form – It is the most suitable form of organisation where national security is concerned since it is under the direct control and supervision of the concerned Ministry. Center for Responsive Politics, 16 May 2017. The tax burden on public is reduced. 2. It becomes difficult to pay back these loans. Statutory Corporations are public sector enterprises brought into existence by a Special Act of the Parliament which defines its powers and functions, rules and regulations governing its employees and its relationship with government departments. 1.1 The Public Sector comprises all organisations operated directly or indirectly by the government or local services. Political interference – In all the major decisions or where huge funds are involved the Government and political interference has always been there. An Instrument for Economic Development – These have the backing of government power along with private sector initiative. The education sector has been arguably been one that have suffered the most during the industrial … The Five Year Plans gave lot of importance to the public sector in the initial stages of development. A Departmental Undertaking is a public sector enterprise which is run as a part of a government department and under the direction of the Minister concerned. A statutory corporation has an independent accounting system and is not subject to budgetary, accounting and audit applicable to Government departments. Types of Public Sector: Departmental Undertakings, Statutory Corporations and Government Companies, Types of Public Sector Enterprises – 3 Important Types: Departmental Undertakings, Statutory Corporations and Government Companies (With Merits and Limitations), Types of Public Sector Enterprises – Top 3 Types: Departmental Undertakings, Statutory Corporations and Government Companies. Management – These are managed by IAS (Indian Administrative Services) officers and civil servants. Examples of statutory corporations are Reserve Bank of India, Life Insurance Corporation of India, Food Corporation of India, etc. There are three forms of organisations which are undertaking, statutory corporation and relevant to public sector enterprises – departmental Government company. Public Sector. It can enter into contracts with third parties. It is established under a specific Act. Delayed decisions – Due to the practice of appointing advisors to the Corporation Board by the government the freedom of the corporation in entering into contracts and other decisions is curbed. There are two types of public sector organizations, i.e. The service conditions are also given in the specific Acts under which they are set up. State participation in an economic activity along with the private sector has led to the creation of a specific type of organisational form, which is known as … The following are major statutory corporations: i. Where economic control is necessary, for example, state trading in essential commodities, rationing, etc. The entire capital of statutory corporation is financed by Government and these also have right to borrow from public. [5] However, even notable small-government proponents have pushed back on this point of view, citing the ultimate necessity of a public sector for provision of certain services, such as national defense, public works and utilities, and pollution controls.[6]. Appointments – These undertakings act through government officers. The annual reports of the Government companies are placed before the Parliament or State Legislature. 3. Easy Financing – Their financial needs are met by the Government and these can also go to capital market as and when they like. Statutory Corporations or Public Corporations, It is established under the Indian Companies Act, and is managed by provisions. These undertakings may be under the central or the state government and the rules of central/state government are applicable and conduct their activities through officers of the Government. Paying for Europe’s healthcare infrastructure in a recession. 1. Government Companies. It can sue and be sued by others. It is established under the Indian Companies Act, and is managed by provisions of this act. 3. It is also permitted to raise funds from the capital market. iii. These privileges lead to design the working of the corporation in a way which is most suitable to it. 7. Therefore, it cannot be sued without the consent of the Government. Public Accountability – Performance of a Government company is subject to review by the Parliament or State Legislature. 4. Finance for a departmental undertaking comes through Government budget. 6. Statutory Corporations are created by a special Act of Parliament or State Legislature. Owned by government – This type of organisation is wholly owned by the state and the government has the ultimate financial responsibility and has the power to appropriate its profits or to bear the losses, if any. 5. Insensitive to Consumer Needs – These undertakings don’t provide adequate services to the consumers directly because there is a lack of competition and profit motive. 8. 5. Passing of this Act by the Parliament or State Legislature is a lengthy process. 2. Benefits of Private Participation – Since private sector can have a share in such companies, professional managers from private sector can be included in Board of Directors. For example, Life Insurance Corporation of India was established under Life Insurance Corporation Act, 1956. 4. 3. Also, there are many types of public sector organizations such as departmental undertakings, government companies etc. 11 June 2017. Audit – The accounts of these undertakings are audited by the Comptroller and Auditor General of India (CAG). The public sector (also called the state sector) is the part of the economy composed of both public services and public enterprises. The public sector includes public companies, entities and public enterprises and services.An excellent example of the public sector … Financed through government treasury – An annual appropriation from the budget of the Government is made and the funding of these enterprises come directly from the Government Treasury. A departmental undertaking is suitable in the following situations: 1. Limited operational flexibility – In reality, all actions a statutory corporation are subject to many rules and regulations and does not enjoy as much operational flexibility as stated above. It can sue or be sued and can enter into contracts under its own name. Public sectors include public goods and governmental services such as the military, law enforcement, infrastructure (public roads, bridges, tunnels, water supply, sewers, electrical grids, telecommunications, etc. … It is an artificial person with the flexibility of the private sector and the powers of the government . ii. Life Insurance Corporation of India (LIC), iv. 7. Its accounts are audited by a statutory auditor, for example, Comptroller and Auditor General of India in the case of Central Government’s statutory corporations. They have no say in financial and administrative matters. A Hayekian Case Against Anarcho-Capitalism: Of Street Grids, Lighthouses, and Aid to the Destitute. 8. Financing – Financing is done mostly by Government. These are provided in the Act according to the specific needs of the corporation. 5. Formation – It is formed according to the provisions of Indian Companies Act, 2013. Public employee unions represent workers. Civil Service Code – A departmental undertaking is managed by civil servants whose methods of recruitment and service conditions are the same as for other civil servants. iii. Thus, the economic development is ensured. Such public sector reforms can be launched for a number of reasons. No separate Act of parliament is required. iv. 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