Departmental undertakings are the oldest among public enterprises. A departmental undertaking is organized, managed, and financed by the government. It is controlled by a specific department of the government.
A minister heads each such department. The controlling ministry takes all policy matters and other important decisions. The parliament lays down the general policy for such undertakings.
Features of Departmental Undertakings
The main features of departmental undertakings are as follows:-
- It is established by the government, and its overall control rests with the minister.
- It is a part of the government and is managed like any other government department.
- It is financed through government funds.
- It is subject to budgetary, accounting, and audit control.
- Its policy is laid down by the government, and it is accountable to the legislature.
Advantages of Departmental Undertakings
The following are the advantages of departmental undertakings:
Fulfillment of Social Objectives
The government has total control over these undertakings. As such, it can fulfill its social and economic objectives.
For example, the opening of post offices in far off places, broadcasting and telecasting programmers, which may lead to the social, economic and intellectual development oft he people, are the social objectives that the departmental undertakings try to fulfill.
Responsible to Legislature
Questions may be asked about the working of departmental undertakings in the parliament, and the concerned minister has to satisfy the public with his replies.
As such, they cannot take any step, which may harm the interest of any particular group of public. These undertakings are responsible to the public through the parliament.
Control Over Economic Activities
It helps the government to exercise control over the specialized economic activities and can act as an instrument of making social and economic policy.
Contribution to Government Revenue
The surplus, if any, of the departmental undertakings belong to the government. This leads to an increase in government income.
Similarly, if there is a deficiency, it is to be met by the government.
Little Scope for Misuse of Funds
Undertakings are subject to budgetary accounting and audit control; the possibilities of misuse of their funds are considerably reduced.
Disadvantages of Departmental undertakings
The Influence of Bureaucracy
On account of government control, a departmental undertaking suffers from all the ills of bureaucratic functioning.
For instance, government permission is required for each expenditure, observance of government decisions regarding appointment and promotion of the employees, and so on.
Because of these reasons, important decisions get delayed, employees cannot be given instant promotion or punishment. On account of these reasons, some difficulties come in the way of w forking of departmental undertakings.
Excessive Parliamentary Control
On account of the Parliamentary control, difficulties come in the way of day-to-day administration. This is also because questions’ are repeatedly asked in the parliament about the working of the undertaking.
Lack of Professional Expertise
The administrative officers who manage the affairs of the departmental undertakings do not generally have the business experience as well as expertise.
Hence, this undertaking is not managed professionally and suffers from deficiency leading to excessive drainage of public funds.
Lack of Flexibility
Flexibility is necessary for a successful business so that the demand for the changing times may be fulfilled. But departmental undertakings lack flexibility because its policies cannot be changed instantly.
Such organizations suffer from inefficiency on account of incompetent staff and lack of adequate incentives to improve the efficiency of the employees.
It may be noted that the departmental form of organization for public enterprises is on its way to oblivion.
Most undertakings such as those providing telephone, electricity services are now being converted into government companies.