Departmental Undertakings

A departmental undertaking is the oldest and most traditional way of organising a public enterprise.

Meaning

• These enterprises are set up as departments of a ministry and are treated as a part or extension of the ministry itself.
• The government functions through them, and their activities are an integral part of the working of the government.
• They are not autonomous or independent institutions and are not separate legal entities; they act through government officers, and their staff are government employees.
• They may operate under the central or a state government, and the rules of that government apply.
• Examples: the Railways and the Post and Telegraph Department.

Features

• Funding from the treasury: money comes directly from the Government Treasury as an annual appropriation from the budget, and revenue earned is paid back into the treasury.
• Government accounting and audit: they are subject to the same accounting and audit controls that apply to other government activities.
• Government staff: employees are government servants, recruited and serving on the same terms as other direct government staff. They are usually headed by IAS officers and civil servants who are transferable from one ministry to another.
• Subdivision of a department: each is treated as a major subdivision of a government department, under the direct control of the ministry.
• Ministerial accountability: their management is directly under the concerned ministry, to which they are accountable.

Merits

• Parliamentary control: they let Parliament exercise effective control over their operations.
• High public accountability.
• Source of revenue: earnings go straight to the treasury, providing income for the government.
• Suited to national security: where security is involved, this form is most suitable because it is under the direct control and supervision of the ministry.

Limitations

• No flexibility: they lack the flexibility essential for the smooth running of a business.
• No independent decisions: heads and employees cannot decide anything without the concerned ministry's approval, causing delays where prompt action is needed. …