Statutory Corporations

A statutory corporation is a public enterprise brought into existence by a Special Act of Parliament.

Meaning

• The Act that creates it defines its powers and functions, the rules governing its employees, and its relationship with government departments.
• It is a body corporate created by the legislature, with defined powers and functions, financially independent, and with clear control over a specified area or a particular type of commercial activity.
• Being a corporate person, it can act in its own name.
• It therefore combines the power of the government with a considerable amount of the operating flexibility of a private enterprise.

Features

• Created by an Act of Parliament: it is governed by the provisions of that Act, which defines its objects, powers and privileges.
• Wholly state-owned: the government owns it fully, bears the ultimate financial responsibility, can appropriate its profits and must also bear its losses.
• Body corporate: it can sue and be sued, enter into contracts and acquire property in its own name.
• Independently financed: it usually finances itself — borrowing from the government or the public, and earning revenue from the sale of goods and services, which it has the authority to use.
• Own accounting/audit: it is not subject to the accounting and audit procedures of government departments and is not tied to the central budget.
• Own service conditions: its employees are not government or civil servants and are not bound by government rules; their service conditions are governed by the Act itself, though some officers may be taken from government departments on deputation to head it.

Merits

• Independence and flexibility: it enjoys operational independence and flexibility, free from undesirable government regulation and control.
• Financial freedom: since its funds do not come from the central budget, the government generally does not interfere in its income and receipts.
• Own policies: as an autonomous body it frames its own policies and procedures within the powers given by the Act (which may still reserve a few matters for a ministry's prior approval).
• Instrument of development: it is a valuable instrument for economic development, combining the power of the government with the initiative of private enterprise.

Limitations

• Flexibility is limited in practice: in reality it does not enjoy the flexibility claimed, as its actions are subject to many rules and regulations. …