Q.What are the different kinds of organisations that come under the public sector?

For the government to take part in business it needs an organisational framework. A public enterprise is organised as one of three forms:

• Departmental undertaking — run as a department/extension of a ministry.
• Statutory corporation — created by a Special Act of Parliament.
• Government company — set up under the Companies Act, 2013.

The government has a major role in the economy, but it acts through its offices, officers and employees. To participate directly in economic activity it sets up public enterprises, which are owned by the public, run with public funds, and accountable to the public through Parliament. But what form should such an enterprise take? The form depends on the nature of the enterprise's operations and its relationship with the government. There are three forms:

• (1) Departmental undertaking

  • The oldest and most traditional form.
  • Set up as a department of a ministry and treated as a part or extension of that ministry; it is not a separate legal entity.
  • Examples: the Railways and the Post and Telegraph Department.

• (2) Statutory corporation

  • Brought into existence by a Special Act of Parliament, which defines its powers, functions and relationship with government departments.
  • A body corporate that is financially independent and can sue and be sued in its own name.
  • Combines the power of the government with the operating flexibility of a private enterprise.

• (3) Government company

  • Established under The Companies Act, 2013 and registered/governed by it.
  • Set up for purely business purposes and competes with private sector companies.
  • The government holds not less than 51 per cent of the paid-up capital.

Whatever the form chosen, a public sector organisation must still ensure sound organisational performance, productivity and quality standards.