CHAPTER 3: PUBLIC SECTOR ENTERPRISES - FORMS
Case Study 1: The Ministry Control
The Indian Railways is the backbone of transport in India. It is established as a part of the Ministry of Railways. Its budget is presented annually in the Parliament, and all its earnings are deposited directly into the Government Treasury. The employees are civil servants, and the entire recruitment process is handled by the government.
Questions:
(a) Identify the form of public sector enterprise mentioned here.
(b) State any two features of this enterprise as highlighted in the paragraph.
(a) Identify the form of public sector enterprise mentioned here.
(b) State any two features of this enterprise as highlighted in the paragraph.
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Answer:
(a) Departmental Undertaking.
(b) Features mentioned:
1. Funding: It is funded directly from the government treasury and its revenue is deposited back into the treasury.
2. Accounting & Audit: It is subject to budget, accounting, and audit controls applicable to any other government department.
(a) Departmental Undertaking.
(b) Features mentioned:
1. Funding: It is funded directly from the government treasury and its revenue is deposited back into the treasury.
2. Accounting & Audit: It is subject to budget, accounting, and audit controls applicable to any other government department.
Case Study 2: The Special Act
The Life Insurance Corporation (LIC) of India was created by a Special Act of the Parliament. This Act defines its powers, functions, and rules for management. LIC is a body corporate with a separate legal entity, meaning it can sue and be sued in its own name. Unlike the Post Office, it has significant financial autonomy and can use its own revenues for business expansion.
Questions:
(a) Identify the form of enterprise being discussed.
(b) Explain one merit of this form of organization over a Departmental Undertaking.
(a) Identify the form of enterprise being discussed.
(b) Explain one merit of this form of organization over a Departmental Undertaking.
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Answer:
(a) Statutory Corporation.
(b) Operational Flexibility: Statutory Corporations enjoy much more internal autonomy and flexibility in their day-to-day operations. They are free from the undesirable government interference and "red tape" that usually affects Departmental Undertakings.
(a) Statutory Corporation.
(b) Operational Flexibility: Statutory Corporations enjoy much more internal autonomy and flexibility in their day-to-day operations. They are free from the undesirable government interference and "red tape" that usually affects Departmental Undertakings.
Case Study 3: The Red Tape Trap
A manager at a government-run ammunition factory (a Departmental Undertaking) needs to purchase high-tech machinery urgently to meet a new defense contract. However, he has to wait for months for approvals from the Ministry, followed by strict bidding procedures and parliamentary queries. By the time the machines arrived, the contract deadline had passed.
Questions:
(a) Which limitation of Departmental Undertakings is highlighted here?
(b) Why is "Red Tapism" common in this form of organization?
(a) Which limitation of Departmental Undertakings is highlighted here?
(b) Why is "Red Tapism" common in this form of organization?
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Answer:
(a) Lack of Flexibility: Decisions are delayed due to the need for approvals from the Ministry.
(b) Red Tapism: Since the enterprise is run as a government department, every action must follow a long chain of command and strict administrative protocols, which prevents quick action and leads to excessive paperwork.
(a) Lack of Flexibility: Decisions are delayed due to the need for approvals from the Ministry.
(b) Red Tapism: Since the enterprise is run as a government department, every action must follow a long chain of command and strict administrative protocols, which prevents quick action and leads to excessive paperwork.
Case Study 4: Power and Autonomy
The Food Corporation of India (FCI) manages the food security of the nation. Since it was formed by an Act of Parliament, it has the power to borrow money from the public and enter into contracts with private suppliers without needing the Finance Ministry's signature on every file. It prepares its own budget and recruits its own specialized staff.
Questions:
(a) Identify the merit of Statutory Corporations discussed in this case regarding finance.
(b) Mention one reason why these enterprises are called "Body Corporates".
(a) Identify the merit of Statutory Corporations discussed in this case regarding finance.
(b) Mention one reason why these enterprises are called "Body Corporates".
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Answer:
(a) Financial Autonomy: These corporations have independent finances. They can borrow money and utilize their own earnings, which allows them to react faster to market needs.
(b) Body Corporate: They are called body corporates because they have a Separate Legal Entity. They can own property and enter into contracts in their own name, separate from the government.
(a) Financial Autonomy: These corporations have independent finances. They can borrow money and utilize their own earnings, which allows them to react faster to market needs.
(b) Body Corporate: They are called body corporates because they have a Separate Legal Entity. They can own property and enter into contracts in their own name, separate from the government.
Case Study 5: Strategic vs. Service Motive
The Government of India is considering two projects:
1. Managing the National Defense manufacturing units.
2. Setting up an Airline to provide commercial travel services.
The government decides that Project 1 should be under direct control of a Ministry for security reasons, while Project 2 should have professional management and its own legal identity.
Questions:
(a) Suggest the best form of enterprise for Project 1 and Project 2.
(b) Why is a Departmental Undertaking considered suitable for defense-related industries?
(a) Suggest the best form of enterprise for Project 1 and Project 2.
(b) Why is a Departmental Undertaking considered suitable for defense-related industries?
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Answer:
(a) Suggestions:
Project 1: Departmental Undertaking.
Project 2: Statutory Corporation.
(b) National Security: Departmental Undertakings are most suitable for defense because they allow for maximum government control and high levels of secrecy, which is crucial for the strategic interests of the country.
(a) Suggestions:
Project 1: Departmental Undertaking.
Project 2: Statutory Corporation.
(b) National Security: Departmental Undertakings are most suitable for defense because they allow for maximum government control and high levels of secrecy, which is crucial for the strategic interests of the country.
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