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Public Undertakings and Control over Corporations

Public Undertakings and Control over Corporations

🔷 What are Public Undertakings?

  • Public Undertakings, also called Public Sector Undertakings (PSUs) or Public Enterprises, are companies or corporations owned and controlled by the government.

  • They are established to carry out industrial, commercial, and service activities on behalf of the State.

🔷 Why are Public Undertakings Formed?

  • To promote economic development and ensure public welfare.

  • To operate key industries like oil, power, banking, transport, etc., which are essential for the nation.

  • To create employment and reduce income inequality.

  • To ensure that basic services reach all sections of society, not just the rich.

🔷 Legal Status:

  • Public undertakings may be established by:

    1. Special statutes passed by Parliament (e.g., LIC Act, ONGC Act).

    2. Company Act, 2013, where the government owns 51% or more of the shares.

    3. Constitutional provisions, in some cases like Statutory Corporations.

🔷 Types of Public Undertakings:

1. Departmental Undertakings

  • Run directly by the government like any other department.

  • Examples: Indian Railways, Postal Services.

  • Employees are government servants.

2. Statutory Corporations

  • Created by a special law passed by the legislature.

  • Have separate legal identity and more autonomy.

  • Examples: LIC (Life Insurance Corporation), ONGC.

3. Government Companies

  • Formed under the Companies Act.

  • Government owns 51% or more of the shares.

  • Examples: BHEL, SAIL, NTPC.

🔷 Features of Public Undertakings:

  • Government ownership and control.

  • Aim to serve the public interest, not just profit.

  • Provide basic services and employment.

  • Use public funds and are answerable to Parliament and public.

🔷 Need for Control Over Public Undertakings:

Even though public undertakings are created for welfare, some control is necessary to ensure:

  • Accountability to the public (since they use public money).

  • Transparency and efficiency in operations.

  • No misuse of power or corruption.

  • Legal compliance with rules, policies, and Constitution.

🔷 Types of Control Over Public Corporations:

✅ 1. Parliamentary Control

  • Parliament has the power to question and discuss the working of public undertakings.

  • Public Accounts Committee (PAC) and Estimates Committee review expenditure and performance.

  • Annual Reports and Audit Reports of PSUs are submitted to Parliament.

✅ 2. Ministerial Control

  • The concerned Minister (like Minister of Petroleum, Finance, etc.) gives directions.

  • Approves important decisions, like budgets, major policies, and appointments.

  • Acts as a link between Parliament and the PSU.

✅ 3. Financial Control

  • PSUs get funds from the government budget or through loans.

  • CAG (Comptroller and Auditor General) audits their accounts.

  • Financial irregularities are reported and acted upon.

✅ 4. Judicial Control

  • PSUs can be taken to court like other legal persons.

  • Their actions must comply with the Constitution and laws.

  • Courts can issue writs (like Mandamus, Certiorari) if fundamental rights are violated.

✅ 5. Administrative Control

  • Parent ministries set rules, policies, and guidelines.

  • Bureaucrats are appointed as directors or board members.

  • Periodic reviews and inspections are done.

✅ 6. Professional or Internal Control

  • Each PSU has its own Board of Directors, auditors, and management.

  • Internal audits and vigilance departments check misuse or inefficiency.

🔷 Challenges Faced by Public Undertakings:

  • Political interference in decisions.

  • Lack of autonomy in management.

  • Red-tapism and inefficiency.

  • Financial losses and burden on taxpayers.

  • Privatization pressure due to poor performance.

🔷 Reforms and Suggestions:

  • Give more autonomy to PSUs.

  • Encourage professional management.

  • Reduce bureaucratic delays.

  • Implement e-governance and digital auditing.

  • Promote Public-Private Partnerships (PPPs) for better performance.

🔷 Important Case Law:

✅ Ajay Hasia v. Khalid Mujib (1981)

  • Supreme Court held that a government-controlled company or society performing public functions is considered as State under Article 12 of the Constitution.

  • Hence, it is subject to Fundamental Rights and judicial review.

🔷 Conclusion:

Public Undertakings play a vital role in nation-building and economic development. But since they are funded by the people and serve the public, there must be strong controls and transparency to ensure they work efficiently, honestly, and in the public interest.

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