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Public Undertakings in Administrative Law

Public Undertakings in Administrative Law

🔷 Meaning

  • A Public Undertaking (also called Public Sector Undertaking – PSU) is a government-owned enterprise or company, created to carry out commercial, industrial, or developmental activities.

  • These undertakings are usually set up by Central or State Governments to promote economic growth, welfare, and national interest.

📌 Example:
BHEL (Bharat Heavy Electricals Limited), LIC (Life Insurance Corporation), ONGC (Oil and Natural Gas Corporation), Indian Railways.

🔷 Importance of Public Undertakings

  1. To ensure economic development in strategic areas

  2. To provide essential services like energy, transport, health

  3. To generate employment

  4. To control the monopoly of private players

  5. To develop backward areas

  6. To maintain public welfare through government-owned companies

🔷 Types of Public Undertakings

🔹 1. Departmental Undertakings

  • Run as part of the government (like a government department)

  • Controlled directly by a ministry

✅ Example: Indian Railways, Post Office
✅ Employees = government servants
✅ Budget and accounts are part of the Union Budget

🔹 2. Statutory Corporations

  • Set up by a special Act of Parliament or State Legislature

  • Have independent legal status

  • Can sue or be sued

✅ Example: LIC, RBI
✅ Enjoy more autonomy, but under parliamentary control

🔹 3. Government Companies

  • Company in which at least 51% of shares are held by the government

  • Registered under Companies Act, 2013

✅ Example: BHEL, SAIL, ONGC
✅ Run like private companies, but controlled by the government

🔷 Features of Public Undertakings

  1. Ownership by Government

    • Majority of control lies with Central or State Government.

  2. Service + Profit

    • Focus is both on public welfare and profit-making.

  3. Autonomous Functioning

    • Especially statutory corporations and government companies.

  4. Public Accountability

    • Accountable to Parliament or State Legislature.

  5. Capital Investment

    • Large funds from government treasury or public sector banks.

  6. Policy Implementation

    • Help in executing government schemes and policies.

🔷 Need for Public Control Over PSUs

Even though these undertakings are independent, they use public money. So, it is important to have checks and accountability.

🔸 Why control is needed:

  • To prevent corruption or misuse

  • To ensure transparency

  • To monitor performance and efficiency

  • To align with national goals and welfare

🔷 Types of Controls Over Public Undertakings

🔹 1. Parliamentary Control

  • Through questions, debates, committees

  • Public Accounts Committee examines their spending

  • Audit reports of CAG (Comptroller and Auditor General)

🔹 2. Ministerial Control

  • Concerned ministry supervises and guides working

🔹 3. Judicial Control

  • Courts can review actions if there is violation of fundamental rights, corruption, or malpractice

🔹 4. Administrative Control

  • Department of Public Enterprises (DPE) issues guidelines

  • Government monitors appointments, budgets, and reports

🔹 5. Financial Control

  • Through audits, budgets, and performance reviews

🔷 Constitutional and Legal Status

  • Article 12 of the Constitution: Public Undertakings may be considered as "State", so fundamental rights can be enforced against them.

✅ This means they must follow:

  • Article 14 (Right to Equality)

  • Article 21 (Right to Life and Liberty)

📌 Case law:
R.D. Shetty v. International Airport Authority (1979)
Held: A PSU is a "State" under Article 12. It must act fairly and not arbitrarily.

🔷 Privatisation of Public Undertakings

  • In recent years, many PSUs have been privatised due to poor performance, losses, or to improve efficiency.

✅ Example: Air India sold to Tata Group

❗ Issues:

  • Loss of public control

  • Job insecurity for employees

  • Profit motive may ignore public welfare

🔷 Challenges Faced by Public Undertakings

  1. Political interference

  2. Inefficiency and corruption

  3. Poor decision-making

  4. Financial losses

  5. Lack of innovation

🔷 Reform Suggestions

  1. Professional management

  2. More autonomy and less political control

  3. Strict audit and accountability

  4. Performance-based evaluation

  5. Public-private partnerships (PPP) for better outcomes

🔷 Conclusion

Public Undertakings are important pillars of a welfare state. They help in achieving economic and social justice. However, they must be made more efficient, transparent, and accountable to serve the people effectively. With proper reforms, they can continue to play a vital role in nation-building.


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