Is Departmental Undertaking under Government ?

Departmental Undertaking :

This is the oldest and most traditional form of organising public enterprises. 

These enterprises are established as departments of the ministry and are considered part or an extension of the ministry itself. 

The Government functions through these departments and the activities performed by them are an integral part of the functioning of the government. 

They have not been constituted as autonomous or independent institutions and as such are not independent legal entities. 

They act through the officers of 

the Government and its employees are Government employees. 

These undertakings may be under the central or the state government and the rules of central/state government 

are applicable. 

Examples of these undertakings are railways and post and telegraph department.

Features :

The main characteristics of

Departmental undertakings are as

follows:

(i) The funding of these enterprises

come directly from the Government Treasury and are an annual

appropriation from the budget

of the Government. The revenue

earned by these is also paid into

the treasury;

  (ii) They are subject to accounting

and audit controls applicable to

other Government activities;

(iii) The employees of the enterprise

are Government servants and

their recruitment and conditions

of service are the same as that of

other employees directly under

the Government. They are headed

by Indian Administrative Service

(IAS) officers and civil servants

who are transferable from one

ministry to another;

(iv) It is generally considered to be

a major subdivision o f the

Government department and is

subject to direct control of the

ministry;

(v) They are accountable to the

ministry since their management

is directly under the concerned

ministry.

Merits

Departmental undertakings have

certain advantages which are as

follows:

(i) These undertakings facilitate the

Parliament to exercise effective

control over their operations;

(ii) These ensure a high degree of

public accountability;

(iii) The revenue earned by the

enterprise goes directly to the

treasury and hence is a source of

income for the Government;

(iv) Where national security is

concerned, this form is most

suitable since it is under the

direct control and supervision of

the concerned Ministry.

Limitations

This form of organisation suffers from

serious drawbacks, some of which are

as follows:

(i) Departmental undertakings fail

to provide flexibility, which is

essential for the smooth operation

of business;

(ii) The employees or heads of departments of such undertakings are

not allowed to take independent

decisions, without the approval

of the ministry concerned. This

leads to delays, in matters where

prompt decisions are required;

(iii) These enterprises are unable

to take advantage of business

opportunities. The bureaucrat’s

over-cautious and conservative

approval does not allow them to

take risky ventures;

(iv) There is red tapism in day-to-day

operations and no action can be

taken unless it goes through the

proper channels of authority;