Forms of business organization

Public Sector Organisation – Needs/Objectives

• Public Sector Enterprises came into 

existence to curb the monopolistic 

tendencies of Private capitalists and 

exploitation of poor labourers

• To provide infrastructure like Railways, 

Roads, power, telecom, irrigation.

• To promote public welfare.
• To develop backward areas.

Types of Public Sector Organisations

Public Sector Organisations are divided into the following forms:

• Departmental Undertakings
• Public Corporations
• Government Companies

Departmental Undertaking

Features

• Formation- created by Govt and attached 

to particular ministry

• No separate Legal Entity
• Management and Control- by concerned 

ministry

• Finance- wholly financed by govt 
• No Borrowing powers

Departmental Undertaking

Merits

• Easy to form
• Easy Financing
• Secrecy-suitable for defence undertaking
• Misuse of funds- Govt audit of financial 

records. 

Departmental Undertaking

Demerits

• Lack of Flexibility
• Lack of Professional management
• lack of quick decision making
• lack of Autonomy
• Guided by political considerations

Public Corporations

Features

• Formation- By Act of Central/State legislature
• Separate Legal Entity
• Management and Control- Board of Directors
• Finance- Wholly financed by Govt.
• Borrowing powers: It can borrow from public
• Staffing – No civil servants, governed by contract