A Government company can be easily
formed under the Companies, Act, just by an executive decision of the
A government company can
manage its affairs independently. It is relatively free from ministerial
control and political interference, in its day-to-day functioning.
Government company device, the government can avail of the
management skills, technical know- how and expertise of the private sector
and foreign countries. For example, the Hindustan Steel Limited has obtained
technical and financial assistance from the U.S.S.R., West Germany and the U.K.
for its steel plants at Bhilai, Rourkela and Durgapur.
Easy to Alter
Objectives and powers of the Government
Company can be changed by simply altering the Memorandum of Association of the
company, without seeking the approval of the Parliament.
The Government Company is subject to
provisions of the Companies Act; which keeps the management of the company
active, alert and disciplined.
A Government company can employ
professionally qualified managers; because it has its own personnel policies.
The Annual Report of a Government
company is presented to the Parliament/ State Legislature. These reports can be
discussed and debated there.
Board of Directors Packed with ‘Yes-Men’
On the Board of Directors of a
government company, there are Government appointed directors (Government being
the major shareholder); who are ‘yes-men’
of the Government. They are unable to run the company, in a businesslike
Autonomy Only in Name
Independent character of a Government
company exists only in name. In reality, politicians, ministers, Government
officials, interfere excessively in the day-to-day working of the government
A Fraud on Companies Act and Constitutions
A Government company is criticized as
being a ‘fraud on the Companies Act and on the Constitution. This criticism is
valid on the ground that the
Government can exempt a
Government company from application of several provisions of the
Companies Act. Again, the Parliament is not taken into confidence, while
creating a Government company.
Fear of Exposure
The annual report of the government company is placed before the Parliament/ State Legislature. The working of the company is exposed to Press criticism: Therefore, managementofthe Government Company often gets demoralized and may not take initiative to come out with and implement something innovative.
Lack of Expertise in Deputationists
Thekey personnel ofa Governmentcompany
are often deputed from Government departments. These deputationists generally
lack expertise and commitment;
leading to lower operational
efficiency of the government company.
The Government Company works neither for
the government nor for the public at large. It serves the personal interests of
people who work in the company and who dictate policies of the company.