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Chapter: 11th Commerce : Chapter 9 : Government Organisation

Advantages and Disadvantages of the departmental undertaking

Following are the advantages and disadvantages of the departmental undertaking.


Advantages of the departmental undertaking

Following are the advantages of the departmental undertaking.

i. Easy Formation

It is easy to set up a departmental undertaking. The departmental undertaking is created by  an  administrative  decision of the Government, involving no legal formalities for its formation.

ii. Direct and Control of Parliament or State Legislature

The departmental undertaking is directly responsible to the Parliament or the State legislature through its overall head i.e. the minister concerned.

iii. Secrecy Maintained

Strategic industries like defence and atomic power cannot be better managed other than government departments. Department undertakings can maintain secrecy in their working.

iv. Lesser Burden of Tax on Public

Earnings of departmental undertaking are entirely paid into Government treasury, resulting in lesser tax burden on the public.

v. Instrument of Social Change

Government can promote economic and social justice through departmental undertakings.  Hence, a departmental undertaking canbe used by the Government, as an instrument of social change.

vi. Lesser Risk of Misuse of Public Money

As the departmental undertaking  is  subject to budgeting, accounting and audit procedures of the government; the risk of misuse of public money is relatively less.

vii. Guided by Rules and Regulations of the Ministry

Theofficersofthedepartmentalundertaking are under the supervision of the direct administrative control of the ministry. They are guided by the rules and regulations of the ministry, framed with a focus on public welfare.


Disadvantages of the departmental undertaking

Following are the major limitations of the departmental undertaking.

i. Red-tapism

There is too much of procedures which results in delay. Commercial organisation cannot afford delay in taking decisions.

ii. Incidence of Additional Taxation

Losses incurred bya departmental enterprise are met out of the treasury. This very often necessitates additional taxation the burden of which falls on the common man.

iii. Lack of Competition

Civil Servants are given control of these undertakings who may not have business outlook or commercial experience. So, they run the undertaking in their own fashion without considering the sovereignty of the consumers.

iv. Casual Approach to Work

As officers of a departmental undertaking are subject to frequent transfers; they develop a sense of casual approach to work. As a result, the operational efficiency of the undertaking suffers a lot.

v. Government Interference

There is an excessive government interference and control in department organisation. These undertakings are not given freedom to decide their own policies. Centralised control leads to delay in action. Red-tapism and bureaucracy have become the limiting features of these organisations

vi. Lack of Professional Management and Fear of Criticism

A departmental undertaking is  managed  by civil servants, who do not possess professional management skills. Moreover, these managers could not afford to be innovative, because of a fear of criticism by the minister or the Parliament.

vii. Financial Dependence

A departmental undertaking is economically and financially dependent on the Government’s budgetary allocations. As such, it cannot have its own independent long range investment decisions, which may bring enormous prosperity to the undertaking.


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11th Commerce : Chapter 9 : Government Organisation : Advantages and Disadvantages of the departmental undertaking |

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