Public Corporation

A combination of public ownership, public

accountability and business management
for public ends. In fact, it is clothed with the
power of government but possesses the
flexibility and initiative of a private
enterprise.
- Herbert Morrison
(BritishLabour politician

PRIMARY OBJECTIVE

Govt controlled , public sector organisation

Serve the public interest

Best mechanism for administration of public

enterprise.

Maximum autonomy

Consistent with public accountability

Eliminating bureaucracy

Accountable to the parliament for its policy

decisions and resultant functioning

FORMATION

Created by separate act passed by the Parliament or

State Legislative Assembly -Law defines its objectives,
powers, duties and privileges and also prescribes the form
of management and its relationship to the government
departments as a corporate body.

Owned by govt ( Central / State / Local Bodies)

Managed by board of directors nominated by govt

One of the directors is appointed to function as the

chairman of the board.

AUTONOMY

Enjoys complete internal autonomy

Free from parliamentary or political control in the

internal and routine management

Not subject to direct control of the head of the

department in its normal operations.

It is guided by the statute which created it

(Except for the formal policy directions issued to it by a minister )

FINANCIAL FREEDOM

Can raise financial resources independently.

Not necessary to depend on budget appropriations exempt from regulatory and prohibitory statutes applicable
to the expenditure of public funds and are not subject to
budget, accounting and audit procedures which are
applicable to non-corporate agencies.

Has borrowing power- It obtains its funds from

borrowing which may be from the treasury or from the
public and from revenues derived from the sale of its goods
and services

LEGAL ENTITY

It is a separate entity for legal purposes

Can sue and be sued,

Can enter into contracts

Can acquire property in its corporate name.

EMPLOYMENT

Employees not treated as Civil Servants of Govt

Can follow its own personal policies for recruitment ,

training ,transfer and promotion

Some of the important public

corporation established by the
Union government are:

(1) Reserve Bank of India (1935)

(2) Damodar Valley Corporation (1948)

(3) Industrial Finance Corporation of India (1948)

(4) Indian Airlines Corporation (1953)

(5) Air India International (1953)

(6) State Bank of India (1955)

(7) Life Insurance Corporation of India (1956)

(8) Central Warehousing Corporation (1957)

(9) Oil and Natural Gas Commission (1959)

(10) Food Corporation of India (1964)

Some of the important public

corporations established by state
governments are:

(1) State Financial Corporations

(2) State Road Transport Corporations

(3) State Land Mortgage Banks

(4) State Electricity Boards

 Public corporation is the most

important invention of the 20th
century in the sphere of
government institutions.
- W.A. Robson
( Politician )

ADVANTAGES
A public corporation is able to manage its affairs with
independence, initiative because it is an autonomous
set up
It is relatively free to adapt to changing circumstances
It maintains continuous existence in spite of changes
in the government
It leads to high morale among the employees and the
executives because of least government interference

.
Protection of public interest: Public corporations can
formulate and implement policies which promote public
welfare. Policies of the corporation are subject to
ministerial review and parliamentary scrutiny. Therefore
it would be ensured that public interest is protected and
promoted.
Bureaucratic delays are minimized to a great extent. A
file need not pass through different levels of
bureaucracy as in a departmental undertaking.
Speedier decisions: delays in decision making are
avoided so the problems are solved faster, opportunities
are tapped in a better manner and overall organization
is improved

 It can utilize the service of competent persons because it

has its own cadre of employees
The board of directors consists of members from
business, laborers and consumers. So a board of director
can give better advice for the operation of cooperation
Since public corporations are government owned
statutory bodies, they can raise the required funds by
issuing bonds. They need not entirely depend on the
government for their financial requirements.

 Comparative prices: Profit is not the primary motive

of public corporations. So it does not strive to
charge high prices to maximize profits.
Employee welfare: A public corporation follows its
own recruitment policy. It can recruit the best talent
and provide them appropriate training. Better perks
and amenities can be provided to the employees
which improves their motivation level..

DISADVANTAGES
Management structure in public cooperatives is decentralized so
managers in most cases are not business owners. So they may not
be motivated towards companys goal and vision
Taking a company public is very expensive due to legal fees,
meeting up with demand of government agencies and regulatory
bodies.
Have to serve three bodies: customers, government and investors.
This is very stressful and cumbersome to handle
They are subjected to more legal restrictions than other entities

 Company becomes subjected to accounting

strict rules and principles
Business affairs and financial statements cannot
be kept in secret. It should be revealed to public
These are subjected to heavy cooperate tax.
They are both federal and state tax.

Also subjected to double taxation

EXAMPLES
Life insurance cooperation
Indian airlines
Air India
State Bank of India
Oil and Natural gas commission