(Online Course) Pub Ad for IAS Mains: Public Sector Undertakings - Problems of autonomy, Accountability and Control (Paper -2)

(Online Course) Public Administration for IAS Mains Exams

Topic: Public Sector Undertakings: Problems of autonomy, Accountability and Control

Autonomy and accountability must co-exist being directly inter-related. Autonomy carried to an extreme would totally frustrate the principle of accountability while accountability also carried to and extreme would nullity is very concept. As Public undertakings are to be judged by their total results, they should have sufficient operational autonomy. The Government’s control should be restricted to issuing of policy directives, exercising of strategic control and making of necessary coordinating arrangements to fulfil its responsibility for effective implementation of its socio-economic goals. At present there is a growing tendency on the part of the Government to interfere in the day-to-day working of enterprise.

Autonomy is pre-requisite for the successful functioning of Public enterprises. This is all the more important in view of the persistent allegations of Government interference in the internal affairs of Public enterprises.

Each five-year plan has emphasized the need for autonomy of the Public Enterprises in regard to the management of their affairs. Of late, several measures have been initiated to respect their autonomy. Civil Servants are no longer appointed in public enterprises. Professionalism in public enterprises is being consciously promoted.

Last but not the least in importance is the recent policy of signing of MOU (Memorandum of Understanding) between the Public enterprises and the controlling Government Ministry. Such MOUs have been signed with a large number of Public Enterprises to enforce accountability.

India created a new category for its highly-efficient state-run firms, called Maharatnas to extend much greater autonomy to its managements and flexibility in areas like mergers, acquisitions and recruitment.

Some of the Special powers to Maharatna Companies Include:

(a) Make equity investment to establish joint Ventures and subsidiaries in India or abroad.
(b) Execute merger in India or abroad subject to a ceiling of 15% of its net worth up to an absolute ceiling of Rs. 5,000 crore ($ 1 Billion)
(c) Power to the board on recruitment.


One of the unresolved issues in the field of public enterprises is that of reconciling their autonomous status with their public and political accountability. The need for such autonomy has been recognised and admitted by various committees and commissions.

Public undertakings in India, except the departmental undertakings, enjoy a measure of autonomy. They are not answerable to the parliament in the way of departmental enterprises are. While in the case of departmental undertakings the management is fully responsible to the parliament, it is under no such obligation regarding other forms of public enterprises, except to a limited extent. The corporation or/and company form of undertakings are normally run on commercial lines and, being largely autonomous in character, are not responsible to the parliament in the ordinary sense of the term. The question of autonomy of public corporations came under detailed study by the Damodar Valley Corporation Enquiry Committee, 1952, Paul Appleby’s examination of Administration of Government’s Industrial and Commercial Enterprises, 1956, Chagla Inquiry Commission, 1958 and the Krishna Menon Committee (appointed by the Indian National Congress Party), 1959.

However, these enterprises cannot be made entirely free from responsibility to the people for a number of reasons:

1. The governmental controls intrinsically applicable to an industrial activity ought to be applied fully to public enterprises engaged in that activity.
2. That control over the private sector designed to protect the interests of workers and consumers ought not to lapse in the case of public sector undertakings.
3. That propitious conditions must be created for the realisation of special needs expected of public enterprises.
4. The fact that we have opted for a planned economy implies that no major economic unit in India, whether in the private or public sector, can enjoy undiluted autonomy in its major decisions which must be taken in the context of the overall national objective.

The principal objectives of control over public enterprises may be summarised as follows:

1. Promotion of efficiency: By efficiency is meant the optimum use of men, materials and money invested in the enterprise. Efficiency here is used in its positive sense; as the realisation of goods results.
2. Attainment of national objectives: There are certain purposes common to all enterprises, such as, earning surpluses for general economic development, training of personnel in skills, a contended and motivated personnel, workers’ participation in management, etc. It is necessary that these objectives are specified with regard to each enterprise and revised from time to time.
3. Attainment of targeted results: Priorities once chosen from among a set of alternatives ought to be realised by the enterprise concerned and the system of control has to concern itself with the necessary scrutiny of achieving these, targets. It is necessary that such ends are fairly clearly laid down in government regulations and directives issued from time to time.
4. Regulation of power concentration: Concentration of power may occur in the case of ministers, civil servants or directors. For example, the power of ministers to make appointments to the management, boards of corporations and companies is a potential source of power concentration. Similarly, a large number of directorships held by senior civil servants is another instance of power concentration. In certain cases, the managements of such undertakings may abuse of misuse their powers.

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