Sample Material of Public Administration Study Kit (Paper -
Public Sector Undertakings: Problems of control
PROBLEMS OF CONTROL OF PUBLIC UNDERTAKINGS
The problem of control of public enterprises is thus not of a
single uniform pattern. The channels of control vary with the organizational
form of the enterprise. Even the substantive content of control varies from one
public enterprise to another according to its exact socioeconomic role. Lastly,
the very history of the organization of an enterprise in the public sector
sometimes has a bearing on the system of control. Thus, while a departmental
undertaking is under the full control of the minister, companies and
corporations are free of detailed ministerial or parliamentary control and enjoy
a large measure of operational autonomy. Secondly, there is no significant
difference in the matter of control between statutory corporations and
government companies. Thirdly, there exists some confusion in the matter of
division of responsibilities between the government and the management of the
enterprise in the field of public accountability. Instruments of Control Public
control over public enterprises is exercised through three main agencies - the
minister, the parliament and special agencies.
Generally, the ministerial Control is exercised in the fields of
administration and finance. .In the administrative field the controlling powers
of the minister concerned are exercised in the following matters:
1. The power of issuing directives is by far the most
important power to be exercised by a minister. Clause 48 of the Damodar Valley
Corporation enjoins upon it to be guided by such instructions on questions of
policy as may be given to it by the Central Government. A sub-clause of the same
clause lays down that, if any dispute arises between the Central Government and
the Corporation as to whether a question is or is not a question of policy, the
decision of the Central Government shall be final.
2. The government can institute enquiries into the working of a corporation.
Such an inquiry committee was appointed in the case of the Damodar Valley
Corporation in 1952.
3. The government is authorized to frame rules and regulations to facilitate
the working of these enterprises. It can prescribe forms, lay down procedures
and even prescribe the activities to be undertaken.
4. If a particular board of management fails to carry out the purposes for
which it was set up or if it fails to carry out the directives issued by the
government, the latter can supersede it and appoint a new board.
5. Under certain conditions, the government can remove from office any member
of the management board.
6. The government is empowered to appoint the chairman and
members of the board of management and the managing director. In addition, the
government retains the power of approval of appointment to posts carrying
salaries above a certain limit, namely, Rs. 2,250 a month.
Ministers exercise control over the working of public undertakings in the
financial field as follows:
1. The government also controls the fixation of prices of
goods produced by the enterprises as well as the quantum and rate of payment for
services rendered. These matters cannot be settled on purely economic grounds
and wider issues of public interest have to be kept in view.
2. The approval of the government is required regarding the forms for
maintaining the accounts of the enterprise and for their audit. Usually the
audit of accounts is done by the auditors appointed by the government.
3. The sanction of the government is necessary to (i)
sanction capital expenditure above a certain amount, (ii) for approving
variation in estimates of over 10%, and (iii) for matters connected with
borrowings, investments, securities, distribution of profits, etc. For instance,
in the case of the Hindustan Steel (Private) Limited, approval of the central
government is necessary for increase of capital, issue of new shares, reduction
of capital, borrowing of money and its terms, issue of bonds, debentures and
other securities, any programme of capital expenditure for an amount exceeding
Rs. 40 lakhs, winding up of the company, etc.
4. Ministers are authorised to appoint a financial adviser on
the governing board of a corporation. Such adviser, as has been described above
in the case of the DVC, exercises a sort of veto over matters affecting
expenditure and the financial policy of the government.
Public enterprises are owned by the state and are created by
investment from public funds and must, therefore, be subject to the
accountability to which all activities financed from public funds are subjected,
namely., to the parliament which is not merely the custodian of public funds but
also represents the shareholders, that is, the tax-payers. “The relation between
the Parliament and public enterprises has to be considered within the overall
equation of the parliament-ministerenterprise relationship. Members of
parliament feel a keen sense of responsibility for the efficiency and
achievements of public enterprises. They, therefore, want ministers to answer
shortcomings and difficulties and failures of the public enterprises. Faced with
this detailed and continuous scrutiny by parliament, the responsible minister
has little choice but to keep himself informed on all matters that relate to a
public enterprise including matters of day-to-day administration."
Report on Public Undertakings, any act or omission of an act,
which directly affects the fulfilment of (prescribed) objectives and obligations
cannot be described as a mere matter of day-today administration. In the same
way, all matters except those which have a bearing on any established policy of
government, should ordinarily be treated as matters of routine administration.
Parliamentary control over public enterprises is exercised principally through
questions, adjournment motions, debates and parliamentary committees. We shall
now briefly discuss these instruments.
Questions: There has been considerable discussion on
the scope of admissibility of questions relating to the working of public
corporations and government companies and certain broad principles have been
laid down. These principles and guidelines do not make any distinction between a
corporation and a company.
Debates: The performance of public undertakings can
form the subject of debate in parliament in several ways, namely, raising half
an hour discussion or of two hours’ debate on any enterprise, moving a motion of
adjournment if the matter is of urgent public importance, debate on the
president’s address, debates on bills and resolutions, and budget debates.
Reports: Every statutory corporation is obliged under
law to submit an annual report on its policies, activities and programmes during
the previous year to the government. This report is also expected to indicate
the nature of activities and programmes to be undertaken next year. A copy of
such a report together with the report of the auditors is laid before both
houses of parliament.
Parliamentary Committees: The parliamentary committee
on Public Undertakings consists of not more than fifteen members, ten from the
Lok Sabha and five from the Rajya Sabha, elected by the concerned house every
year from amongst its members according to the principle of proportional
representation by means of the single transferable vote. However, a minister
cannot be elected as a member and in case a member of the committee becomes a
minister in future he ceases to be a member of the committee with immediate
effect. The term of office is one year but there is no bar to re-election of the
same members. One of the members is elected as the chairman of the committee.