It is established under a special act passed in parliament or state legislative assembly.
Its objectives, powers and functions are clearly defined in the Statute /Act. Examples include Unit Trust of India, Life Insurance Corporation of India, Steel Authority of India Limited etc.
Features
- It is established under a special act which defines its objects, powers and functions.
- It has a separate legal entity. Its management is vested in a Board of Directors appointed or nominated by the government.
- It has its own staff, recruited and appointed as per the provisions of act.
- This type of enterprise is usually independently financed.
- It obtains funds by borrowing from government or from public or through earnings.
- It is not subject to same accounting and audit rules which are applicable to Government Department.
Merits
- Internal autonomy: It enjoys a good deal of autonomy in its day to day operations and is free from political interference.
- Quick decisions: It can take prompt decisions and quick actions as it is free from the prohibitory rules of government.
- Parliamentary control: Their performance is subject to discussion in Parliament which ensures proper use of public money.
- Efficient management: Their Directors and top Executives are professionals and experts of different fields.
Demerits
- Flexibility is for name sake only: In reality, there is not much operational flexibility. It suffers from lot of political interference.
- Lack of profit motive: Usually they enjoy monopoly in their field and do not have profit motive due to which their working turns out to be inefficient.
- Corruption: Where there is dealing with public, rampant ** exists. Thus public corporation is suitable for undertaking requiring monopoly powers e.g., public utilities.
