Departmental Undertaking

What is Departmental Undertaking?

A departmental undertaking is responsible for creating, improving, and maintaining a public sector enterprise operated by the ministry of Government. It is the most traditional and oldest form of creating and organising a public sector business and is controlled by the minister responsible for answering to the parliament. Furthermore, government officials manage the department accountable to the highest-ranked officers, making money much more efficient and less corrupt.

For a departmental undertaking to occur, no separate legal entity is required from the Government or its budgetary allocations. However, the operating Government will be responsible or answerable for each move the enterprise performs. Some enterprises which fall as an example of departmental undertakings are Indian Railways, Doordarshan, Post and telegraph, All India Radio, and many more.

Advantages of Departmental Undertaking

Better functionalities and easy understanding

For applying a beneficial scheme for the public, the departmental undertaking is the best choice. The Government takes charge of all the administrative decisions and operations to run smoothly and efficiently without legal formalities.

Direct access over the State legislature

A departmental undertaking policy is carried out by the government officials who represent themselves in the parliament or the Government. Hence, the minister operating the departmental undertaking enterprise takes control over each movement and solves it immediately if any cliche is found as the reports are to be submitted with the parliament. 

Reduction in taxes

The profit earned from this department is stored in the Government’s treasury, resulting in a stabilised and profitable market, eventually leading to lesser taxes on the public.

Trained officials

The employees working on departmental undertaking are directly under the administrative control of the ministry. Before being assigned, the officials are trained to follow the rules and regulations of the ministry, with public service as a priority.

Disadvantages of Departmental Undertaking

Insufficient flexibility

The working skeleton of a departmental undertaking is strictly under the control of ministers and governments. Hence, ministers and top financial investors interfere while developing the operational plan or execution, reducing flexible blueprint implementation.

Delayed decision making

As the Government involved decides for choosing the most appropriate blueprint with the proper budget and execution, there might be a late decision making between the assembly of ministers, which would affect the performance of the undertaking on a large scale.

Lack of business opportunities and motivation

In the absence of competition and motivation, the worker may find it hard to give his peak hard work and efficiency. Furthermore, the promotions and rewards are based on performances that are not directly linked to the incentives in the case of departmental undertakings.

Insufficient public experience

Due to the unnecessary political interference, the value of the development undertaking scheme seems to be insensitive to customer needs because insufficient services with service blockages make the user experience go down.

Characteristics of Departmental Undertakings

The departmental undertaking is usually abbreviated by PSU (public sector undertaking). It is a department that executes a government scheme to develop a particular section. The main characteristics which are involved in a departmental undertaking are as follows.

• The funding of departmental enterprises comes directly from the Government Treasury, reducing the fund’s shortage for the execution of the blueprint.

• The portion of the money to be used on which sector is allocated for these departmental budgetary allocations.

• The revenue or profit earned by a PSU (public sector undertaking) is paid into the treasury, later used for further development.

• Departmental undertakings are subject to accounting and auditing controls, as applicable to other Government entities.

• The employees are called Government servants, and their recruitment & conditions of service are the same as that of other government employees. Before being assigned, they are specially trained so that their priorities are to be public profit only.

• A departmental undertaking is administered by Indian Administrative Service (IAS) officers and civil service officers transferable from one ministry to another.

• It is generally considered a major subdivision of the Government’s development department.

• It is subject to direct control of the ministry and takes all the instructions from the Government only.

Features of Departmental Undertaking

Sufficient amount of funds

They are financed directly from the Consolidated Fund of India, which in simple terms is known as the government treasury by following an annual budget planned by the Government. Therefore, any revenue earned by these undertakings belongs to and is paid into the government treasury.

Government accounting and auditing

These undertakings follow the rules as framed by the Indian Audit and Accounts Department. Therefore, audit of these undertakings is also under the control of the Government.

Service conditions

These undertakings are headed by Indian Administrative Services, Indian Revenue Service, Indian Audit and Accounts Service, etc. The employees of these enterprises are government servants, and their service conditions are the same, which apply to any other government servant. The terms and conditions of their recruitment and service are the same as those of any other government employee.

Control of ministry

These undertakings are subdivisions or part of the ministry they are expected to work. Hence, the concerned ministry exercises full and direct control over such assignments.

Accountability to the ministry

These enterprises are established to assist the ministry in particular fields. Hence, these enterprises are fully accountable to the ministry concerned.

Government accounting

These undertakings are subject to government accounting and audit control.

Difference between public undertaking and public cooperation

Formation of the enterprise  

A public undertaking is formed as a part of the ministry. Meanwhile, a public corporation is formed by passing a particular act of the State legislature in the parliament. 

Legal requirements

A departmental undertaking does not require any separate legal entity from the Government. But a public corporation or a government company needs to have a separate legal entity.

Source of capital

A PSU (public sector undertaking) is financed by the sessions of the Government in the budgetary allocations. But in the case of public corporations, the funds can be acquired through the Government or by external means, too, i.e., receiving funds independently.

Management

Government officials manage a departmental undertaking. While a public corporation is managed by a Board of Directors of concerned ministers nominated by the Government.

Public accountability

The PSUs are Accountable to the working Government. Meanwhile, the actions taken by a public corporation are Accountable to the ministers of the parliament.

Conclusion

The concept of the departmental undertaking is very crucial to learn. It helps solve any business idea with ease and at a faster pace. Also, the departmental undertaking could be a valuable tool to simplify the problem and make its solving process more efficient. 

Therefore, the departmental study material above could help you understand the topic more quickly and efficiently. Furthermore, studying all issues and concepts about a departmental undertaking can help you achieve the milestone of tackling challenging problems in business management.