Forms of Organising Public Sector

The last few years have seen a rapid growth of the Indian economy. The private sector has seen tremendous improvement, but the public sector has also made great strides. Public sector organisations play a very important role in the advancement of our country. Let us take a look at the organizing of the public sector.

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Public Sector

The public sector is that part of a country’s economy that is effectively controlled by the government. This includes central government, state government as well as local government bodies. The public sector includes public companies, entities and public enterprises and services. An excellent example of the public sector is the Indian Railways. The Indian railway system is 100% owned and managed by the state.

Now, these enterprises in the public sector need to be given some structure. They need clear ideas about their funding and their spending. We call this the organizing of the public sector. So depending on the nature of its operations the enterprise of the public sector can follow one of the following forms of organisation

1. Departmental Organisation
2. Public/ Statutory Organisation
3. Government Organization

(Source: getwaytechnolabs)

Departmental Organisation

In this form of organisation, the public enterprise is run by a department of the government. So they are an extension of the ministry of the government itself. They are not independent entities but are a vital part of the functioning of the government.

Departmental organisations are allocated a budget made by the legislature. The revenue from all these enterprises goes into the Treasury of the country. Usually, there are some very strict accounting controls applicable to them. They must also be audited by the appropriate authorities every year.

The staff of such departmental organisation comprises of civil servants, officers of the government and other such government employees. The overall administration is controlled by their respective ministries. An example of such an enterprise is the Posts and Telegraph Department of India.

Public Organisation or Statutory Organisation

Statutory organisations or corporations come into existence by an Act of the Parliament. This act will define the power, functions, responsibilities and the rules and regulations of the corporation. Even the management structure will be defined by the Act.

Such corporations are autonomous bodies under the law. They have full organisational and financial control over the commercial activity that they deal in. There will be a well-represented Board of directors and an elected chairman or director. The employees of such an organisation are not considered as civil servants.

While statutory corporations are fully owned by the state, they are independently financed. The government may have to provide the startup capital, but the corporation can borrow funds, from the government or even in some cases from the public. The revenue that it earns is also at its disposal to reinvest.

Government Organisations

These are public sector companies, incorporated under the Companies Act 2013. They are formed purely for business reasons and are commercial concerns. The composition is so that the government (centre, state or local) owns a minimum of 51% of the company and its shares.

Just like any other company under the Companies Act, Government organisations are a separate legal entity. They can sue and be sued. They can hold assets and properties in its own name and has a completely separate legal identity.

Certain sections of the Companies Act have to be adapted to the circumstances in case of such organisations. Like an Auditor is appointed by the government itself. And the Annual Report of the company is submitted to the state or the centre parliament. An example of this is the State Bank of India.

Solved Question for You

Q: Government organizations receive funds from

1. The government
2. The public
3. Both of the above
4. None of the above

Ans: The correct answer is C. A government organization is a public company. The government holds a minimum of 51% of such a company. But usually, there are other private shareholders as well. So it gets its funding from the government and private shareholdings.