Private, Public and Global Enterprises

Departmental Undertaking

So we know that Air India or Indian Railways are under the control and the ownership of the government. But how are these organisations set up? Who is responsible for their performance, and their day to day activities? So let us learn more about Departmental Undertaking.

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Departmental Undertaking

The departmental undertaking is the oldest and traditional form of an organization of the public sector enterprise.It is organized, financed and controlled in such a manner that any other government organization.

The undertaking is under the control of a minister who is responsible to the parliament. Some example of departmental undertakings is Indian Railways, Post and Telegraph, All India Radio, Doordarshan etc.

Departmental Undertaking: Indian Railways

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Features of Departmental Undertaking

1. Audit and Accounting

Normal budgeting, accounting and audit procedures are applicable to departmental undertakings just like government departments.

2. Managed by Civil Servants

The departmental undertakings are managed by the civil servants, who are subject to the same services condition as applicable to civil servants of the government.

3. Sovereign Immunity

Without the consent of the government, a departmental undertaking cannot be sued at all.


1. Provides easy information

It is easy to set up departmental undertaking. The departmental undertaking is created by an administrative decision of the government, involving no legal formalities for its formation.

2. Direct control over Parliament or State Legislature

The departmental undertaking is directly responsible to the parliament or the state government through its overall head i.e. the minister concerned.

3. Tax on the Public is lesser

Earnings in this department are paid into government treasury, resulting in the lesser tax burden on the public.

4. Tool for social change

The economic activity and social justice can be promoted by the government through departmental undertaking. It can be used by the government, as a tool for social change.

5. Avoid misuse of Government Treasury

The officers of the departmental undertaking are under the direct administrative control of the ministry. They are guided by the rules and regulations of the ministry, framed with a focus on public welfare.

6. Monitored by the rules and regulations of the Ministry

As the departmental undertaking is subject to the budgeting, accounting and audit procedures of the government, the risk of misuse of public money is relatively less.

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Solved Example for You

Q1. What are the Drawbacks suffered by departmental undertakings?


  • Lack of flexibility: the departmental undertakings are strictly under the control of parliament. The minister and the top financial managers also interfere frequently in its working.
  • Lack of motivation: In the absence of competition and profit motive, there is little incentive for hard work and efficiency. There is hardly any link between reward and the performance and promotions are based on the incentives.
  • Financial dependence: the departmental undertaking deposits its earnings into the government treasury. It cannot take long-term decisions as it is financed by the government.
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