The Act or statute defines its
objectives, powers an functions. A public corporation seeks to
combine the flexibility of private enterprise with public ownership
and accountability. In the words of the late President Roosevelt to
U.S.A., “a public Corporation is an organisation that is clothed
with the power of the government, but is possessed of th flexibility
and initiative of private enterprise.” A public Corporation is thus
a combination of public ownership, public accountability and business
management for public end. Life Insurance Corporation of India,
Reserve Bank of India, Employees State Insurance Corporation,
Industrial Development bank of India are examples of public
Corporation. It must be remembered that, an enterprise does not
become a public corporation simply by using the word 'corporation' in
its name. For example, the Stat Trading Corporation of India is a
government company and not a public corporation.
features of a public corporation are as under:
Corporate body: It is a body
corporate established through a special Act of Parliament or Stat
Legislature. The Act defines its powers and privileges and its
relationship with government departments and ministries.
Legal entity: It enjoys a
separate legal entity with perpetual succession and common seal. It
can acquire an own property in its own name. It can sue an be sued
and can enter into contracts in its own name.
Government ownership: The
public corporation is wholly owned by the Central and/ or State
4. Financial independence: It
enjoys financial autonomy. Its initial capital and borrowings are
provided by the government but it is supposed to be self-supporting.
It can borrow money from the public an is empowered to plough back
5. Accounting system: The
corporation s not subject to the budgetary, accounting and audit
regulations applicable to government departments. It is generally
exempt from the rigid rules applicable to the expenditure of public
6. Management and personnel: A
public corporation is manged by a Board of Directors appointed by the
Government. However, its employees need not necessarily be civil
servants. They can be employed on terms and conditions laid down by
the corporation itself.
7. Service motive : The
primary motive of the corporation is public service rather than
private profits. It is, however, expected to operate in a
Public corporation offers the following advantages;
Operational autonomy : A public
corporation enjoys internal autonomy as there is no Parliamentary
interference in its day-to-day working. Therefore, it can be run in
a businesslike manner. There is “a high degree of freedom,
boldness and enterprise in the management of undertakings and
circumspection which is considered typical of government
2. Flexibility operations: Being
relatively free from bureaucratic control, a public corporation
enjoys flexibility and initiative
in business affairs. It can experiment in new lines of activity and
decisions can be taken without undue delay.
Continuity: Being a distinct
legal entity, it is not affected much by political changes. It can,
therefore, maintain continuity of policy and operations.
Special privilege: A public
copora ton is often granted special privileges. The special law by
which by which it is created can be tailor made to meet the specific
needs of the particular situation.
of managerial talent: A public
corporation can employ professional managers by offering them better
terms and conditions or service than those available to government
public corporation suffers from the following drawbacks:
Difficult formation: It is very
difficult and time-consuming to set up a public corporation because a
special law has to be passed in the Parliament.
Inflexibility: It is very
difficult to change the objects and powers because the special law
has to be amended by the Parliament or the State legislature.
Excessive accountability: There
are frequent debates and discussions on the reports and working of
public corporations. Ministerial and political interference in
day-to-day working do not allow internal autonomy in actual practice.
4. Clash of divergent interests: When
the Board of Directors is constituted to give representation to
divergent interests, a conflict may arise. This will hamper the
smooth and efficient functioning of the corporation. Emphasis on
service motive and lack of incentive may further reduce the
profitability of operations.
weaknesses, the public corporation is generally considered
appropriate for public enterprises of industrial and commercial
nature. It represents an appropriate combination of public
accountability and operational autonomy. According to Prof. Robson:
“It is destined to play as important a part in the field of
nationalized industry in the 20the century as the privately-owned
corporation played in the realm of capitalist organisation in the
The public corporation is suitable for
undertakings requiring monopoly powers,. e.g., public utilities. It
is also useful for undertakings which involve exercise of powers to
be conferred by legislature and enterprises which may not be
self-supporting and have to be financed by regular grants by the
State. However, in India, “it would not be wrong to say that for
the most part the public corporation has lost the spirit but retained
the form.” Bureaucratic management, financial dependence on the government and
lack of personal motivation are the main reasons for this state of