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Public Or Statutory Corporation Forms of Organisation and management
A public or statutory Corporation is an autonomous corporate body set up under a special Act of Parliament or State Legislature.


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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.


The essential features of a public corporation are as under:

1. 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.

2. 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.

3. Government ownership: The public corporation is wholly owned by the Central and/ or State Government (s).

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 its earnings.

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 funds.

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 business-like manner.


A Public corporation offers the following advantages;

1. 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 departments”

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.

3. Continuity: Being a distinct legal entity, it is not affected much by political changes. It can, therefore, maintain continuity of policy and operations.

4. 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.

5. Availability of managerial talent: A public corporation can employ professional managers by offering them better terms and conditions or service than those available to government servent.


A public corporation suffers from the following drawbacks:

1. 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.

2. 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.

3. 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.


Despite its 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 19the century.”

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 affairs.

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