These are established as departments of the ministry and are financed, managed and controlled by either central government or state government. Examples: Indian railways, post and telegraph.
Features
- No separate entity: It does not have separate legal entity.
- Finance: It is financed by annual budget allocation of the government and all its earnings go to government treasury.
- Accounting and Audit: The government rules relating to audit and accounting are applicable to it.
- Staffing: Its employees are government employees and are recruited and appointed as per government rules.
- Accountability: These are accountable to the concerned ministry.
Merits
- It is more effective in achieving the objective laid down by government as it is under the direct control of govt.
- It is a source of government income as its revenue goes to government treasury.
- It is accountable to parliament for all its actions which ensures proper utilisation of funds.
- It is suitable for activities where secrecy and strict control is required like defence production.
Demerits
- It suffers from interference from minister and top officials in their working.
- It lacks flexibility which is essential for smooth operation of business.
- It suffers from red tapism in day to day work.
- These organizations are usually insensitive to consumer needs and do not provide goods and adequate service to them.
- Such organisations are managed by civil servants and government officials who may not have the necessary expertise and experience in management.
