Question

Attempt the following.

Demerits of Statutory Corporation.

Explain the limitations of a statutory corporation.

Answer 1

Though statutory corporations are autonomous bodies and enjoy flexibility in their working, they have certain limitations which are as follows:

1. Clashes amongst Interests:  All or a majority of directors of Statutory Corporations are appointed by the Government from different fields. As there are many members, it is quite possible that their interests may clash. The smooth functioning of the corporation may be hampered.
2. Autonomy on Paper Only: Ministers, government officials, and political parties often interfere with the working and decision-making policies, which affects the autonomy and flexibility of it.
3. Rigid Structure: Though statutory corporation-have operational flexibility, they are subject to many rules and regulations. Any changes in the constitution, objects, powers, duties, etc., require amendments to be passed in the parliament which is a difficult task. This reduces its flexibility.
4. Lack of Initiative: The statutory corporation has no profit motive. There is no competition between them. So employees do not take initiative to increase the profit.
5. Unfair Practices: Before 1991, these corporations enjoyed a monopolistic and semi monopolistic position. They were charging high prices from the consumers to cover up their inefficiencies. After 1991, due to liberalization, most of them lost their monopolistic position but skill, in practice the lack of competition as they are not aware of consumer needs.