Question

State any four merits of Government Company.

Discuss the merits of government companies.

Answer 1

1. Profitability and Accountability: It works on business principles and follows a commercial approach. Though not profit oriented like the private sector, it does make a reasonable profit which is used for public welfare, modernisation, renovation, and development. Moreover, its performance can be evaluated by the Parliament as it has public accountability.
2. Internal Autonomy: Government Company enjoys financial and administrative autonomy. Its dependence on Government authority is minimum. It has its own capital structure, financial plan, borrowing powers, and so on.
3. Government Ownership: The ownership of the government company rests with Central or State Government, which owns the major capital of the company and as such looks after its management and control. The government always promotes the public welfare.
4. Foreign Capital and Technical Know how: As the government provides 51% of the capital, the rest 49% can be raised through foreign investment. By seeking foreign capital, Government companies bring advanced technology and technical know how.
5. Acquisition of Sick Units: A government company can acquire a sick unit in the private sector without rationalisation. It can be acquired by purchasing 51% of the share capital of a private company.

Answer 2

1. Easy Formation: It requires no separate statute to be passed in Parliament or state legislatures, making it simple to establish. It can be established by executive order of the government.
2. Internal Autonomy: It operates with minimal bureaucratic and political influence. It is a separate and autonomous body. Without direct ministerial authority, it can operate independently. It can be operated using commercial principles.
3. Flexibility of Operations: Government companies can readily change their objectives, powers, and organisational structure without needing to update any statutes, as long as the Companies Act rules are followed. The company can take timely judgements on management, finance, and related matters. The government has the authority to exclude entities from certain requirements of the Companies Act.
4. Expert Management: Professional managers can be appointed at high wages. It can provide better working circumstances compared to government officers. Consequently, managerial efficiency can be great. Parliamentary discussions on annual reports can lead to more caution and efficiency among management.
5. Collaboration: The government relies only on this organisation to gain access to the experience and management skills of the private sector and foreign countries.