Question

What are the advantages and disadvantages of Departmental undertaking?

Answer 1

Advantages:

1. Easy Formation:
It is easy to set up a departmental undertaking. The departmental undertaking is created by an administrative decision of the Government, involving no legal formalities for its formation.

2. Direct and Control of Parliament or State Legislature:
The departmental undertaking is directly responsible to the Parliament or the State legislature through its overall head i.e. the minister concerned.

3. Secrecy Maintained:
Strategic industries like defense and atomic power cannot be better managed other than government departments. Department undertakings can maintain secrecy in their working.

Disadvantages:

1. Red–Tape and Bureaucracy: There are too many procedures that result in delays. The commercial organization cannot afford delay in taking decisions.

2. Incidence of Additional Taxation: Losses incurred by a departmental enterprise are met out of the treasury. This very often necessitates additional taxation the burden of which falls on the common man.