Departmental Undertaking: Features, Advantages and Solved Examples

The compilation of these Private, Public and Global Enterprises Notes makes students exam preparation simpler and organised.

Departmental Undertakings

So we know that Air India or Indian Railways are under the control and the ownership of the government. But how are these organisations set up? Who is responsible for their performance, and their day-to-day activities? So let us learn more about Departmental Undertaking.

Departmental Undertaking

The departmental undertaking is the oldest and traditional form of an organization of the public sector enterprise. It is organized, financed, and controlled in such a manner that any other government organization.

The undertaking is under the control of a minister who is responsible to the parliament. Some example of departmental undertakings is Indian Railways, Post and Telegraph, All India Radio, Doordarshan, etc.

Departmental Undertaking Indian Railways

Features of Departmental Undertaking

1. Audit and Accounting
Normal budgeting, accounting, and audit procedures are applicable to departmental undertakings just like government departments.

2. Managed by Civil Servants
The departmental undertakings are managed by the civil servants, who are subject to the condition of the same service as applicable to civil servants of the government.

3. Sovereign Immunity
Without the consent of the government, a departmental undertaking cannot be sued at all.


1. Provides easy information
It is easy to set up departmental undertakings. The departmental undertaking is created by an administrative decision of the government, involving no legal formalities for its formation.

2. Direct control over Parliament or State Legislature
The departmental undertaking is directly responsible to the parliament or the state government through its overall head i.e. the minister concerned.

3. Tax on the Public is lesser
Earnings in this department are paid into the government treasury, resulting in a lesser tax burden on the public.

4. Tool for social change
Economic activity and social justice can be promoted by the government through departmental undertaking. It can be used by the government, as a tool for social change.

5. Avoid misuse of Government Treasury
The officers of the departmental undertaking are under the direct administrative control of the ministry. They are guided by the rules and regulations of the ministry, framed with a focus on public welfare.

6. Monitored by the rules and regulations of the Ministry
As the departmental undertaking is subject to the budgeting, accounting, and audit procedures of the government, the risk of misuse of public money is relatively less.


Question 1.
What are the Drawbacks suffered by departmental undertakings?
Lack of flexibility: the departmental undertakings are strictly under the control of parliament. The minister and the top financial managers also interfere frequently in their work.

Lack of motivation: In the absence of competition and profit motive, there is little incentive for hard work and efficiency. There is hardly any link between reward and the performance and promotions are based on incentives.

Financial dependence: the departmental undertaking deposits its earnings into the government treasury. It cannot take long-term decisions as it is financed by the government.