Concept of departmental undertakings

Departmental Undertakings are the common and more established form of establishing public enterprises. These enterprises are formed, operated, and part of the department of the ministry.

All the government works and activities are accomplished through this department, and cannot be entitled as independent or autonomous entities.

All the employees working in that department are under the government, therefore, they are termed as government employees. However, the government undertakings are divided into state and central government. Few examples of government undertakings are a railway, post office, etc.

Advantages of Department Undertakings

  • These allow the government to take control of all operation efficiently.
  • These assure public accountability
  • The revenue collected by the business is directly credited to the treasury which becomes a source of income for the government
  • It has direct authority and guidance of the ministry, therefore, for national security, it is the best kind of undertaking

Disadvantages of Department Undertakings

  • It doesn’t have flexibility which is essential for a business to run smoothly
  • Employees are not allowed to take an independent decision. Therefore, it leads to a delay in decision making
  • They cannot take advantage of business opportunities as they do not want to take a risk in new venture
  • Unnecessary political interference
  • They are insensitive to customer needs and do not give sufficient services to them


  • This is the oldest and most traditional form of organizing public enterprises.
  • These enterprises are established as departments of the ministry.
  • These enterprises are not established as independent institutions as these are not independent legal entities.
  • They act through the officers of the Government and its employees are Government employees.
  • These undertakings may be under the central or the state government and the rules of central/state government are applicable.
  • Example:

    • Railways
    • Post OFFICE
    • Telegraph department


  1. The funding of these enterprises come directly from the Government Treasury
  2. The portion of the budget is allocated for these departmental undertaking.
  3. The revenue earned by these is also paid into the treasury.
  4. They are subject to accounting and auditing controls, as applicable to other Government entities.
  5. The employees are Government servants and their recruitment & conditions of service are the same as that of other government employees.
  6. They are headed by Indian Administrative Service (IAS) officers and civil servants who are transferable from one ministry to another.
  7. It is generally considered to be a major subdivision of the Government department
  8. It is subject to direct control of the ministry.


  • These undertakings facilitate the parliament to exercise effective control over their operations.
  • These ensure a high degree of public accountability.
  • The revenue earned by the enterprise goes directly to the treasury
  • Hence this is the source of income for the government.


  • Departmental undertakings fail to provide flexibility, which is essential for the smooth operation of the business.
  • The employees of such undertakings are not allowed to take independent decisions, without the approval of the ministry concerned.
  • This leads to delays in matters where quick decisions are required.
  • These enterprises are unable to take advantage of business opportunities.
  • The bureaucrat’s over-cautious and conservative approval does not allow them to take risky ventures.
  • There is red-tapism in day-to-day operations.
  • No action can be taken unless it goes through the proper channels of authority.
  • There is a lot of political interference through the ministry;
  • These organizations are usually insensitive to consumer needs and do not provide adequate services to them.


Q.1- Types of departmental undertakings are-

a. Railways

b. Post offices

c. Both A & B

d. None of the above

Q.2- Name the organisation which is formed for the public utilities

a. Cooperative societies

b. Companies

c. Departmental undertakings

d. None of the above

Q.3- Identify the demerits of departmental undertakings:

a. The high degree of public accountability

b. Revenue goes to treasury

c. parliament have effective control

d. All of the above


1-c, 2-c, 3-d

Departmental organization: It is the oldest form of business organization and it is common in many countries. Stay tuned to BYJU’S to learn more.Concept of Departmental Undertakings