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Departmental Undertaking- Indian Railway
- 1. BUSINESS PROJECT Topic: departmental undertaking - Yashaswini Agarwal 2012
- 2. INDEX SNO. TOPIC PAGE NO. 1 What is Departmental Undertaking? 1 2 Characteristics of Departmental Undertaking 2 3 Advantages of Departmental Undertaking 3 4 Drawbacks of Departmental Undertaking 4 5 The Indian Railways 5 6 History 6 7 Indian Railways as a Government Body 7 8 Government Financing to the Railways 8 9 Railways – Accounts and Audits 9 10 Recruitment of Government Employees 11 11 Newer development in Departmental Undertaking 12 12 Bibliography 13 13 Thank you 14
- 3. WHAT IS A DEPARTMENTAL UNDERTAKING? It is a form of a public sector enterprise which is run as a department of the Government. It is organized, financed and controlled like any other Government department. A departmental undertaking is self- contained but it is under the overall control of the departmental head and the ministry concerned. It is a very old and traditional form of public enterprise. It may be organized as a separate full-fledged ministry. For instance, the Indian Railways is managed by the Ministry of Railways through the Railway Board. The Railway Board consisting of a Chairman, three members and a financial commissioner manages the Indian Railways under the overall direction and control of the Railway Minister. The Railway Minister is in turn responsible to the parliament. The undertaking operates as a wing of the government with ultimate control and responsibilities vested in the Minister concerned. Similarly, Posts and Telegraphs are a department in the Ministry of Communications. The postal service comes under the Department of Posts which is a part of the Ministry of Communications and Information Technology under the Government of India. The apex body of the department is the Postal Service Board. The board consists of a chairman and six members. The six Members of the Board hold portfolios of Personnel, Operations, Technology, Postal Life Insurance, Human Resource Development (H R D) and Planning functions. They are in turn accountable to the Minister of Communications.
- 4. CHARACTERISTICS OF DEPARTMENTAL UNDERTAKING ARE: 1. They are a part of the government: The undertakings are the major sub-division of one of the departments or ministries of the Government. They are subjected to direct control by the head of department. The concerned minister has the ultimate authority and is answerable to the parliament or the state legislature. The undertaking has no separate entity distinct from the Government. 3. Accounting and audit: The undertaking is subject to the normal budgeting, accounting and audit procedures applicable to other government departments. 4. Civil service code: The recruitment and service methods of these government employees are like that of any other government servant. 5. Sovereign immunity: It means being an integral part of the Government; a departmental undertaking cannot be sued without the consent of the government. The sovereign immunity doctrine in India states that a State cannot be sued in its own courts without its consent. 2. It has government financing: The undertaking is financed through annual budget appropriations by the Parliament or the State Legislature. The revenues of the undertaking are paid into the treasury. It is wholly owned by the Government.
- 5. ADVANTAGES OF DEPARTMENTAL UNDERTAKINGS ARE: 1. Easy formation: It is very easy to set up a departmental undertaking as no registration or special law is required. The undertaking is created by the administrative decision of the Government and no legal formalities are involved. 2. Direct government control: The undertaking is under the direct and complete control of the State. Therefore, it is more effective in achieving the objectives laid down by the Government. 3. Public accountability: The departmental undertaking is totally and completely accountable to the parliament as its management is under the ministry concerned. 4. Judicious use of money: Due to strict budget, accounting and audit controls the risk of misuse of public money is minimized and funds are used for the benefit of the public. 5. Secrecy: It is easy to maintain secrecy of policy because the Government can avoid disclosure on the plea of public interest. 6. Instrument of social change: The Government can promote economic and social justice through departmental undertakings. It can also maintain effective control over the production and distribution of essential goods and services.
- 6. DRAWBACKS SUFFERED BY DEPARTMENTAL UNDERTAKINGS: 1. Lack of flexibility: A departmental undertaking functions under strict Parliamentary control. The minister and top officials also interfere frequently in its workings. The undertaking is treated just like a government office. There is little delegation of powers. As a result, the staff of the undertaking gets little opportunity to exercise initiative. Lack of autonomy reduces the flexibility and efficiency of operations. 2. 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 performance, and promotions are based on seniority. This leads to complacent attitude. As losses are borne by the Government treasury and tax payers, these are not taken seriously. Employees try to shift responsibility and shirk duty. 3. Red tapism: There is excessive centralization of control which results in red tapism. Decisions are generally delayed due to bureaucratic procedures and political interference and therefore the enterprise cannot run in a business-like manner. It fails to adapt itself to changes in technology and market conditions. 4. Financial dependence: A departmental undertaking deposits its earnings into the Government treasury. It cannot take long-term investment decisions as it is financed by the government. 5. Inefficient management: A departmental undertaking is managed generally by Government officials and civil servants who are sent on deputation. Most of their time is spent in answering to the parliamentary enquiries. These officials generally do not possess the necessary expertise and experience in management. Moreover, their tenure is not stable and they can be transferred at any time. Therefore they adopt a carefree attitude and lack a sense of responsibility. Bureaucratic control and lack of incentive on the part of officials make the undertaking inefficient and irresponsive to consumer needs.
- 7. THE INDIAN RAILWAYS The Indian railway is a government owned enterprise operating through the Railway ministry. Initially a private owned company, it was taken over by the government in 1946 with the purpose to serve the countrymen. The first train ran from Bombay to Thane (33.81 Km) on 16th April 1853. Today, Indian Railway is the largest railway network in Asia. It carries over 13 million passengers & 1.3 million tones of freight every day. It runs about 14,300 trains daily. Currently, the railway minister of India is Mukul Roy. Now let us examine how it fits into the criteria of a government undertaking.
- 8. HISTORY The history of rail transport in India began in the mid-nineteenth century under the British Empire. Indian businessmen also played a great role and took interest in founding the railways. The Bengali merchant Prince Dwarkanath Tagore (grandfather of poet Rabindranath Tagore) owned the company, Tagore &company, which in 1844 had reported to raise 1/3th of the capital for a railway line from Calcutta northwest to the coalfields above Burdwan. After his death the other Indian businessmen played a passive role. From 1857 onwards a British engineer, Robert Maitland Bereton was given the responsibility for the expansion of the railways. The Allahabad-Jubbulpore branch line of the East Indian Railway had been opened in June 1867. Brereton was responsible for linking this with the Great Indian Peninsula Railway. In 1900, the GIPR (Great Indian Peninsula Railway) became a government owned company. The network spread to the states of Assam, Rajasthan and Andhra Pradesh and soon various independent kingdoms began to have their own rail systems. Railway Board was constituted in 1905 but the powers were invested with Lord Curzon. It served under the Department of Commerce and Industry and had a government railway official serving as chairman, and a railway manager from England. In 1907 almost all the rail companies were taken over by the government. The government took over the management of the Railways and started to detach the finances of the Railways from other governmental revenues.
- 9. INDIAN RAILWAYS AS A GOVERNMENT BODY The Indian Railways Act of 1989 enacted by Parliament gives the Central Government (Ministry of Railways) with powers over the functioning of Indian Railway. The act provides for operational independence of IR. There are only few instances when there is need for direct interaction with Parliament. They are related to safety, and exemptions and amendments with respect to the Act. The rail department organisation is as follows :
- 10. GOVERNMENT FINANCING TO THE RAILWAYS The government of India allocates an annual budget to the railways which is presented to the parliament separately from the annual budget presentation. Apart from that the railway department is funded by The Indian Railways Finance Corporation which was incorporated in 1986 to partly finance the plan outlay of IR by raising funds from the market. For example, on March 2001, the total fund inflow into IR had been Rs 99,542 crores. Out of this Rs 32,661 crores came in through budgetary support (government), Rs 30,679 crores from internal resources which included the Railway Capital Fund, Depreciation Reserve Fund and the Development Fund, Rs 21,707 crores from the IRFC route and the rest in the form of reserves, deposits and current liabilities. Out of this money, Rs 35,554 crores was invested in buildings and track, Rs 34,016 crores in rolling stock and Rs 11,516 crores used towards procurement of plant and equipments. The rest of the money was spent on land, investments, and deposits with the central government and in current assets.
- 11. RAILWAYS - ACCOUNTs AND AUDITS Every expenditure in Indian Railways has to pass through Financial scrutiny. India Railways Accounts Service cadre of Indian Railways is responsible for the Finance and Accounting functions of the Railways. Core functions of this cadre include maintenance of accounts of Indian Railways and Financial Advice to the executive. The IRAS cadre exercises substantial control over the affairs of the Indian Railways. A check is needed to ensure proper utilization of the fund to ensure that it serves the purpose. This check is known as Audit. Railways Audit was separated from Accounts in 1929. In Railways Auditing is done by two means viz. Internal and external Auditing. Internal Audit Internal Auditing is done by Accounts department of Railways. It is done for the purpose of giving financial advice, to consider proposals involving finance, to maintain accounts, and to formulate Railway Budget. In the process records are scrutinized, executive orders involving finance are verified, and traffic and transport earnings and accounts are checked to avoid loss of revenue.
- 12. External Audit The Comptroller & Auditor General of India (CAG) controls External Auditing. All expenditures incurred from consolidated fund of India are subjected to External Auditing. The Director of Railway Audit of Railway Board is assisted by Chief Audit Officers, Divisional Audit Officers, are responsible for the external auditing in Railways. Shri Vinod Rai is the present Comptroller and Auditor General of India. Shri B.B.Pandit is the Deputy Comptroller & Auditor General for Railways, Communication and Defense.
- 13. RECRUITMENT OF RAILWAY EMPLOYEES The Indian Railway Personnel Service (IRPS) is a cadre of the Group-A services of the Government of India. The officers of this service are selected based on written and viva-voce test which is conducted by the Union Public Service Commission (UPSC) of India along with other Group A Services like IAS, IPS and IRS etc. The UPSC is responsible for recruiting middle and top-level bureaucrats for the Government of India. Indian Railways has a work force of about 1.4 million employees.
- 14. NEWER DEVELOPMENTS IN DEPARTMENTAL UNDERTAKINGS A new development concerning departmental undertakings in India is the setting up of corporations to raise loans from the public through the issue of bonds. For example The Railway finance Corporation has issued railway bonds, Mahanagar Telephone Nigam has also issued telephone bonds and it is coordinating the telephone services in the metropolitan cities. Through this the railways help to increase Government revenue because their earnings are deposited in the Government treasury and therefore it reduces the burden of tax on the public and serves public interest better.
- 16. THANK YOU