Statutory corporations and government companies

A statutory corporation is a public enterprise created by a Special Act of Parliament (or of a state legislature). The Act sets out its powers and functions and the rules for its staff. Think of it as: the government owns it and keeps an eye on it, but lets it run its own affairs.

Its features:

• It is a body corporate: it can own property, make contracts, and sue and be sued in its own name.
• It is wholly owned by the state.
• It is independently financed: it raises money by borrowing or from its own income, though the government may also fund it.
• It is not subject to the government's budget, accounting and audit rules.
• Its employees are not government or civil servants; they follow the corporation's own rules.

In short, it has the power of the government with the flexibility of private enterprise. But its freedom is only on paper if ministers keep interfering, and any change to its powers needs Parliament to amend the Act.

A government company is a company registered under the Companies Act, 2013, in which at least 51 per cent of the paid-up capital is held by the central government, a state government, or both. The government's shares are held in the name of the President of India. Well-known examples include BHEL and GAIL.

Its features and merits: it is formed under the ordinary company law, so it needs no separate Act of Parliament; it is a separate legal entity; it has autonomy in its management; and, like any company, it can raise funds in the capital market.

Limitations: the government still interferes in practice, because it is the main shareholder; and since it does not answer to Parliament the way a department does, it may evade the constitutional responsibility that a public body should carry.