Model Answer
0 min readIntroduction
Public Corporations, established post-independence, were envisioned as instruments of rapid industrialization and socio-economic development, operating with a degree of managerial autonomy to foster efficiency and innovation. However, the extent of this autonomy became a contentious issue, sparking a debate about the balance between operational freedom and public accountability. The core of the debate revolved around whether these corporations should function as independent entities, free from political interference, or remain subject to the control of Ministers and Parliament, ensuring alignment with national priorities. This tension impacted both their internal functioning and external relationships, raising questions about their effectiveness and responsiveness.
Understanding Public Corporation Autonomy
Autonomy for Public Corporations implies the freedom to take managerial decisions – regarding investment, pricing, personnel, and production – without undue interference from political executives or the legislature. This was initially advocated to insulate corporations from short-term political considerations and allow for long-term planning and professional management. However, complete autonomy proved problematic.
Arguments For Autonomy
- Efficiency & Innovation: Proponents argued that autonomy fosters efficiency by allowing professional managers to make decisions based on market realities, rather than political expediency.
- Long-Term Planning: Autonomy enables corporations to pursue long-term strategic goals without being swayed by electoral cycles.
- Reduced Corruption: Minimizing political interference reduces opportunities for corruption and rent-seeking.
Arguments Against Autonomy & Concerns
- Accountability Deficit: Critics argued that excessive autonomy leads to a lack of accountability to the public and elected representatives. Without parliamentary oversight, corporations might pursue goals that are not aligned with national interests.
- Policy Implementation Challenges: If corporations operate independently, it can be difficult to ensure that they effectively implement government policies and programs.
- Resource Misallocation: Without proper oversight, corporations might misallocate resources or engage in wasteful spending.
Internal Working & Autonomy
Greater autonomy can lead to improved internal working. Corporations like the Bharat Heavy Electricals Limited (BHEL), when granted operational flexibility, demonstrated improved efficiency and technological advancements. However, autonomy without strong internal controls can also lead to bureaucratic inefficiencies and a lack of responsiveness to consumer needs. The Air India example (prior to privatization) illustrates how a lack of accountability, even with a degree of autonomy, resulted in significant financial losses and operational failures.
External Relations & Control Mechanisms
The relationship between Public Corporations and Ministers/Parliament is typically governed by several mechanisms:
| Control Mechanism | Description |
|---|---|
| Financial Control | Parliamentary approval of budgets, audit by the Comptroller and Auditor General (CAG). |
| Administrative Control | Ministries oversee the performance of corporations through reporting requirements and board appointments. |
| Legislative Control | Parliament can question corporations, conduct inquiries, and amend legislation affecting their operations. |
The Administrative Reforms Commission (ARC), in its various reports (particularly the 11th Report on Public Enterprises – 1966), emphasized the need for a clear delineation of roles and responsibilities between the government and the management of Public Corporations to ensure both autonomy and accountability.
The Evolving Landscape
Over time, the debate has shifted towards greater emphasis on accountability and performance. The New Public Management (NPM) reforms of the 1990s and 2000s, influenced by globalization and liberalization, led to increased focus on commercialization, privatization, and corporatization of Public Sector Undertakings (PSUs). This resulted in a gradual reduction in the scope of autonomy for many corporations, with greater emphasis on performance-based evaluation and shareholder value.
Conclusion
The debate surrounding the autonomy of Public Corporations remains relevant today. While complete autonomy is undesirable due to accountability concerns, excessive control stifles innovation and efficiency. A balanced approach, characterized by clear lines of accountability, transparent governance structures, and professional management, is essential. The ongoing reforms in the PSU sector, including strategic disinvestment and corporatization, reflect a continuing effort to strike this balance and enhance the performance of Public Corporations in a dynamic economic environment.
Answer Length
This is a comprehensive model answer for learning purposes and may exceed the word limit. In the exam, always adhere to the prescribed word count.