'There is red tapism in day-to-day operations and no action can be taken unless it goes through the proper channels of authority'.

The above statement highlights the limitation of which public enterprise?

Departmental undertaking

The correct answer is option 2- Departmental undertaking.

Departmental undertaking is the oldest and most traditional form of organising public enterprises. These enterprises are established as departments of the ministry and are considered part or an extension of the ministry itself. The Government functions through these departments and the activities performed by them are an integral part of the functioning of the government. They have not been constituted as autonomous or independent institutions and as such 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. This form of organisation suffers from serious drawbacks, some of which are as follows:

(i) Departmental undertakings fail to provide flexibility, which is essential for the smooth operation of business;

(ii) The employees or heads of departments of such undertakings are not allowed to take independent decisions, without the approval of the ministry concerned. This leads to delays, in matters where prompt decisions are required;

(iii) 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;

(iv) There is red tapism in day-to-day operations and no action can be taken unless it goes through the proper channels of authority;

(v) There is a lot of political interference through the ministry;

(vi) These organisations are usually insensitive to consumer needs and do not provide adequate services to them.