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Merits

Departmental undertakings have certain advantages which are as follows:

(i) These undertakings facilitate the Parliament to exercise effective

Control over their operations.

(ii) These ensure a high degree of Public accountability.

(iii) The revenue earned by the Enterprise goes directly to the Treasury and hence

is a source of Income for the Government.

(iv)Where national security is concerned, this form is most suitable since it is

under the direct Control and supervision of the Concerned Ministry.

Limitations

This form of organization 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.