The Statutory Corporation (or Public Corporation) refers to such organisations which are incorporated under the special Acts of the Parliament or State Legislative Assemblies. Its management pattern, its powers and functions, the area of activity, rules and regulations for its employees and its relationship with government departments, etc. are specified in the concerned Act.

Examples of statutory corporations are State Bank of India, Life Insurance Corporation of India, Industrial Finance Corporation of India, etc. More than one corporation can also be established under the same Act. State Electricity Boards and State Financial Corporation fall in this category.

Features of Statutory Corporations

The main features of Statutory Corporations are:

  1. It is incorporated under a special Act of Parliament or State Legislative Assembly.

  2. It is an autonomous body and is free from government control in respect of its internal management. However, it is accountable to parliament and state legislature.

  3. It has a separate legal existence. Its capital is wholly provided by the government.

  4. It is managed by Board of Directors, which is composed of individuals who are trained and experienced in business management. The members of the board of Directors are nominated by the government.

  5. It is supposed to be self sufficient in financial matters. However, in case of necessity it may take loan and/or seek assistance from the government.

  6. The employees of these enterprises are recruited as per their own requirement by following the terms and conditions of recruitment decided by the Board.

Merits of Statutory Corporations

  1. Expert Management: It has the advantages of both the departmental and private undertakings. These enterprises are run on business principles under the guidance of expert and experienced Directors.

  2. Internal Autonomy: Government has no direct interference in the day-to-day management of these corporations. Decisions can be taken promptly without any hindrance.

  3. Responsible to Parliament: Statutory organisations are responsible to Parliament. Their activities are watched by the press and the public. As such they have to maintain a high level of efficiency and accountability.

  4. Flexibility: As these are independent in matters of management and finance, they enjoy adequate flexibility in their operation. This helps in ensuring good performance and operational results.

  5. Promotion of National Interests: Statutory Corporations protect and promote national interests. The government is authorised to give policy directions to the statutory corporations under the provisions of the Acts governing them.

  6. Easy to Raise Funds: Being government owned statutory bodies, they can easily get the required funds by issuing bonds, etc.

Limitations of Statutory Corporations

  1. Government Interference: It is true that the greatest advantage of statutory corporation is its independence and flexibility, but it is found only on paper. In reality, there is excessive government interference in most of the matters.

  2. Rigidity: The amendments to their activities and rights can be made only by the Parliament. This results in several impediments in business of the corporations to respond to the changing conditions and take bold decisions.

  3. Ignoring Commercial Approach: The statutory corporations usually face little competition and lack motivation for good performance. Hence, they suffer from ignorance of commercial principles in managing their affairs.