Features, Merits and Demerits of Government Companies


These are units started by the Government in the form of Joint Stock Companies under the provisions of the Indian Companies Act of 1956, with Government owning 51% or more of the capital of the company.

Features of Government Companies

1. Company form of organisation structure.


2. State ownership.

3. Nomination of directors by Government.

4. Ministerial control.

5. Government audit and accounting.


Merits of Government Companies

1. Ease of formation.

2. Flexibility in operation.

3. Prompt decisions.


4. Absence of political interference.

5. Greater efficiency of operation.

Demerits of Government Companies

1. Absence of freedom of operation


2. Chances of misuse of power.

3. Restricted growth.

4. Constant political interference.

5. Inefficiency in administration.


General advantages of Government Undertakings

1. Balanced growth.

2. Long period planning.

3. Facilitates economic development.

4. Greater public welfare.

5. Equal distribution of wealth.

6. Better co-ordination.

7. Abolition of monopoly.

8. Greater economy.

9. Better relationship with labour force.

10. Better deal to consumers.

11. Utilization of local resources.

12. Achievement of self-reliance.

13. Establishment of heavy and strategic industry.

14. Balanced production and equitable distribution of wealth.

General disadvantages of Government Undertakings

1. Lack of initiation and efficiency.

2. Lack of selection of goods.

3. Political interference.

4. Slow growth.

5. Poor management.

6. Lack of flexibility.

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