Government Company

Introduction to Business World

To work in the business world, the owners are required to choose the form of business structure that they need to function in. There are Sole Proprietorships, Corporates, MNCs and other organisations. Among these, Companies play an impressive role in the growth of the economy of India.

 

Also, Companies are divided into two – Private and Public Owned. The Public Owned Companies are also called the ‘Government Companies’. In this context we will understand what a Government Company is? Who owns a Government Company? And so forth to talk about these Government Companies.

 

What is a Government Company? 

There are companies where the Central or the State Government, or any of the two, or both of them combined holds 51% of the stake or capital of that particular company, then the specified company is deemed to be a ‘Government Company’. ‘Public Enterprises’ or ‘State Enterprises’ are the other names for this Government Company. They are to be registered legally under the Companies Act. 

 

Under section 2(45) of the Companies Act 2013, a Government Company is defined as “any company in which not less than 51% of the paid-up share capital is held by the Central Government, or by any State Government or Governments, or partly by the Central Government and partly by one or more State Governments, and includes a company which is a subsidiary company of such a Government Company”. 

 

This means that one of the basic features of the company is to have 51% of governmental stake.

 

Subsidiary Company

Another extended part of the Government Company is this – Subsidiary Company. A ‘Subsidiary Company’ or simply a ‘Subsidiary’ is a subsidiary or the side or extended part of a Government Company. In the case of a subsidiary company, the board is controlled by the Government Company itself. 

 

The Government Company exercises more than half of the control of voting rights on the subsidiary. Joint Ventures created by governments and even the public sector undertakings are also considered as the Government Companies. The BOD or Board of Directors are controlled by the government. 

 

In case of Government Companies, the auditor is appointed by the CAG (Comptroller and Auditor General of India). Also, a Government Company’s books are presented to both the houses of parliament, and unlike other companies, a Government Company cannot contribute directly to the political parties.

 

Features of Government Company

Specified features are anticipated to be present in any kind of organisation. Similarly, in Government Companies too, some distinct features bloom. Those features are discussed in the following paragraph. 

Features of a Government Company are:

  1. Government Companies are legally registered under the Companies Act 2013, under section 2(45). The Government Companies observe the rules engraved in this section.

  2.  Like all other companies, Government Companies too have a separate legal entity, that is to be sued and can sue in legal matters. They can also hold properties in their name.

  3. The annual reports, at the end of the financial year, are to be presented in the houses of Parliament.

  4. The capital of the company is to be held wholly or partially by the state government and the central government together or individually.

  5. They are managed by the directors who are appointed by the government itself.

  6. Accounting and Audit Practises are done by Chartered Accountants appointed by the government. 

  7. The employees are not civil servants. They regulate their own personal policy following the Articles of Associations.

 

Government Companies in India

India is enrolled as a developing country, with a mixed economic system in regard to trade. This means that the big enterprises in India are both owned by the Private Company as well as still by the Government Companies. While the Government remains predominantly engaged in the crucial sectors, like the petrol or mines, the private companies remain engaged in developmental sectors as well.

 

There is a huge list of Government Companies in India. Few of them are listed below:

 

List of Government Companies in India

Name of the Companies 

Net Profit (Amount in Crore, INR)

  1. Indian Oil Corp. Ltd. 

16,894

  1. NTPC Ltd.

11,750

  1. Coal India Ltd.

10,470

  1. Power Grid Corporation of India Ltd. 

9,939

  1. Bharat Petroleum Corporation Ltd.

7,132

  1. Power Finance Corporation Ltd. 

6,953

  1. Mahanadi CoalFields Ltd.

6,040

  1. Hindustan Petroleum Corporation Ltd.

6,029

  1. Gail (India) Ltd. 

6,029


Understanding the Background for Government Companies

Humans use resources to sustain their life on Earth. Resources are any materials obtained from nature which can be used by humans as food, shelter or other services. Mankind started processing the raw materials from the very beginning of the Neolithic period for its own use. In later times with the growth of population production systems became more localised. In modern days we see industries performing the job of processing raw materials in a single place. These started with the effort of individuals to sell the goods and gain profit. With a government system in place it took charge of some of the work of production of goods and services for the general population. it established companies to manage the production units in a systematic way. These companies are known as Government Companies. 


The Government Company responsible for a certain work is regulated by government authorities. These are usually no profit companies established by the investment of public money. Any gain obtained from the operation of such companies goes to the public fund of the government. The government tries to operate these companies consistently with the market which results in a healthy economy of the country. It is also very essential for the employment generation and inspiration for the masses to start their own businesses. Proprietorship is another type of company established by individuals without any help or group. the individual remains legally responsible for all the activities of such companies.


In recent times there has been criticism of incompetence of the authorities  running the Government Companies. Some critics have also stated to completely exclude Government Companies and privatise them all which is difficult to do.


In conclusion , Government Companies are essential for a welfare state. and it helps in regulating the prices of commodities in the open market.

FAQs on Government Company

1. What is PSU?

PSU is the abbreviated form of Public Sector Undertakings. Another name for Government Companies is Public Sector Undertakings, that are owned and managed by the government and government appointed directors. After the post-independence era, governmental companies are lessened considerably yet the crucial sectors are still handled by the government.

2. When does a company become a subsidiary of the government company?

If a company’s 51% of voting powers are held by the state or central government individually or combined both, they are deemed as Government Companies. Even a private company becomes a Government Company once it becomes the subsidiary of the Government Company.

3. How are the board of directors controlled by the government?

The board of directors are appointed by the government, their expulsion too is majorly under the control of the state or central or both. They function according to the decisions cast by the majority directors who eventually represent the government, this way the government controls the BOD or Board of Directors.

4. What are the advantages of government companies?

The advantages of the Government Company are enumerated below:

  1. The procedure of establishment is simple.

  2. They function efficiently.

  3. The management system is efficient.

  4. There exists healthy competition among the PSUs.

5. Which type of companies are established by the government of any country ?

The Government of any country can establish any type of company at its discretion. In particular, the resources of national interest are given first priority. There are also various service sectors which are owned and operated by the government. One of the best examples is the Indian Railway Catering and Tourism Company (IRCTC)  of India. Devi Jalsa service sector PSU named Bharat sanchar Nigam limited  (BSNL) working in the area of telecommunication. so the government of any country can establish any company according to the suitability and its available resources.

6. What are the different categories of government companies present in india ?

Government of India has categorised itss company according to the capital invested in them. The highest rank is awarded  to 9 companies with the highest investment termed as 'Navratnas.' other big companies with some low investment are termed as Maharatnas.' The remaining companies with lowest investment are known as miniratnas. It helps the government to manage the companies and improve them in an environment of cooperative competition. It also helps the general population to get a glimpse of the actual performance of the companies.

7. What are PSUs or PSEs?

The full form of PSU is public sector utilities and full form of PEC is public sector enterprises. Both are different names for the same type of company. It is established by the government of the country to take care of production of various goods and services for the greater population of the country. The Government of India also has various PSUs in its ambit. To name some examples are National Aluminium Company Limited (NALCO), Bharat Heavy Electronics Limited (BHEL), National Thermal Power Corporation Limited (NTPC) among others.

8. What is the difference between a government company and a corporation ?

corporations are the legal institutions established by a group of people or investors. They are the sole owners of the company  and manage its resources and production units. The profit obtained from the operation of the corporations is shared by the investor according to their proportion of investment. Any loss occurred is also borne by the investor. While a  Government Company  is a nonprofit institution established by the government for better utilisation of its available resources. technically a Government Company is owned by the people of the country and works for them all.

9. Where can I learn about all the PSUs of India ?

Students who have selected commerce stream for class 11 and 12 in CBSE and ICSE board should be aware of the different types of companies present. The course curriculum of Commerce stream has enough syllabus concerning the knowledge about different categories of corporations. The National Council of Education Research and Technology (NCERT)  also produces books covering this topic of study. students can get the book available in the market or can visit the official website of NCERT to get it downloaded in PDF format. The website for Vedantu online courses also provides these books in PDF format which students can download for free.

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