The government establishes a statutory corporation under an act of parliament or any other legislation. These corporations are run independently with financial autonomy and are created for an economic or social purpose. The government fully finances it. Its powers, objects, limitations, etc., are also decided by the act of the legislature. Statutory Corporation examples include Air India, State Bank of India, Life Insurance Corporation of India, etc.
Governments create statutory corporations to make such entities operationally efficient and to insulate them from political interference. Statutory corporations do not have the rigidity of departmental undertakings and can work much more flexibly and professionally. They have their finances, make their own decisions, and regulate themselves while at the same time remaining accountable to the government. These corporations provide very important services to society while ensuring economic viability. Unlike regular private businesses, statutory corporations stop to maximize their profits. The corporations are expected to be self-sufficient but are expected not to jeopardize government policy.
What is Statutory Corporation?
Statutory corporations are called government-organized organizations set up by law. These are financially independent and free in administration, subject to the government. These corporations prioritize the important services they offer, regulate industries, and participate in the country’s economic development. They operate under private corporate characteristics and manners but are owned, controlled, and supervised by the government.
Statutory corporations can, unlike government departments, earn income, enter into contracts, and sue or be sued in their name.
10 Examples of Statutory Corporation
Certain key areas, including banking, insurance, and infrastructure, are kept in touch with the working sphere to ensure they run smoothly and efficiently. The law regulating statutory corporations also enables smooth operation despite bureaucratic interferences, allowing for an expeditious decision-making process and effective service delivery. Statutory corporations appear in various sectors: banking, insurance, transport, infrastructure, etc.
Reserve Bank of India (RBI)
The RBI regulates banking and monetary policy in India. It was established under the Reserve Bank of India Act of 1934. The RBI plays an important role in India’s economic stability with money supply regulation, keeping inflation in control. It manages foreign exchange reserves and implements monetary policies to enable economic growth.
- Controls inflation and money supply.
- Issues currency notes and ensures smooth transactions.
- Regulates banks and financial institutions by setting guidelines.
- Ensures financial stability and oversees economic development.
Life Insurance Corporation of India (LIC)
The LIC was formed in 1956 under the Life Insurance Corporation Act. It is India’s largest life insurance company and is important in mobilizing national savings.
- Provides life insurance policies to individuals and companies.
- Encourages savings by offering investment-linked insurance.
- Provides financial security to the policyholders and their families.
- Invests in infrastructure projects from which the government welfare programs benefit.
- Ensures government control over the life insurance industry, thus preventing market exploitation.
Airports Authority of India (AAI)
The AAI governs Indian airports and was formed under the Airports Authority of India Act 1994. It plays a key part in the modernization and development of airport sites.
- Managed and operated airports across India, ensuring efficient operation.
- Developing infrastructure to meet the demand of increasing air travel.
- Controlling air traffic operations to ensure passengers’ safety.
- Facilitating air navigation and communication services to airlines.
- Working towards world-class facilities and security at Indian Airports.
Food Corporation of India (FCI)
The FCI was set up under the Food Corporations Act of 1964 and intervened concerning food security in India, which involves maintaining buffer stocks and helping distribute essential food grains.
- Procurement and Distribution of Food-Grain at Concessional Rates.
- Maintains a buffer stock to avoid food shortage and price fluctuation.
- Joining government food policies to help agriculture and farmers.
- Assures fair prices for farmers with advantages in rural India.Provides food-grain supply under welfare programs such as the Public Distribution System (PDS).
Oil and Natural Gas Corporation (ONGC)
The ONGC came into being under the ONGC Act of 1959. This instance is the oil and gas exploration and production company of India.
- Extract crude oil and natural gas to ensure energy security.
- Promotion of self-reliance in oil and gas production to cut imports.
- Contribute significantly to India’s economic development.
- Drilling activities, both offshore and onshore.
- Renewable energy investments for sustenance.
State Bank of India (SBI)
Though commercial, SBI was made a statutory corporation under the State Bank of India Act of 1955, and plays a key role in the Indian banking sector.
- Banking and financial services for millions.
- Manages with foreign exchange and remittances.
- Assists in government banking schemes like Jan Dhan Yojana.
- Promotes financial inclusion through the dissemination of banking services in rural areas.
Employees’ State Insurance Corporation (ESIC)
The ESIC grants medical benefits and payment for sickness under the E.S.I. Act of 1948.
- Provides medical care and the insurance of employees plus family.
- Fit persons against any loss of income due to sickness, disability, or unemployment.
- Covers employment injury benefits and maternity benefits.
- Undertake to further the social security schemes for the low-income workers.
National Highways Authority of India (NHAI)
The NHAI was established under the NHAI Act 1988 to develop highways in India.
- It is responsible for developing and maintaining national highways in the country.
- It ensures smooth transport and logistic services in favor of economic activity.
- Road safety is ensured to prevent accidents.
- Encourages private investments for roads using public-private partnerships.
Indian Railways Finance Corporation (IRFC)
The Indian Railways Finance Corporation was constituted under the Companies Act, 1956, but operates as a statutory corporation.
- It provides financial assistance for the expansion of Indian Railways.
- Leasing and asset finance activities for railway projects.
- It supports the development and modernization of railway infrastructure.
Damodar Valley Corporation (DVC)
Damodar Valley Corporation was constituted under the DVC Act of 1948 to manage the region’s irrigation, power generation, and flood control.
- It generates hydroelectric and thermal power.
- To control floods for the safety of the people and agriculture in the area.
- It develops irrigation facilities to assist farmers.
- It promotes industrial development through a secured power supply.
Feature of Statutory Corporation
Statutory corporations differ from other government-controlled organizations because they possess distinct and specific features that can function independently and efficiently from state control.
- Legal Identity – A statutory corporation is created by law and exists as a separate legal entity apart from its founders. The statute permits the corporation to own property, enter into contracts, sue in its name, and be sued.
- Financial Independence – They have their finances, manage these without government interference, reinvest profit for further expansion, and earn revenue through their operations.
- Operational Autonomy – Sometimes governmental control is exercised, but a statutory body usually has operational freedom in the decision-making process.
- Public Welfare Orientation – Most statutory corporations are formed to serve the public patronage in providing services such as banking, insurance, transport, and power.
- Government Oversight – Thus, these corporations can run independently but subject the government to accountability in their actions and operations so that they do not become opaque or inefficient.
- No Political Interference – Public responsible corporations are far from political interference, unlike a government department. Thus, their decisions are not delayed, and they are waiting for approvals.
- Long-term Stability – Such corporations remain government-supported and stable as never-failing institutions and are relied upon to deliver services in sensitive sectors.
Advantages of Statutory Corporation
Statutory corporations give remarkable advantages to the governance system in their overall performance and economic growth. They constitute a major part of the governance mechanisms.
- Efficient Management: A cadre of efficient professionals manages the statutory corporation to ensure the optimum operation efficiency of the entire corporation.
- Quick Decision Making: They can develop innovative and market-oriented decisions without the usual bureaucratic delay; hence, they are autonomous.
- Financial Freedom: Unlike departmental undertakings, statutory corporations generate and reinvest their revenues, thus reducing dependency on government budgets.
- Public Welfare and Development: The agencies work towards improving society by providing services such as banking, insurance, and transportation at reasonable costs.
- Stability and Reliability: These furnish government ownership, which ensures stability and makes statutory corporations useful in the long term for economic and social developmental programs.
- Less Political Interference: As they are autonomous, statutory corporations can avoid many needless political pressures, allowing them to focus on their objectives more efficiently.
- Increased Investment: Many statutory corporations are concerned with infrastructure development, drawing domestic and foreign investments to boost economic growth.
Difference Between Departmental Undertaking and Statutory Corporation
A statutory corporation operates more efficiently than a departmental undertaking because it has more flexibility and financial independence. Thus, it will compete effectively in its industry even while pursuing the public interest. Both are under government control and government-owned but very different from each other regarding their structure, operation and system of finance.
| Feature | Departmental Undertaking | Statutory Corporation |
| Legal Status | Part of government, no separate entity | Independent legal entity |
| Financial Autonomy | No financial independence relies on the government budget | Has financial autonomy and reinvests earnings |
| Operational Freedom | Operates under strict government control | Has managerial independence |
| Decision-Making | Slow and bureaucratic | Quick and market-oriented |
| Political Interference | High | Low |
| Examples | Indian Postal Service, Public Works Department | Reserve Bank of India, LIC, ONGC |
Statutory Corporation Examples FAQs
1. What is statutory corporation?
Statutory corporation as the name implies, refers to government-created organizations established by an act of legislation. They operate independently with endowed financial autonomy but rely on providing essential services, such as banking, insurance, and transport while being accountable to the government.
2. What are statutory corporation examples?
Examples are Reserve Bank of India, Life Insurance Corporation of India, Oil and Natural Gas Corporation, Airports Authority of India, Food Corporation of India, State Bank of India, Employees’ State Insurance Corporation, National Highways Authority of India, Indian Railways Finance Corporation, and Damodar Valley Corporation.
3. What is the feature of statutory corporation?
The statutory corporation has a separate legal identity, financial independence, operational independence, governmental oversight, public welfare orientation, free political interference, and working towards economic and social stability.
4. What are the merits of statutory corporation?
The merits include efficiency, freedom in financial matters, quick decision-making, reduced political interference, stability, focus on public welfare, the attraction of investments, and balanced growth in key sectors.
5. What is the difference between departmental undertaking and statutory corporation?
Departmental undertakings are entirely under government control without any financial independence; on the other hand, statutory corporations are independent and operate on a totally different level with financial autonomy and managerial freedom that helped keep efficiency and competitive performance.
