August 9, 2020

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PSU-Privatisation

The impact of privatization of government assets on India

Privatization primarily means shifting to the private sector from the public sector. It is also sometimes used as a synonym for deregulation when there is less regulation of a heavily regulated private enterprise or industry.

Public functions and services can also be privatized (which may also be referred to as “franchising” or “out-sourcing”); in this situation, private companies are charged with enforcing government policies or providing government services which were previously the responsibility of state-run agencies. Revenue collection, law enforcement, water supply, and jail administration are some examples.

list of Companies to be Privatized

SR. NO.CPSES LINK
1Bharat Aluminium Company Ltd. (BALCO)
2CMC Ltd. (CMC)
3Hindustan Zinc Ltd. (HZL)
4HTL Ltd. (HTL)
5Indian Petrochemicals Corporation Ltd. (IPCL)
6Indo. Hokke Hotels Ltd. (Subsidiary of HCI)
7Jessop & Co. Ltd. (Subsidiary of BBUNL)
8Lagan Jute Machinery Co. Ltd. (LJMC) (Subsidiary of Bharat Bhari Udyog Nigam Ltd. hereinafter referred to as BBUNL)
9Maruti Udyog Ltd. (MUL)
10Modern Food Industries Ltd. (MFIL)
11Paradeep Phosphates Ltd. (PPL)
12Punjab Hotels Ltd. (Subsidiary of ITDC) – Unfinished Chandigarh Project
13Videsh Sanchar Nigam Ltd. (VSNL)
142 Hotel Units of Hotel Corporation of India Ltd.
1517 Hotel Units of India Tourism Development Corp. Ltd. (ITDC)
161 Hotel Unit of ITDC (Given on 30 year lease-cum-management control)

Privatization in India

Privatization is taken into consideration to convey greater performance and objectivity to the enterprise, something that doesn’t subject a central authority company. In 1991, India opted for privatization. It was known as ‘New Economic Policy or LPG policy‘.

India made several major policy changes to its economic philosophies in 1991. The economy has seen inflation and sluggish growth. Dr. Manmohan Singh, the then finance minister, introduced some major economic reforms to tackle these problems. Now, we call it Indian Economy Liberalization, and the reforms of the LPG.

private companies vs govt. companies

Conceptualization of Indian Privatization

  • Delegation: here, the government retains the ownership and liability of a company through a contract or license or lease or grant, etc.

So the private sector must manage the day-to-day operations to offer the product or service. In this phase, the State must remain an active participant.

  • Divestment: The Government must sell the company’s majority interest to one or more private companies. This can retain some ownership but will be a minority stakeholder in the company.
  • Displacement: This would be the first step towards deregulation. It will require the entry of private players into the market. And the private corporation would gradually and steadily displace the public sector.

There, the private sector will contend with and potentially outperform public corporations, forcing the public undertaking to displace itself.

  • Disinvestment: direct sale to private interests of a part or whole of a public enterprise.

Impact of Privatization in India

Reports suggested that the private sector is the main sector in the Indian economy, following the rapid growth of the public sector during the planning period.

India is essentially self-reliant in its consumer-goods requirements. According to the decision of 1956, “Industries generating intermediate merchandise and machines can be evolved withinside the non-public sector. As a result, in the private sector, chemical industries such as paints, varnishes, plastics, etc. and industries manufacturing machine tools, machinery, and plants, ferrous and non-ferrous metals, rubber, paper, etc. were created.

flow of provatization

The positive aspects

It frees up the money for more efficient use.

  • Private companies tend to be profit-oriented and open in their operation as private owners are often geared towards profit making and getting rid of sacred cows and hitches in traditional bureaucratic.
  • Get rid of task inconsistencies consisting of unfastened loaders or over-hired departments which lessen aid strain.
  • Lessen the financial and administrative burden on the government.
  • Reduces corruption efficiently, and optimizes performance and functions.
  • Enable a contribution by the private sector to economic growth.
  • Production of general budget capital and a diversification of revenue sources.

The problem with Privatization in India

In India, company privatization is required to enhance the economic status. While the PSUs have made a major contribution to the growth of the country’s industrial base, they continue to suffer from a range of inadequacies such as:

  • Most PSU’s have continually suffered and reported losses. As a result, a significant number of loss giving units have also been referred to as PSUs.
  • The multiplicity of authorities accountable to by PSUs. Delay in project implementation contributing to cost escalation and other effects.
  • There is inefficient and severe administrative inefficiency.
  • Many PSUs are over-staffed leading to lower productivity of labor, weak industrial relations.

The privatization debate should concentrate on the complexity of organizational changes and not on a large political debate on the role and effectiveness of government. Replacing public with private control does not serve the public interest by itself, just as private ownership alone was not enough to increase profit for the shareholders of many large companies.

The guiding lights should be transparency and consonance with the public interest. We can be found where the processes of competition and organization ensure managers do what we, the owners, want them to do.

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