Defination:
Privatisation refes to any process that reduces the participation of thestate/public sector in econoimc activities of a country.Private sector has been allowed to play a major role in different types of economic activities.
Aspects:
(a) Transfer of the government ownership of productive assets to the private sector.It implies denationalisation.(b) Disinvestment:-sale of a part of equity of public sector enterprise to private capital.(c)Entry of private sector industries into the exclusively reservedindustries for the public sector.(d) Limiting the scope of public sector and on further expansion of theexisitng public sector.
Argument for Privatisation:-
Poor performance of public enterprise:- In view of poor performanceof public sector undertakings,public sectro has become a burden onnational economy.Rising budgetary deficits:- budgetary deficits are increasing whichfurther contributes to rising prices.Growing non-developmenatal Expenditure:- non developmentalexpenditure weakens our financing.High capital-output ratio:- high capital investment but poor outputhas lead to demand of privatisation
Policies:
Contracrion of public sector:- list of 18 is reduced to 7 & only3(atomic mineral,railway n atomic energy) are reserved for publicsector.Disinvestment:- shares of public sector undrtakings are being soldamong the workers and public for greater praticipation of privateindividuals.
M
ore institutuional credits:- more institutional credit to privatesector enterprises from national financial institutions.according tothe New Industrial Policy,these financial institutions will not insistfor conversion of loans into share capital.
Argument against privatisation:
Unbalanced growth:- Privatisation is no gurantee for social betterment.It results in unbalanced growth of the economy.Publicsector is indispensable for the development of all sectors/sections of the economy.Adverse effects on standard of living:- Privatisation has nothing todo with standard of living of the masses.Less scope for the development of infrastructure:- economic andsocial infrastructure remains untouched.Growth of state monopoly:- privateisation tampers public sector and prohibits any development .
ADVANTAGES OF PRIVATIZATION
Increased efficiency Specialization Corruption Accountability Security Goal
DISADVANTAGES OF PRIVATIZATION
Short term view Downsizing Political interference Reliability
Problems of PSUs
1. Price policy of the Public Sector undertakings.2. Underutilization of capacity.3. Problem related to planning and construction of projects4. Problems of labour, personnel and management5. Lack of autonomy
Other important factors
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