lMPACT OF PRlVATl5ATlON lMPACT OF PRlVATl5ATlON

OF PUBLlC 5ECTOR ON OF PUBLlC 5ECTOR ON
lNDlAN ECONOMY lNDlAN ECONOMY
PRLSLNTLD 8Y :
Sumltra Nanoan Srlvastav U.Prablr [alswal
Susbant Sagar Ujjal 8anerjee
Swatl 8balla Prasbant Kumar
Tavleenvlrmanl Tanay Tulsaney
Tutul Samanta Sunny Rastogl
vlsbal Kumar Raj Asbutosb Sbarma
PR|vAT|SAT|ON PR|vAT|SAT|ON
TransIer oI any government Iunction to the
private sector.
Used to describe two unrelated transactions
1. buyout, by the maiority owner
2. demutualization oI a mutual organization
Three main methods oI privatisation
1. Share issue privatisation (SIP)
2. Asset sale privatisation
3. Voucher privatisation
erlts ot Prlvatlzatlon erlts ot Prlvatlzatlon
Private-run industries tend to be less bureaucratic
Increased eIIiciency
Specialisation
Less Corruption
Managers are accountable to stakeholders
Organized goals
Easy to raise investment capital in the Iinancial markets
ProIits tend to be dispersed and diversiIied
Less political inIluence
Better paid iobs
More risk leads to more proIits
Private-run industries tend to be less bureaucratic
Increased eIIiciency
Specialisation
Less Corruption
Managers are accountable to stakeholders
Organized goals
Easy to raise investment capital in the Iinancial markets
ProIits tend to be dispersed and diversiIied
Less political inIluence
Better paid iobs
More risk leads to more proIits
Demerlts ot prlvatlzatlon Demerlts ot prlvatlzatlon
The Government is motivated to perIormance
improvements
Governments can raise money in the Iinancial markets
more cheaply.
No iob security
Concentration oI power in Iew hands
More exploitation oI employees
Cuts in essential services
Lack oI market discipline
The Government is motivated to perIormance
improvements
Governments can raise money in the Iinancial markets
more cheaply.
No iob security
Concentration oI power in Iew hands
More exploitation oI employees
Cuts in essential services
Lack oI market discipline
Publlc sector Publlc sector
|s a part ot tbe state tbat oeals wltb eltber tbe
proouctlon, oellvery ano allocatlon ot gooos ano
servlces by ano tor tbe government or lts cltlzens.
Forms ot Publlc Sector
1. Dlrect aomlnlstratlon tunoeo tbrougb ta×atlon
2. Publlcly owneo corporatlons
3. Partlal outsourclng
|s a part ot tbe state tbat oeals wltb eltber tbe
proouctlon, oellvery ano allocatlon ot gooos ano
servlces by ano tor tbe government or lts cltlzens.
Forms ot Publlc Sector
1. Dlrect aomlnlstratlon tunoeo tbrougb ta×atlon
2. Publlcly owneo corporatlons
3. Partlal outsourclng
|mpact ot prlvatlzatlon on 8anklng |mpact ot prlvatlzatlon on 8anklng
S8| enjoys a monopoly ot tbe government buslness.
S8| was tormeo unoer tbe S8| Act ln 1955. Tbe
government bolo arouno 93° ot tbe equlty, leavlng 7° to
prlvate ownersblp. 8y tbls act tbe equlty ot R8| cannot
be olluteo below 55°.
Tbls act was outoateo ano neeos to be re-aooresseo.
However, ettorts were lnltlateo by S8| to prlvatlze lts
non ÷ banklng subslolarles llke S8| Caps, S8| Funos
anagement etc, wbere S8|'s bololng ls about 85° ot tbe
equlty.
S8| enjoys a monopoly ot tbe government buslness.
S8| was tormeo unoer tbe S8| Act ln 1955. Tbe
government bolo arouno 93° ot tbe equlty, leavlng 7° to
prlvate ownersblp. 8y tbls act tbe equlty ot R8| cannot
be olluteo below 55°.
Tbls act was outoateo ano neeos to be re-aooresseo.
However, ettorts were lnltlateo by S8| to prlvatlze lts
non ÷ banklng subslolarles llke S8| Caps, S8| Funos
anagement etc, wbere S8|'s bololng ls about 85° ot tbe
equlty.
by prlvatlzatlon ot banks by prlvatlzatlon ot banks
|n early 80s, tbe 8anklng Sector ln |nola was
oomlnateo by tbe publlc sector banks wblcb
were cbaracterlzeo by
lHlgb |ntermeolatlon Costs
lOver-stattlng ano Over-brancblng
lHuge porttollo ot Non pertormlng Loans
lPoor Customer Servlces
lUnoercapltallzeo
lPoorly anageo / Narrow Proouct Range
lUnoue |nterterence ln Lenolng, Loan Recovery
& Personnel
|n early 80s, tbe 8anklng Sector ln |nola was
oomlnateo by tbe publlc sector banks wblcb
were cbaracterlzeo by
lHlgb |ntermeolatlon Costs
lOver-stattlng ano Over-brancblng
lHuge porttollo ot Non pertormlng Loans
lPoor Customer Servlces
lUnoercapltallzeo
lPoorly anageo / Narrow Proouct Range
lUnoue |nterterence ln Lenolng, Loan Recovery
& Personnel
Posltlve lmpact on banklng Posltlve lmpact on banklng
l Tbere was a great lncrease ln tbe no. ot bank
brancbes atter prlvatlzatlon trom 8262 to 45,898.
l8rancbes ln rural/seml-urban sectors lncreases trom
2° to 40° atter prlvatlzatlon.
lCreolt to agrlculture lncreases trom Rs.162 crore to
Rs.4,46,496 crore.
lore job opportunltles ralse atter prlvatlzatlon wblcb
leaos to lncrease ln statt trom 2,20,000 to 9,65,720.
l8ecause ot creolt mlsallocatlon, publlc sector
banks may be a blgger tbreat to stablllty tban prlvate
sector.
l Tbere was a great lncrease ln tbe no. ot bank
brancbes atter prlvatlzatlon trom 8262 to 45,898.
l8rancbes ln rural/seml-urban sectors lncreases trom
2° to 40° atter prlvatlzatlon.
lCreolt to agrlculture lncreases trom Rs.162 crore to
Rs.4,46,496 crore.
lore job opportunltles ralse atter prlvatlzatlon wblcb
leaos to lncrease ln statt trom 2,20,000 to 9,65,720.
l8ecause ot creolt mlsallocatlon, publlc sector
banks may be a blgger tbreat to stablllty tban prlvate
sector.
Negatlve lmpact on banklng Negatlve lmpact on banklng Negatlve lmpact on banklng Negatlve lmpact on banklng
Interest rate is more in private sector banks as
comparative to the public sector banks.
private banks are responsible Ior this recession in the
world & also in india.
Private banks give loans to the real estate sector and
many other similar sectors with the eyes closed not taking
even some proper securities by these companies.
There is less iob security in case oI private banks.
InterIerence and manipulation by the politician and
industrialist is in Iull swing. In some cases, bank loans
were used to garner votes.
Previously the public money was saIeguard through
Deposit Insurance corporation but now this corporation is
abolished.
Interest rate is more in private sector banks as
comparative to the public sector banks.
private banks are responsible Ior this recession in the
world & also in india.
Private banks give loans to the real estate sector and
many other similar sectors with the eyes closed not taking
even some proper securities by these companies.
There is less iob security in case oI private banks.
InterIerence and manipulation by the politician and
industrialist is in Iull swing. In some cases, bank loans
were used to garner votes.
Previously the public money was saIeguard through
Deposit Insurance corporation but now this corporation is
abolished.
|nsurance sector |nsurance sector
Causes tor Prlvatlzatlon ot |nsurance Sector
1. low lnsurance penetratlon ln |nola.
2. Tbe aovertlslng lnltlatlves were llmlteo to some
prlnt ano electronlc meola aovertlsements.
3. Tbe market seems to be e×panolng ano growlng
4. 8reak tbe monopoly posltlon ot publlc sector
companles
Causes tor Prlvatlzatlon ot |nsurance Sector
1. low lnsurance penetratlon ln |nola.
2. Tbe aovertlslng lnltlatlves were llmlteo to some
prlnt ano electronlc meola aovertlsements.
3. Tbe market seems to be e×panolng ano growlng
4. 8reak tbe monopoly posltlon ot publlc sector
companles
Competltlve prlclng
value tor money tor tbe customer
Hlgb servlce levels
Upgraolng tbe quallty ot agents
8ack ottlce ano tront ottlce statt
Consumer awareness ano sensltlve
Prompt response to tbe consumers' grlevances
|ncrease ln number ot jobs
Competltlve prlclng
value tor money tor tbe customer
Hlgb servlce levels
Upgraolng tbe quallty ot agents
8ack ottlce ano tront ottlce statt
Consumer awareness ano sensltlve
Prompt response to tbe consumers' grlevances
|ncrease ln number ot jobs
Impact Of private sector On public Insurance Companies
Power sector Power sector
ProbIens in the EIectricity 5ector in DeIhi
· T&D losses (Transmlsslon ano Dlstrlbutlon losses)
lncreaseo trom 7° ln 1953 to over 50° ln 2000. Arouno
18° losses are transmlsslon losses ano 32° ls lost oue
to power tbett.
· alntenance was neglecteo, leaolng to lnettlclently
worklng equlpment.
· Commerclal losses ot Dv8 lncreaseo sbarply trom Rs
207 crore ln 1993 to Rs 1,103 crore ln 2000.
ProbIens in the EIectricity 5ector in DeIhi
· T&D losses (Transmlsslon ano Dlstrlbutlon losses)
lncreaseo trom 7° ln 1953 to over 50° ln 2000. Arouno
18° losses are transmlsslon losses ano 32° ls lost oue
to power tbett.
· alntenance was neglecteo, leaolng to lnettlclently
worklng equlpment.
· Commerclal losses ot Dv8 lncreaseo sbarply trom Rs
207 crore ln 1993 to Rs 1,103 crore ln 2000.
Privatisation of the Energy 5ector in DeIhi Privatisation of the Energy 5ector in DeIhi
Tbe prlvatlsatlon process starteo ln February 1999
Huge tlnanclal lnputs are requlreo to lmprove tbe
sltuatlon ln Delbl's power sector
5teps in Privatisation
· Settlng up a Delbl Power Generatlon ano Transmlsslon Company
· Lncouraglng new generatlon ln tbe prlvate sector as well as ln
jolntventures
· Settlng up new power olstrlbutlon companles
· Lstabllsblng an lnoepenoent statutory Delbl Llectrlc Regulatory
Commlsslon tbat sboulo be responslble tor unoertaklng llcenslng
ot new capaclty, prescrlblng pertormance stanoaros ano tl×lng
tarltts
Tbe prlvatlsatlon process starteo ln February 1999
Huge tlnanclal lnputs are requlreo to lmprove tbe
sltuatlon ln Delbl's power sector
5teps in Privatisation
· Settlng up a Delbl Power Generatlon ano Transmlsslon Company
· Lncouraglng new generatlon ln tbe prlvate sector as well as ln
jolntventures
· Settlng up new power olstrlbutlon companles
· Lstabllsblng an lnoepenoent statutory Delbl Llectrlc Regulatory
Commlsslon tbat sboulo be responslble tor unoertaklng llcenslng
ot new capaclty, prescrlblng pertormance stanoaros ano tl×lng
tarltts
Demerlts ot Demerlts ot prlvatlsatlon prlvatlsatlon
Too many large concesslons were granteo to
tavoureo blooers
Tbe loss reouctlon target ot 34° wltbln tlve years ls
not ambltlous enougb.
tarltts are calculateo on amucb blgber cost prlce base
Problem ln valuatlon ot assets
prlvatlsatlon process leo to tbe creatlon ot prlvate
monopolles.
Too many large concesslons were granteo to
tavoureo blooers
Tbe loss reouctlon target ot 34° wltbln tlve years ls
not ambltlous enougb.
tarltts are calculateo on amucb blgber cost prlce base
Problem ln valuatlon ot assets
prlvatlsatlon process leo to tbe creatlon ot prlvate
monopolles.
Detence Detence Sector Sector
ltb tbe tblro largest mllltary torce ln tbe worlo,
mllltary e×penolture ln |nola amounteo to $23.9 bllllon
ln 2006 (source S|PR|) ano bas grown steaolly over tbe
past years.
On 9
tb
may, 2001, oetence sector was openeo tor
prlvate sector
100° |nolan prlvate lnvestment + 26° torelgn
partlclpatlon ln prlvate arms manutacturlng ventures
ltb tbe tblro largest mllltary torce ln tbe worlo,
mllltary e×penolture ln |nola amounteo to $23.9 bllllon
ln 2006 (source S|PR|) ano bas grown steaolly over tbe
past years.
On 9
tb
may, 2001, oetence sector was openeo tor
prlvate sector
100° |nolan prlvate lnvestment + 26° torelgn
partlclpatlon ln prlvate arms manutacturlng ventures
Rallways. Rallways.
WState-owned railway company oI India
Woverseen by the Ministry oI Railways oI
the Government oI India.
W Railways were Iirst introduced to India in
1853
W It share a 'monopoly¨ market.
W In 1951 the systems were nationalised as one
unit, becoming one oI the largest networks in
the world.
WState-owned railway company oI India
Woverseen by the Ministry oI Railways oI
the Government oI India.
W Railways were Iirst introduced to India in
1853
W It share a 'monopoly¨ market.
W In 1951 the systems were nationalised as one
unit, becoming one oI the largest networks in
the world.
|mpact ot |mpact ot Prlvatlsatlon Prlvatlsatlon
Pros ot prlvatlsatlon:
1.8etter connectlvlty ano better commutatlon even ln
rural sectors.
2.|ntrastructure can be lmproveo wltb tbe prlvate
players partlclpatlon
3.Customer servlce can be lmproveo wltb tbe
competltlon comlng trom prlvate players
Pros ot prlvatlsatlon:
1.8etter connectlvlty ano better commutatlon even ln
rural sectors.
2.|ntrastructure can be lmproveo wltb tbe prlvate
players partlclpatlon
3.Customer servlce can be lmproveo wltb tbe
competltlon comlng trom prlvate players
|mpact ot |mpact ot Prlvatlsatlon Prlvatlsatlon (conto.) (conto.)
cons:
1.Neeo to ensure tbe satety ot tbe passengers.
2.|ncrease ln competltlon can also trlgger tare wars.
cons:
1.Neeo to ensure tbe satety ot tbe passengers.
2.|ncrease ln competltlon can also trlgger tare wars.
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