211.

BUSINESS, GOVERNMENT AND

SOCIETY
TOPIC: PRIVATISATION
AND REGULATION
TEAM NO:
OMKAR BULLAND 201127
MANISHA 201265
DEEPAK YADAV 201134
BHUPAL KAMBLE 201124
KANCHAN LONDHE 201601.
DEFINITION & MEANING
• The transfer of ownership, property or business from the government to the private sector is termed
privatization. The government ceases to be the owner of the entity or business.
• Privatization is considered to bring more efficiency and objectivity to the company, something that a
government company is not concerned about
• India went for privatization in the historic reforms budget of 1991, also known as ‘New Economic Policy
or LPG policy’.
NATURE OF PRIVATIZATION
1. New Concept
• Privatization is a new concept that has emerged in the last two.
2. Universal Concept
• The concept of privatization has emerged not only in India but it has developed all over the world. Countries like USA, UK, Japan, India,
etc. Has adopted this ideology.
3. Economic Democracy
• It provides the chance to the private sector to operate in economic activities freely.
4. Process
• Privatization is a process which goes on continuously.
5. Assumption
• The privatization is based on the assumption that the private sector is more efficient in the management and control of an enterprise
than the public sector.
REASONS OF PRIVATIZATION

1. Improve economic efficiency

2. Strengthen the share of the private sector in the economy
3. Reducing the role of government in the marketplace
4. Improve the financial stance of the public sector
5. Develop better capital markets
6. Use the revenues generated by the privatization for other social, security or infrastructure purposes.
 METHODS OF PRIVATIZATION

Competitive Bidding – In this method, the company’s shares and assets are sold by way of tender. An enterprise may
choose to sell an undertaking instead of the whole business.
• Public Flotation of Shares – In this method, the shares of a government-held enterprise are sold to the general public by
way of listing them on the stock market.
• Private Placement – Private placement refers to the transferring of ownership to the hands of a few private individuals.
The government may decide to transfer the ownership of the public company to select individuals who meet their
requirements and criteria.
• Dilution of Capital – In this method, instead of selling the shares of the public sector company, the capital is raised by
issuing them to private investors. Hence, the stake of government in such companies become diluted.
• Management Employee Buyout – It involves the selling of the stake of the entire or a part of the enterprise to the
employees.
• Mass Privatization – It is a method by which a large number of enterprises are privatized in one go. For this, a
combination of various methods mentioned above is used.
 IMPORTANCE OF PRIVITISATION

• Upliftment of underperforming PSUs: Private enterprises have raised the level of revenue, productivity and
efficiency. Therefore in this situation private sectors can help & support the underperforming public sector
undertakings.
• Accelerates competitive sectors: privatization has accelerated among various sectors in economy, state owned
sectors to become more competent & efficient.
• Improves financial health: high financial health provides benefits to business & high renumeration to people,
whereas government owned enterprise where all earned revenue & profit are kept for sake for national deficits
and debts.
• Beneficial for growth of employees: improves living standard & purchasing power of employees by providing
them better incentives & amenities.
• Minimizes corruption: there is cut throat competition, people need to work to sustain & grow also
decrease in government control
• Proper utilization of resources: As compared to public sector, private sector very quickly accepts and
adopt the advanced technology and this helps to exploit natural resources in a better and balanced manner.
• Quick decision: Private organization takes quick decision as compared to public sector and this benefits
the organization.
• No political interference: Private sector does not depend on any government agency for taking any sort
of action or decision. Also it is not influenced by third class government policies like corruption, etc.
• Better services to customers: Success of private sector mainly depends upon consumer satisfaction and
hence private sector aims and works for consumer satisfaction.
• Easy funding: Government can easily raise huge funds by selling its equities to private sector.
• Easy to fix responsibility: In private sector in most of the cases authority and responsibility goes
together and the responsibility of every individual is clearly defined. This force individuals to perform
their duties efficiently.
PROBLEMS OF PRIVATIZATION

• Natural monopoly
• Public interest
• Government loses out on potential dividends.
• Problem of regulating private monopolies.
• Fragmentation of industries
• Short-termism of firms
• Your services get worse
• Privatization costs you more
• You don’t get a democratic voice
LAW REGULATING PRIVATIZATION

The choice of whether or not to enact a privatization law depends upon the constitutional and legal circumstances
of the country concerned. Typically in the case of countries with constitutions derived from the French legal
tradition, a privatization law to authorize the sale of state assets will be a constitutional requirement. Even if a
separate privatization law is not mandatory, such a law can serve a variety of purposes, such as to:
define the government’s objectives and establish commitment to the privatization process;
• make amendments to existing laws which otherwise would be an obstacle to privatization, e.g. laws preventing
private sector participation in what were previously thought of as “strategic” activities;
• Create institutions with the authority to implement privatization;
• avoid the “vacuum of authority” which can lead to spontaneous or unauthorized privatization;
• allow for the financial restructuring of enterprises prior to sale and permit liabilities to be cancelled, deferred
or swapped for
THANK YOU