PRIVATIZATIO

N
TRENDS AND
ISSUES
 Consist of all enterprises owned by the government
(central or state or both) and managed by the
government itself or by some other agency.
 Increase in the number of PSUs from 5 in 1951 to

244 in 2007. investment raised from Rs.29 cr. To

Rs. 4,21,089cr. In 2007.
 Rate of net profit after tax was 1.1% in 1980-81

which rose to 3.9% in 2006-07.

 Provides employment to about 16.5 million

persons.
 Rapid economic growth
 Return on investment
 Redistribution of income
 Employment opportunities
 Balanced development
 Small-scale and ancillary industries
 Promote import substitutions
 Prevent concentration of economic power
 Low Profitability
Delays in decision making
Bureaucratic management
Overstaffing
Lack of accountability
Below capacity operations
Political interference and corruption
Indiscipline
 Recurring Budgetary support to PSUs and high interest
burden
 Failure to create sustainable employment
 Burden of social obligations
 Reaching commanding heights of inefficiency
 Failure to develop strong infrastructure
PUBLIC SECTOR REFORMS:

Reforms introduced to make PSUs more efficient

and competitive.
 Restructuring: modernization of plant, changes in
product mix, rationalization of productive capacity
Professional management
Autonomy and Accountability – MoU
Opening for Private sector and disinvestment
It is the incidence or process of transferring
ownership of a business, enterprise,
agency or public service from the
government to the private sector.

In a broader sense, privatization refers to

transfer of any government function to the
private sector including governmental
functions like revenue collection and law
enforcement.
 Expose the privatised companies to market
discipline

 Wider distribution of wealth

 Increase in Economic Activity

 Wider choices for consumers

 DENATIONALISATION
complete transfer of state owned blocks of
productive assets to private sector.
eg. Modern food industries sold to HUL.
 DISINVESTMENT

sale of part of equity capital of PSUs to private

sector.
eg. A part of equity of Maruti Udyog sold to Suzuki.
 LIMITING

restricting the role of PSUs and non diversification

of existing PSUs
 DERESERVATION
Entry of private firms into areas reserved for
public sector like telecom, power, banking etc.
except for major oil and mineral sector, strategic
industries like defence equipments and essential
infrastructure.

 TRANSFER OF CONTROL
transfer of management and control to private
hands through franchising, leasing etc. leading to
professionalism.
Disinvestment : sale of equity and bond capital invested by
the government in PSUs. It also implies the sale of
governments loan capital in PSUs through securitization.
However, it is the government and not the PSUs who receive
money from disinvestment.
Targeted and Actual Disinvestment from April 1991onwards
Year Targeted Receipts(Rs. Actual Receipts(Rs.
Crores) Crores)
1991-92 2,500 3,038

1992-93 2,500 1,913

1993-94 3,500 -

1994-95 4,000 4,843

1995-96 7,000 362

1996-97 5,000 380

1997-98 4,800 910

1998-99 5,000 5,371

1999-00 10,000 1,829

2000-01 10,000 1,870

2001-02 12,000 5,637

2002-03 12,000 3,348

2003-04 14,500 15,547

2004-05 4,000 2765

2005-06 No fixed target 1569

2006-07 No fixed target -

2007-08 No fixed target 2366

Total 96,800 51,610

 Lagan Jute Machinery Company Limited (LJMC),
(subsidiary of Bharat Bhari Udyog Nigam Ltd.
hereinafter referred to BBUNL)
 Modern Food Industries Limited (MFIL)
 Bharat Aluminium Company Limited (BALCO)
 CMC Ltd. (CMC)
 HTL Ltd. (HTL)
 Videsh Sanchar Nigam Limited (VSNL)
 Paradeep Phosphates Limited (PPL)
 Jessop and Company Limited, (subsidiary of
BBUNL)
 Hindustan Zinc Limited(HZL)
 Maruti Udyog Limited (MUL)
 Indian Petrochemicals Corporation Ltd.(IPCL)
 Indo. Hokke Hotels Ltd. (subsidiary of HCI)
 17 Hotel units of India Tourism Development
Corporation Ltd. (ITDC)
 Punjab Hotels Ltd. (subsidiary of ITDC) –
unfinished Chandigarh Project
 2 Hotel units of Hotel Corporation of India Ltd.
 One hotel unit of ITDC has been given on 30
year lease cum-management control.
 Increase in efficiency.
 Professional management.
 Increase in competition.
 In line with international trends.
 Reduction in economic burden of Govt.
 Less wastage and reduced costs.
 Reduction in political interference.
 Encouragement to new innovations.
 Increase the industrial growth.
 Flexibility in decision making and better use of

scarce resource.
 Concentration of economic power.
 Lack of social welfare.
 Private sector not always more efficient.
 Increase in inequality.
 Opposition by employees.
 Political pressure.
 Increase in unemployment.
 Ignores the weaker sections.
 Ignores the national importance.
The privatization carried out so far has been
too insignificant and half hearted to improve
the working environment of the public sector.
Momentum of privatization need to pick up.
As momentum picks up, there’s a need to
formulate a comprehensive policy on it.
But to prove it wrong, there are still some PSUs
like ONGC which are among the top in the
world.
THANK
YOU
By: SAGAR AGGARWAL
MUDIT AGGARWAL
SAJAL AGARWAL
JASVEEN SINGH
UTKARSH SETHI
MBA, 1ST SEM, SEC. A
NIEC